Transcript School Finance in Iowa

Finance Overview:
AEA’s/LEA’s
Barb Harms
Business Manager
Grant Wood Area Education Agency
Management Team Meeting – 11/3/06
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How AEA’s are Funded:

Per pupil funding based on LEA
enrollments

Formula is separate for 3 service areas
(Media, Ed Services, Special Education)

No direct taxing authority
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Other AEA Revenues:


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Federal funds – IDEA, Part C, etc.
Various other state, local grants
Sales of non-mandated services (such
as printing, computer services, SEMS)
AEA’s also receive State funding for
Juvenile Home/Shelter instructional
programs
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“Show-through” concept:



Each district includes the AEA per pupil
funds in their budget to generate the
dollars earmarked for AEA’s.
Districts generate property taxes for the
AEA’s through their levy rate
The funnel is on paper only – dollars
actually are paid directly from the State
to each AEA
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Finance Formula:

AEA cost per pupil X enrollment

Cost per pupil grows each year by the
allowable growth amount (4% for FY 08)

Child-based: allowable spending is
based on number of students counted
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Finance Formula (cont’d):

Special Education Services
– Funding is a mix of State aid & prop taxes
– Enrollment includes weighting for children
with IEP’s
AEA cost per pupil
X Weighted Enrollment
= Budget for Special Education services
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Finance Formula (cont’d):

Media/Technology and Educational
Services
– Funded entirely from property taxes
– Enrollment includes approved nonpublics
AEA cost per pupil
X Actual Enrollment (public & nonpublic)
= Budgets for Media/Ed Services
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Finance Formula (cont’d):
Special Education
Media Services
Educational Services
State Reduction
$16,754,381
$ 2,927,692
$ 3,213,132
$ (1,999,562)
“Controlled Funding”
$20,895,643
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2006-2007 Budgeted Revenues
Controlled Funding
Federal Revenues
Sale of Services
Other State Revenues
Total
$
$
$
$
$
20,895,643
15,189,010
2,797,650
471,979
38,882,303
%
53.7%
39.1%
7.2%
1.2%
100.0%
2006-2007 General Fund Revenues
7.1%
1.2%
Controlled Funding
Federal Revenues
Sale of Services
Other State Revenues
38.6%
53.1%
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Funding for LEA’s:
5 basic principles
1.
2.
3.
4.
5.
Funding based on number of students
State “equalizes” funding through a mix of
state aid & property taxes
Legislature sets allowable growth – the
annual increase in the “cost per student”
Local property taxes are a critical part of the
formula
Funding sources have restrictions on their
use
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Funding for LEA’s:

# 1: Funding based on number of students
Increases or decreases in enrollment affect district
budgets.
– The count on October 1 is used to establish the
district’s budget for the following year
– That means revenues are always a year behind
the actual number of children we are serving in
our classrooms
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Funding for LEA’s:

# 2: Equalization - the school aid formula
relies on two sources of revenue
– State General Fund appropriations
– Locally raised property taxes
– Results in a maximum expenditure per pupil and
therefore a maximum amount a district can raise
and spend
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School Foundation Formula

Three components
– Uniform Levy - Property tax levy of $5.40 per
thousand of taxable valuation.
– State Foundation Percentage - Amount the
state pays in excess of $5.40 - varies by district
(87.5% of cost per pupil).
– Additional Levy - Property tax levy which funds
the difference between the Combined District Cost
and the sum of the Uniform Levy and the State
Foundation Percentage.
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School Foundation Formula
Property Poor District
Property Rich District
Additional Levy
Additional Levy
State Aid
State Aid
Total
Cost
Per
Pupil
87.5%
of Total
Cost
Per
Pupil
$4,067
$4,648
Total
Cost
Per
Pupil
87.5%
of Total
Cost
Per
Pupil
$4,067
$4,648
$5.40 Uniform Levy
$5.40 Uniform Levy
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School Finance - Spending Authority

Spending authority is the sum of:
– Combined District Cost (property tax and
state aid)
– Miscellaneous income
– Unspent balance from previous years
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Why important?
– Districts cannot exceed spending authority
– Not the same as cash
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Term
Spending Authority
Unspent Balance
Term
Cash On Hand
State Aid
Property Taxes
Miscellaneous
Income
Explanation
Total amount a school district can legally spend
during a year.
Remaining amount of spending authority at end of
year (Spending Authority minus Actual
Expenditures).
Analogy
Type
Income + credit cards Recurring
Credit cards
One time
Explanation
Total cash on hand.
Amount received by a district from state General
Fund.
Amount received by a district from local property
taxes.
Any income which is not property tax or state aid
(must be actually received).
Analogy
Savings account
Paycheck
Type
One time
Recurring
Paycheck
Recurring
Birthday money from
Grandma
One time/
recurring
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Funding for LEA’s:

# 3: Allowable growth
The Legislature sets the annual increase in the “cost
per student”.
– Growth rate is set over a year in advance to allow
schools to meet budget deadlines
– Rate for 2006-07 was 4% ($5,128 per student)
– Rate for 2007-08 is 4% ($5,333 per student)
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Funding for LEA’s:
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# 3: Allowable growth (cont’d)

– When is 4% allowable growth not 4%?
• If a district has an enrollment increase, their
“new money” will be more than 4%
• If a district has an enrollment decline, their
“new money” will be less than 4%
• The budget guarantee has been used to
cushion districts that have enrollment declines
– it is now being phased out
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Funding for LEA’s:
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# 4: Local property taxes
Why not remove property taxes from formula?
– Lawmakers would have to replace $1.1
billion dollars statewide with sales tax or
income tax
– Property taxes add stability – if sales tax
was used, funding would fluctuate based
on spending
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Funding for LEA’s:
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# 5: Restrictions on funding sources
– Finance formula revenues go to the
General Fund (salaries, supplies, etc.)
– Other funding streams for facilities
– Can’t be commingled or use excess in
general fund for facilities
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LEA Funding - Facilities
Facility Related Levies
• Board-Approved Physical Plant and Equipment
Levy (PPEL).
• Voter-Approved PPEL - simple majority vote
required.
• Bonded Debt - requires 60% majority vote, then
Debt Service levy used to repay debt
• Public Education and Recreation Levy (PERL).
Public use playgrounds/recreation facilities.
• Local option sales tax - maximum of $0.01
additional local option sales tax for school
infrastructure - 97 of 99 counties have this
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Funding for LEA’s:

Program Levies
– Instructional Support Levy (ISL)
• Maximum of 10% of Regular Program Budget.
• Can be either property taxes or income surtax,
or combination.
• Can be board-approved (maximum five years subject to petition) or voter-approved
(maximum 10 years).
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LEA Funding - Other Levies

Management Levy
– Used to pay unemployment benefits, property
insurance and early retirement benefits.
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Cash Reserve Levy
– Used to generate cash for the General Fund of the
school district.
– Generated by property tax via school board action
annually.
– Used to fund spending authority but does not
directly generate spending authority.
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Summarizing AEA/LEA Finance

What is common?
– State funding based on number of students
– Other revenues from grants, misc sources
– Allowable growth
– Weighted enrollment
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Summarizing AEA/LEA Finance

What is different?
– Schools have taxing authority, AEA’s don’t
– LEA finance formula is more complex
– Schools have separate funding sources for
facilities & other costs
– AEA’s generate revenues from sales of
non-mandated services
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School Finance - Web Resources
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IASB: www.ia-sb.org
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IASBO: www.iowa-asbo.org
Dept. of Education:
www.state.ia.us/educate/index.html
Legislature - bills, amendments, etc.
www.legis.state.ia.us
Dept. of Revenue and Finance:
www.state.ia.us/government/drf/index.html
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School Finance - Contacts
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Iowa Association of School Boards
(IASB)
– Larry Sigel, School Finance Director
515-288-1991 ext. 235
[email protected]
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