Eadm6.310 072 4b Finance

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Education FinanceEducation Finance

Who Pays?Who

Pays?

Who Cares

?

Who Cares

?

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The Tax CollectorThe Tax Collector

School Boards set their own tax rates (called “Mill Rates”), but the municipal governments have to collect them.

School Boards set their own tax rates (called “Mill Rates”), but the municipal governments have to collect them.

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Regina Public’s 2002 Budget

Regina Public’s 2002 Budget

2002 Expenditures = $132,552,712

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Regina Public’s 06-07 Budget

Regina Public’s 06-07 Budget

• Expenditures $155,967,607

• Mill rate will be 18.5528 mills, up 2.92% from 2005

• Estimated average public school tax on a Regina home will be $1,004.98

• Provincial grant is expected to cover 45.33% of the costs

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Regina Catholic’s 04 & 05 Budgets

Regina Catholic’s 04 & 05 Budgets

2005 Expenditures = $68,999,339

2006-2007 mill rate will increase 2.92%

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The lines are drawn . . . .The lines are drawn . . . .

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And the gloves are off . . . .And the gloves are off . . . .

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Horizontal EquityHorizontal Equity

Equal Treatment of Presumed Equals

==

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Vertical EquityVertical EquityUnequal Treatment of Presumed

Unequals

≠≠

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Horizontal & Vertical Equity

Horizontal & Vertical Equity

The concepts of horizontal and vertical equity do not just apply to who receives what from education. They apply equally to who pays.Is it fair to make everyone pay the same amount?

Or should the amount be based on ability to pay?

HorizontalEquity

Vertical Equity

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Saskatchewan K-12 FundingLocal/Provincial Share: 83-84 to 93-94

Saskatchewan K-12 FundingLocal/Provincial Share: 83-84 to 93-94

Saskatchewan Education, Training and Employment. (February, 1994). Saskatchewan education indicators report, p. 77.

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Provincial Grants

School Year

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Local/Prov. Share, Canada and Provinces, 1989-90

Local/Prov. Share, Canada and Provinces, 1989-90

Saskatchewan Education, Training and Employment. (February, 1994). Saskatchewan education indicators report, p. 77.

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Saskatchewan’s Equalized Mill RateSaskatchewan’s

Equalized Mill Rate

Property assessments are “equalized” (i.e., comparable from one location to another) — this done by assuring that all property assessors use the same criteria in the same ways in all areas of the province; and

Property tax rates are “equalized” (i.e., everyone is subject to the same mill rate). To do this the province requires all school boards to levy the same “Equalized” Mill Rate. In 2004 this was 17.4 Mills

In order to insure that the property tax levied on Saskatchewan citizens is fair (i.e., that everyone is required to make an equal “tax effort”), it is necessary to insure that:

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So how is the “Mill Rate” used to calculate property

tax?

So how is the “Mill Rate” used to calculate property

tax?

A “Mill” is 1/1000, just like a “Percent” is 1/100.

Revenue generated by a given Mill Rate can be calculated using the following simple formula:

Assessed RevenueRevenue = Value X Mill Rate ÷ 10001000

of Property

Simple transposition allows you to adjust the formula so that you can calculate how many Mills it will take to generate a given amount of revenue from a given assessment:

RevenueRevenue AssessedMill Rate = RequiredRequired ÷ Value X 10001000

of Property

[X = Y x Z ÷ 1000 = Z = X ÷ Y x 1000]

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Setting a School Board’s Mill RateSetting a School Board’s Mill Rate

1.1. EstablishEstablish program and service priorities and their associated costs (i.e., what do you want to do; how much money are you going to how much money are you going to needneed?)

2.2. Guesstimate probable Foundation Grant Guesstimate probable Foundation Grant from the Province

3.3. Determine the value of your property-tax Determine the value of your property-tax base base

4.4. DetermineDetermine, given the foundation grant, how how much money you have to raise locallymuch money you have to raise locally

5.5. DetermineDetermine, given the amount to raise and the local property-tax base, what tax rate (“Mill what tax rate (“Mill Rate”) you are going to have to chargeRate”) you are going to have to charge

6. Hope your guesses were reasonably accurate and that the public will be willing to support your decision

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Property Taxes in Rex: 2004Property Taxes in Rex: 2004

Mill Rate = 40.3204 Mills [40.3204 ÷ 1000]

Municipal taxes +

Libraries tax +

Hospitals tax = ~ 51% or 20.5704 Mills

School Taxes (Whether Public or Separate) = ~49% or 19.725 Mills

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School Property Tax Revenue in Rex, Saskatchewan, 2004

School Property Tax Revenue in Rex, Saskatchewan, 2004

Rex’s school boards had the following equalized assessments in 2004

Rex PublicRex Public $3,864,913,900Rex CatholicRex Catholic$1,681,489,350

Since: Revenue = Assessment x (Mill Rate ÷ Revenue = Assessment x (Mill Rate ÷ 1000)1000)Rex Public Rex Public School District, using the “Equalized Assessment” and the School Board’s “Mill Rate,” raised

RevenueRevenue = $3,864,913,900 x (19.725 ÷ 1000)

= $76,235,426.43Rex Catholic Rex Catholic School District, using the “Equalized Assessment” and the School Board’s “Mill Rate,” raised

RevenueRevenue = $1,681,489,350 x (19.725 ÷ 1000)

= $33,167,377.43

Rex’s school boards had the following equalized assessments in 2004

Rex PublicRex Public $3,864,913,900Rex CatholicRex Catholic$1,681,489,350

Since: Revenue = Assessment x (Mill Rate ÷ Revenue = Assessment x (Mill Rate ÷ 1000)1000)Rex Public Rex Public School District, using the “Equalized Assessment” and the School Board’s “Mill Rate,” raised

RevenueRevenue = $3,864,913,900 x (19.725 ÷ 1000)

= $76,235,426.43Rex Catholic Rex Catholic School District, using the “Equalized Assessment” and the School Board’s “Mill Rate,” raised

RevenueRevenue = $1,681,489,350 x (19.725 ÷ 1000)

= $33,167,377.43

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A Rex Tax Billfor a house with a “Market” Value of Approximately

$100,000

A Rex Tax Billfor a house with a “Market” Value of Approximately

$100,000

Property Tax = Assessed Value of Property X Mill Rate= $60,000 X .0403204 [40.3204 ÷

1000]= $2,419.22

In Rex, the School Boards’ mill rate (19.725 mills) accounts for about 49% of your property tax bill; therefore:

School Tax = Assessed Value of Property X Mill Rate= $60,000 X .019725 [19.725 ÷ 1000]= $1,183.50

Assume the assessed value of your property is:

Land $15,000Buildings $45,000Total $60,000

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Topping UpTopping UpIf you can afford it!If you can afford it!

Topping UpTopping UpIf you can afford it!If you can afford it!

The Province only required Boards to levy a Mill Rate of 17.4 Mills17.4 Mills. Thus Rex Boards Rex Boards decided to levy an additional 2.325 Mills decided to levy an additional 2.325 Mills in order to raise “extra” funds for their educational programs.

Note that, in 2004, both the Rex Public Rex Public and Rex Catholic Rex Catholic School Boards set their Mill Rates at 19.72519.725.

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Topping UpIf you can afford it!

Topping UpIf you can afford it!

Recall that Rex’s school boards had the following equalized assessments in 2004

Rex PublicRex Public $3,864,913,900

Rex CatholicRex Catholic $1,681,489,350

Since: Revenue = Assessment X (Mill Rate ÷ 1000)Revenue = Assessment X (Mill Rate ÷ 1000)

Rex PublicRex Public, using their “Equalized Assessment” and the extra 2.325 Mills, raised an extra:

Extra Revenue Extra Revenue = $3,864,913,900 X (2.325 ÷ 1000)

= $8,985,924Rex CatholicRex Catholic, using their “Equalized Assessment” and the extra 2.325 Mills, raised an extra:

Extra Revenue Extra Revenue = $1,681,489,350 X (2.325 ÷ 1000)

= $3,909,462

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What Difference Does it Make?

What Difference Does it Make?

HumdingerHumdinger, SaskatchewanA. Recog. Cost/Pupil $7,000B. Enrolment 2,000C. Total recognized

expenditure (A x B) $14,000,000

D. Assessment $900,000,000$900,000,000E. Equalized Mill Rate 17.4 F. Yield from Prov. Mill

Rate (D x (E÷1000))$15,660,000G. Prov. Grant (C - F) $0H. Prov. Share 0%I. Local Share 100%

ArmiwormArmiworm, SaskatchewanA. Recognized Cost $7,000

B. Enrolment 2,000

D. Total recognized

expenditure (A x B) $14,000,000

D. Assessment $500,000,000$500,000,000E. Equalized Mill Rate 17.4

F. Yield from Prov. Mill

Rate (D x (E÷1000)) $8,700,000

G. Prov. Grant (D - F) $5,300,000

H. Prov. Share 37.86%

I. Local Share 62.14%

ArmiwormArmiworm, SaskatchewanA. Recognized Cost $7,000

B. Enrolment 2,000

D. Total recognized

expenditure (A x B) $14,000,000

D. Assessment $500,000,000$500,000,000E. Equalized Mill Rate 17.4

F. Yield from Prov. Mill

Rate (D x (E÷1000)) $8,700,000

G. Prov. Grant (D - F) $5,300,000

H. Prov. Share 37.86%

I. Local Share 62.14%

Foundation GrantFoundation GrantHorizontal EquityHorizontal Equity

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What Difference Does it Make?

What Difference Does it Make?

Over Ceiling Spending: Horizontal Equity?Over Ceiling Spending: Horizontal Equity?

ArmiwormArmiworm, SaskatchewanEqualized Assessment = $500,000,000

J. Extra $ per pupil $1000

K. Additional cost to

taxpayer (100% local)$2,000,000

L. Addition to Mill Rate

(K x 1000)÷Assessment) 4 mills

M. Final mill rate 21.4 mills

N. % increase in mill rate 22.99%

O. On a house with an assessed

value of $60,000, school taxes

would go up $240.00$240.00TOTAL REVENUE = TOTAL REVENUE =

$16,000,000$16,000,000

HumdingerHumdinger, SaskatchewanEqualized Assessment = $900,000,000

J. Extra $ per pupil $1000

K. Additional cost to

taxpayer (100% local)$2,000,000

L. Addition to Mill Rate

(K x 1000)÷Assessment 2.22 mills

M. Final mill rate 19.62 mills

N. % increase in mill rate 12.78%

O. On a house with an assessed

value of $60,000, school taxes

would go up $132.00$132.00TOTAL REVENUE = TOTAL REVENUE =

$17,658,000$17,658,000

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Equity Via the Foundation Grant Plan

Equity Via the Foundation Grant Plan

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Where They Spent Your MoneyWhere They Spent Your Money

Education spending by Saskatchewan school boards,1999, 2000, 2001

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Where Boards Spent Your Money2001

Where Boards Spent Your Money2001

Instruction70.8%

Education Services0.4%

Ancillary Services0.4%

Facilities11.3%

Transportation6.6%

Special Projects0.9%

Payments to Other SD0.1%

Reserves2.3%

Capital2.8%

Debt1.5%

Tuition Fees2.9%

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Teacher Salaries by ProvinceTeacher Salaries by Province

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Class 4 (More or Less)Class 4 (More or Less)

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Class 6 (More or Less)Class 6 (More or Less)