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MAY 3, 2007 615.741.3763 (OFFICE)

615.289.9375 (CELL)



NASHVILLE – Governor Phil Bredesen today outlined plans for a dramatic overhaul of education
funding in Tennessee, a strategy developed in concert with members of the General Assembly and
designed to restore fairness, sustainability and accountability to the funding process.

The proposal – dubbed BEP 2.0 – was outlined in a speech to a special Joint Convention of the General
Assembly. It is the result of extensive conversations between Bredesen and the leadership of both
Houses regarding the Basic Education Plan (BEP), and builds upon a proposal Bredesen presented
earlier this year designed to put schools first by allocating additional state money for school systems
with high numbers of at-risk students and those with high growth in student populations.

In his speech, Bredesen noted three primary factors that made the expanded plan possible: an in-
depth examination of the BEP formula, prompted by concerns expressed by Senate Education
Committee chairwoman Jamie Woodson; broad political leadership in the Legislature to bring about
real reform; and substantial new recurring funds paired with a bipartisan consensus to invest them

“A rising tide floats all boats and makes big changes much easier,” Bredesen said. “The chance is
here to seize the moment.”

The $475 million plan would receive at least half of its funding this year, with the remainder
implemented as state finances allow, Bredesen said. The new money would be used to:

• Fully fund the state’s portion of the costs associated with at-risk students
• Fully fund the state’s portion of student growth costs in the year they occur
• Expanded funding for English Language Learners, with a goal of one teacher per every 30
students (currently the ratio is 1:45)
• Increase the state’s portion of instructional salaries from the current 65% to 75%
• Increase the average teacher salary from $36,700 to $40,000

The plan also calls for a re-design of the way Tennessee allocates money to school systems by
replacing the current formula with a new calculation that is simple, fair and transparent. The new
formula would use a county’s amount of assessed property and sales tax revenue to determine ability
to pay.

Bredesen emphasized that the proposed BEP reform is a two-way contract.

“It goes hand-in-hand with accountability from our school boards, our administrators and our teachers
for their performance. We’re saying, ‘We’ll step up to our responsibility to get you the resources you
need; you need to step up to your responsibility for results,” Bredesen said.
To increase accountability, Bredesen proposed a focus on three primary areas:

• Increased standards for student achievement

• Increased state involvement in the outcome of failing schools
• Increased expectations on state colleges of education to turn out qualified teachers

“We’ve shown we can make tough decisions in hard times; let’s show we can make smart and
sustainable investments in good times,” Bredesen said in his speech to legislators. “This is a unique
time. If education is really the first priority for you, seize the moment, seize the tide.”


MAY 3, 2007

Lieutenant Governor Ramsey, Speaker Naifeh, Speaker ProTem DeBerry, Members of the 105th General
Assembly, Constitutional Officers, Justices, friends, guests and my fellow Tennesseans. I thank you
once again for the privilege of addressing you in these chambers.

I have rarely asked this privilege outside of my State of the State messages. My message this morning is
about education, as you expect, but it is even more about seizing the moment.

This chamber this morning is full of people who care deeply about educating our children, and you know
how much I care about that same thing. It’s not a political position for me, it’s a personal belief.

I grew up in my Grandmother’s house; she had a 6th grade education. She had 11 children, and just one
of them has a college degree; he got it in the military. Yet they all have had great American lives;
owned their own homes, sent their kids on to college — I’m one of those kids. They were able to do this
because you could come back from World War II, get a job in a factory, and be in the mainstream of the
economy of our country.

The world is changing: you can’t do that anymore. Kids today who are willing to work hard but don’t
have that education are not going to be in that mainstream, they’re going to be on the outside looking

This chamber is full of people like me; people who remember or have connections to the world of the
‘50s and ‘60s where that factory job worked, but who now have a public responsibility to children with a
very different future. We’re the generations who have a foot in both worlds, and we have to make sure
we pivot off that foot that’s in the future and not the one rooted in a past that no longer exists.


I asked for this time because in the past few weeks it has become clear that we together have an
opportunity to seize the moment when it comes to education.

Even with some tough fiscal issues, I’ve worked hard to support education: full BEP funding even when
we were cutting everywhere else, Books from Birth, Pre-K, Math and Science High School. You’ve been
full partners in this. With our financial house in order, this year I felt I was able to step out further and
propose some significant new investments in our schools and a revenue source — the cigarette tax — to
sustain those investments over the long haul.

But I’m here this morning because we have a chance now to expand and broaden and improve the
approach I proposed last winter. We have a chance to address not only the funding shortfall in our
school systems, but the fairness shortfall as well.

I trace the origins of this expanded approach back to a conversation with Senator Woodson not long
after my State of the State message. As you know, Senator Woodson is the chairman of the Senate
Education Committee. She told me — and I’m paraphrasing — “You know how much I support education,
and I like your proposals, but I don’t think they go far enough. We all know the Basic Education Plan—
the BEP—is flawed, and if you put more money into that with all its flaws don’t you just make the
eventual sorting-out we have to do even harder?”

It was a very good point.

Craig Fitzhugh — House Finance chairman — is a hard-nosed businessman, and he talked with me about
making sure that accountability was an integral part of anything we did. Les Winningham has been
committed to making sure that rural districts were treated fairly, and Randy McNally had a number of
issues including making sure that districts like Oak Ridge were not penalized for having been willing to
invest in public education over the years.

I’m here this morning to say that I heard you.

Last month I asked Speaker Naifeh and Speaker Ramsey for their OK for me to begin talking with those
four committee chairs: Education and Finance in the House and Senate; two Democrats and two
Republicans. The Speakers gave me the green light, and we have worked with those committee chairs,
and later with the speakers and the majority and minority leaders, to reach the point we are at this

This is not the Bredesen plan; if you have to attach names it is the Bredesen, Fitzhugh, McNally,
Winningham, Woodson plan. That’s alphabetical, by the way.

This broader look has been made possible by several things that have happened since my State of the
State address. First, based on Senator Woodson’s concerns, a group of us rolled up our sleeves and
worked to really understand the BEP formulas. Second, thanks to the work of the Committee Chairs I
have mentioned, the Speakers, and others in the General Assembly, there is now the broad political
leadership to bring about real reform. Third, while the final numbers won’t be in until next week, it is
no secret that we expect to have substantial additional recurring funds to work with this year and a
bipartisan consensus to invest them wisely; a rising tide floats all boats and makes big changes much
easier. The chance is here to seize the moment.

I want to emphasize that our reform plan is a two-way street with our school systems; it’s a contract
with them. We’ll make sure that they have the money they need to educate our children, but it doesn’t
stop there: they’ll be accountable for results.

Let me start by talking about BEP reform and how we get to a fairer and better version; I call it BEP 2.0.

The original BEP was passed in 1992; it has served our state well. It was passed to settle 16 years of
litigation over education funding, a situation I hope we never get ourselves in again. Like what I am
about to propose to you, it was partially funded in its first year — in that case with a half-cent sales tax
increase, far more difficult than the cigarette tax I’ve proposed — and the remainder funded over the
next six years.

That BEP today has two parts; on one side, it’s a way of calculating each year how much we should
spend on a student in Tennessee. It takes into account everything from the salaries of teachers and
administrative people, to the cost of constructing schools, to the cost of books and diesel fuel.

On the other side it determines for each district how much of the cost of education is the state’s
obligation and how much belongs to local government. That side of the BEP has become unfair over the
years and badly needs to be addressed.

Going back to the first part of the BEP — figuring out how much money is needed for each student —
we’re proposing to fix a number of widely recognized problems. Paying the full cost of at-risk students,
funding student growth in the year in which it occurs, funding the costs to a district of English Language
Learner, ELL, students, putting a realistic cost for teachers in the formula and paying a full 75 percent
of that teacher cost.

Once we have determined how much our state is going to spend in a given year on each student, we
then need to decide how the cost is to be split between state and local government. This is where we
have gotten off the trail; there are some real inequities in how the money is split that need to be

One element of this split is the cost differential factor — the so-called CDF you have heard so much
about. This factor allocates a total of $108 million to 17 school systems, ostensibly to recognize the
higher cost of doing business in their communities. That’s the theory; as a practical matter it was a
political fix in 1992 to get more money to some urban school systems. As you might expect, what has
happened over the years is that it no longer works in the way intended. For example, the largest
beneficiary of the CDF today is Williamson County, which gets an 18 percent premium on their state
funding — paid for by other counties' taxpayers — despite being arguably the county in Tennessee most
able to carry the load. Conversely, Hamilton County — Chattanooga — is an urban system with the
second largest number of failing schools in the state; Hamilton County gets nothing - that's not fair. This
reform plan eliminates the CDF.

This state/local split is also determined by a fiscal capacity formula that is outdated and obscure.
Rather than being plain spoken and clear, it uses regression analysis to calculate coefficients, and
reminds me of an old black and white movie where the mad scientist sets some dials on a machine in
the basement of the castle, and turns the crank, and it clanks and lights and bells go off, and finally it
spits an answer out the bottom. The mad scientists in the fiscal capacity case are some great people in
the Department of Education, but the process is the same.

We propose to dramatically simplify this process and make it transparent to the public. If you have
taken freshman algebra and own a $20 calculator you should be able to figure out what your district is
entitled to.

These changes will make BEP 2.0 more fair, more defensible in court, and more transparent to the

When you add up the cost of these changes, the answer is an additional $475 million, and that is more
than we have to work with this year, even with the 40-cent cigarette tax increase and extra growth

What we propose to do is to echo what our state did in 1992; bite off a big piece this year, establish a
secure long-term funding mechanism, and continue to build the funding in the years ahead until we
finish off the plan. The advantage of this is that we are doing what good managers do; set a framework
in place and then work each year to complete it, rather than constantly picking at one issue after


This BEP reform is part of a two-way contract. It goes hand in hand with accountability from our school
boards, our administrators and our teachers for their performance. We’re saying, “We’ll step up to our
responsibility to get you the resources you need; you need to step up to your responsibility for results.”

First, there are standards. Before you can hold someone accountable, you have to be clear with them
what is expected, and there are serious issues with standards in Tennessee. Among the most serious is
our lack of “truth in advertising”; we are telling our kids and our schools that they are doing well in
cases where they simply are not. I’m not the only one who feels this way; in their report on public
education last month, the U. S. Chamber of Commerce gave Tennessee an ‘F’ in “Truth in Advertising.”

Here’s why: when our 8th grade students take the Tennessee tests in math, we tell 87 percent of them
and their parents that they are “proficient”. When our 8th grade students take the national standards
exam, the NAEP tests, 21 percent of those same 8th graders are graded as “proficient”.

If our kids were just going to be competing with other Tennessee kids, we could get away with this. But
you know that’s not the world these kids are going to live in.

There are legitimate differences in opinion among liberals and moderates and conservatives about how
to improve our schools. One thing however everyone can agree on is the need to be completely honest
about just where we are; to be honest with our parents, to be honest with our children and to be honest
with ourselves.

Second, any effort to improve our schools ought to start with those that are clearly failing. We have in
Tennessee 20 schools today that have hit the wall; under our own laws are called out for having failed
to show adequate progress for at least six years running; these are failed schools. Seventeen of them
are in the Memphis school system, two are in Hamilton County, and one is in Nashville. That list will
grow by another five or six this August.

Under our existing laws, the state has broad powers in these cases; we can close the schools, we can
remove the schools from the school system and make them charter schools or run by one of our
universities, we can even remove school board members. We’ve never used those powers. I commit to
you to take a far stronger hand in fixing these schools by aggressively using the laws we already have.

Third, we need to demand more from our colleges of education. The reality is that they are sending us
too many teachers who don’t have the hard content knowledge that it takes to teach effectively. Most
of the teachers in the Tennessee school system are products of our state’s own colleges of education,
and we are going to start holding their feet to the fire on teacher preparation.

Our colleges of education need to be less of an academic department of the university and more of a
professional school, like a law school or a medical school. When a student goes to medical school, they
don’t spend a lot of time on the “History of Medicine”; they don’t take a watered-down “Math for
Doctors” course. They study content; they learn professional skills: how to diagnose, how to treat,
what to do if someone has a heart attack. And they learn it both in the classroom and in the hospital.

Our colleges of education need to be more like that, and specifically they need to send us teachers who
know their subject matter, who know how to use the tools of their trade — their test scores for example
— and who have had practical experience in doing so when they arrive at our door.

We've got some great teachers in Tennessee. I’ve gotten to know a lot of them over these past four
years, and the good ones are ready for some changes. They think of themselves as professionals, they
want to be paid like professionals, and they’re willing to be held accountable like professionals.


So that’s where we are: I put a good plan on the table last winter; and you — Democrats and
Republicans both — have broadened and improved it. That’s the way things should work.

I want to add a postscript. In order to put BEP 2.0 in place, we know that we have to come up with
money in addition to what the 40-cent cigarette tax will produce. The working assumption has been
that if we had an additional $140 million of revenue growth in hand when the funding board meets next
week, we would be able to increase our state pay raises to a full 3 percent and still have enough left
over to realistically consider the more comprehensive BEP 2.0 model. Our early tax collections
indicated that this was a reasonable hope, perhaps a stretch.

Updated results have come in these last 36 hours, and the likelihood is that we will have considerably
more than the $140 million. The possible range has been in the $100-300 million area, and it now seems
likely that when the funding board considers the numbers and projections next week, their estimate
could be near the upper end of that range.

That opens up a number of possibilities at this late date, including pre-funding some future year
additions to the BEP percentage formula and the possibility of phasing in the cigarette tax over time. I
discussed the situation with the speakers as soon as I was aware of it, and will work with them and you
over the next few days to intelligently take into account this fortunate development. We’ve come a
long way together on education reform, and if we can continue in that spirit for the next few days, we’ll
all be proud of what we have accomplished.

We’re at a crossroads. I’ve served in public office for 12 years now, and have been through 13 budgets.
I’ve had some very tough years; I have never had a year with as much new money as we have before us
now; this is unique and is unlikely to happen again. We've shown we can make tough decisions in hard
times; let's show we can make smart and sustainable investments in good times. Believe me, I
understand the politics and pressures this good fortune produces. We need to keep those politics and
pressures at bay; this is a unique time, seize the moment. If education is really the first priority for
you, seize the moment, seize the tide.

I rarely use quotations in my speeches, but I want to close with one, from Shakespeare:

“There is a tide in the affairs of men,

Which, taken at the flood, leads on to fortune.
Omitted, all the voyage of their life,
Is bound in shallows ….”

This is one of those moments; seize the tide.



Change 1: Change the way we measure a county’s ability to contribute

toward the cost of education (Fiscal Capacity)

• Determined by a complex statistical regression equation that attempts to
calculate a county’s revenues that can be raised and applied to education
• No longer provides the best representation of local capacity to raise revenue
for schools
• Has begun to produce questionable results on how education dollars are

Proposed change
• Move to a simpler method that is based on measuring two factors – property
and sales tax
• These two factors represent more than 90% of the amount of local revenue
available for education

Change 2: Eliminate the CDF

• The “Cost Differential Factor” is a mechanism that inflates salary dollars for
certain systems
• CDF attempts to calculate wage competitiveness in a local work force
• Calculation is based on an analysis of 90+ industry subgroupings
• Purpose is to evaluate the wage levels in other industries that could compete
with teacher salaries in a county; has moved away from original intent
• Only 17 systems benefit from the CDF currently

Proposed change
• CDF is eliminated
• Redirect funds that have gone into the CDF to funding cost of increasing state
share of teacher salaries
• Increasing state share of teacher salaries to 75% from 65%

May 3, 2007 Page 1 of 2


Change 3: Increase state’s share of instructional funding to 75%

• State currently provides 65% of the funds needed to pay teachers in
Tennessee. The remaining 35% is provided by local governments

• Funding for teacher salaries represents the largest share of all BEP dollars

Proposed change
• Adjust formula to place a greater portion of the responsibility for funding
teacher salaries on the state

• State will assume a greater share of funding for salaries – increasing from
65/35 state-local share to 75/25

• “Maintenance of Effort” statute still applies: local systems must maintain

current level of funding

Change 4: Increase unit cost for teacher pay

• Current unit cost figure for teacher salaries is not yet reflective of “real world
• Increases financial burden on local governments to fund teacher salaries for
positions outside the BEP
• Allows for greater disparity in teacher pay among school systems

Proposed change
• Move the unit cost for teacher pay toward a higher target that more accurately
reflects “real world cost”
• Teacher pay is reviewed annually, just as other education costs, i.e.
• Migrate unit cost from approximately 36,700 to a target of $40,000

May 3, 2007 Page 2 of 2

BEP Scenarios (in thousands of dollars) May 3, 2007


Estimated SCHOOLS 100% At-
Improvement 100% At- $38,000, All Factors in BEP 2.0
from FY07- Risk and ELL 1:35 Dial Total
FY08 Growth 50% 60% 100%
Statewide 144,650 283,322 286,262 476,005
Anderson County 399 1,121 2,988 3,303 5,136
Clinton City 0 97 325 365 592
Oak Ridge City 268 468 1,665 1,940 3,041
Bedford County 1,539 1,457 2,955 3,016 4,795
Benton County 249 386 598 556 984
Bledsoe County 457 430 439 349 597
Blount County 641 1,571 626 753 1,035
Alcoa City 269 231 117 127 198
Maryville City 509 462 239 262 344
Bradley County 1,639 1,624 3,545 3,715 5,939
Cleveland City 271 593 1,523 1,558 2,672
Campbell County 491 1,292 1,567 1,289 2,259
Cannon County 185 311 573 563 978
Carroll County 102 5 65 79 132
H Rock-Bruceton SSD 46 129 282 279 466
Huntingdon SSD 19 273 536 550 851
McKenzie SSD 203 202 484 494 842
South Carroll Co SSD 40 49 160 171 271
West Carroll Co SSD 107 178 407 412 683
Carter County 553 1,128 1,852 1,717 2,906
Elizabethton City 96 246 475 477 814
Cheatham County 499 569 1,392 1,512 2,562
Chester County 242 500 891 896 1,381
Claiborne County 798 1,325 1,808 1,659 2,612
Clay County 68 230 304 263 457
Cocke County 282 1,052 1,387 1,170 2,043
Newport City 94 105 161 152 260
Coffee County 674 791 2,114 2,256 3,596
Manchester City 73 184 603 637 1,057
Tullahoma City 177 338 1,370 1,520 2,532
Crockett County 448 380 751 745 1,184
Alamo City 146 105 226 219 351
Bells City 0 78 197 194 319
Cumberland County 990 1,100 457 121 488
Davidson County 6,102 10,701 13,780 11,384 21,710
Decatur County 176 310 460 459 717
DeKalb County 176 408 166 39 157
Dickson County 993 1,687 2,974 3,035 4,701
Dyer County 510 532 1,565 1,639 2,731
Dyersburg City 189 587 1,588 1,628 2,681
Fayette County 840 1,028 538 213 405
Fentress County 307 492 782 723 1,210
BEP Scenarios (in thousands of dollars) May 3, 2007


Estimated SCHOOLS 100% At-
Improvement 100% At- $38,000, All Factors in BEP 2.0
from FY07- Risk and ELL 1:35 Dial Total
FY08 Growth 50% 60% 100%
Statewide 144,650 283,322 286,262 476,005
Franklin County 546 912 1,066 951 1,637
Humboldt City 80 328 667 639 1,052
Milan SSD 241 300 750 770 1,282
Trenton SSD 128 293 607 614 979
Bradford SSD 92 99 236 240 399
Gibson County SSD 860 509 1,154 1,237 1,923
Giles County 299 542 1,508 1,598 2,674
Grainger County 623 886 920 786 1,176
Greene County 1,234 1,305 2,735 2,762 4,508
Greeneville City 301 449 1,034 1,125 1,748
Grundy County 215 514 785 706 1,192
Hamblen County 770 1,775 4,094 4,208 6,861
Hamilton County 567 4,508 10,860 12,370 25,177
Hancock County 145 280 172 75 157
Hardeman County 343 995 1,437 1,253 2,114
Hardin County 262 635 783 670 1,200
Hawkins County 1,179 1,441 2,597 2,535 4,136
Rogersville City 178 104 206 216 345
Haywood County 257 859 1,200 1,018 1,736
Henderson County 576 741 1,480 1,515 2,383
Lexington City 183 208 433 455 712
Henry County 251 506 1,000 974 1,666
Paris SSD 144 271 518 518 851
Hickman County 775 620 570 450 811
Houston County 248 393 511 488 704
Humphreys County 150 385 663 651 1,160
Jackson County 198 335 570 530 889
Jefferson County 1,035 1,315 1,048 759 1,334
Johnson County 225 485 179 11 99
Knox County 1,277 3,345 10,114 12,112 26,638
Lake County 253 268 299 253 399
Lauderdale County 300 980 1,569 1,419 2,388
Lawrence County 398 1,033 2,432 2,467 4,107
Lewis County 208 325 398 338 592
Lincoln County 445 479 1,146 1,168 1,998
Fayetteville City 116 105 268 285 480
Loudon County 491 819 339 249 278
Lenoir City 124 536 395 298 431
McMinn County 815 1,123 1,733 1,709 2,740
Athens City 127 255 457 445 756
Etowah City -3 53 97 96 187
McNairy County 654 660 1,647 1,697 2,779
BEP Scenarios (in thousands of dollars) May 3, 2007


Estimated SCHOOLS 100% At-
Improvement 100% At- $38,000, All Factors in BEP 2.0
from FY07- Risk and ELL 1:35 Dial Total
FY08 Growth 50% 60% 100%
Statewide 144,650 283,322 286,262 476,005
Macon County 447 563 1,152 1,153 1,952
Madison County 497 2,282 5,507 5,784 10,677
Marion County 554 728 1,259 1,185 2,009
Richard City SSD 94 56 100 100 166
Marshall County 178 828 2,835 3,123 4,893
Maury County 0 1,286 3,906 5,219 8,513
Meigs County 166 374 224 108 228
Monroe County 986 1,111 938 692 1,206
Sweetwater City 438 366 365 294 515
Montgomery County 5,541 4,468 12,952 14,141 22,209
Moore County 9 105 0 0 0
Morgan County 594 1,025 1,119 993 1,435
Obion County 279 495 1,827 1,951 3,241
Union City 303 271 762 809 1,300
Overton County 231 606 946 868 1,478
Perry County 27 185 281 261 450
Pickett County 50 128 0 0 0
Polk County 504 638 700 608 939
Putnam County 312 1,618 3,992 4,238 6,844
Rhea County 1,161 1,010 1,141 991 1,548
Dayton City 125 132 176 155 274
Roane County 735 959 1,211 1,108 2,027
Robertson County 1,909 1,695 3,091 3,243 5,096
Rutherford County 9,303 4,277 12,097 13,403 21,317
Murfreesboro City 2,075 1,053 2,780 2,965 4,808
Scott County 203 705 983 831 1,407
Oneida SSD 209 293 431 401 644
Sequatchie County 624 530 432 330 497
Sevier County 1,844 2,472 915 915 915
Shelby County 5,797 5,053 16,957 18,558 27,660
Memphis City 7,169 22,895 53,951 51,524 81,886
Smith County 371 388 901 934 1,575
Stewart County 139 309 183 104 253
Sullivan County 614 1,198 3,290 3,343 5,910
Bristol City 357 521 1,214 1,233 2,061
Kingsport City 109 618 1,662 1,692 3,036
Sumner County 5,626 3,274 6,064 6,601 10,409
Tipton County 2,421 2,406 3,426 3,262 5,123
Trousdale County 180 173 295 293 525
Unicoi County 121 364 763 766 1,278
Union County 404 615 317 114 260
Van Buren County 0 267 122 122 122
BEP Scenarios (in thousands of dollars) May 3, 2007


Estimated SCHOOLS 100% At-
Improvement 100% At- $38,000, All Factors in BEP 2.0
from FY07- Risk and ELL 1:35 Dial Total
FY08 Growth 50% 60% 100%
Statewide 144,650 283,322 286,262 476,005
Warren County 649 1,192 2,754 2,865 4,576
Washington County 736 1,151 2,101 2,183 3,690
Johnson City 897 1,079 1,871 1,931 3,274
Wayne County 229 481 385 256 485
Weakley County 763 976 2,052 2,123 3,340
White County 349 695 932 846 1,418
Williamson County 10,372 1,639 1,639 1,639 1,639
Franklin SSD 1,115 665 647 647 647
Wilson County 3,185 1,217 3,034 3,294 5,195
Lebanon SSD 374 334 805 759 1,344
Dept. of Children Services 152 223 205 344
Statewide 144,650 283,322 286,262 476,005

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