Legislative Services Agency

1

Legislative Services Agency

Overview of School Finance in Iowa

LSA contacts:

Shawn Snyder 515-281-7799

Dwayne Ferguson 515-281-6561

2

Brief History of School Finance in Iowa

In 1950 - 4,652 school DistrictsReorganization Plan adopted in 1950’s

1965 – 1,098 school districts1975 – 450 school districts1985 – 437 school districts1995 – 384 school districts2005 – 367 school districtsCurrently - 362 school districts

3

Brief History of School Finance in Iowa

Until the mid 1960’s – school district funding was all property tax.

In 1971, a school foundation program adopted (enrollment based) – substantial increase in State aid to school districts.

In 1989 – enactment of Chapter 257, Code of Iowa. Implementation beginning in FY 1992.

4

Brief History of School Finance in Iowa In 1992, allowable growth adopted. In 1995, modified so that the allowable

growth set 2 years in advance. In 1996, increased Regular Program

Foundation Level from 83.0% to 87.5% beginning in FY 1997 (increased the proportion of State aid and provided property tax relief).

In 1999, Special Education Foundation Level increased from 79.0% to 87.5% beginning in FY 2000.

5

Brief History of School Finance in Iowa In 2001, eliminated the 100.0% budget

guarantee and replaced it with phase-out or alternate budget adjustment to begin in FY 2004. Made permanent on-time funding provision.

In 2006, created additional property tax adjustment aid to “buy down” additional levy rates for qualifying school districts that have the highest tax rates.

6

Brief History of School Finance in Iowa2008 Legislative Session:

State Sales/Use Tax for school infrastructure – excess funds after school infrastructure allocations will be used for property tax relief through school aid formula.

State Categoricals – Additional categorical program funding rolled-into the school aid formula beginning in FY 2010.

7

School District Finance Overview

Revenue SourcesFormula (State Aid and Property Tax)State Categorical FundingMiscellaneous Sources

Budgets/ExpendituresGeneral FundPhysical Plant and Equipment FundManagement FundOther Funds

8

School District Finance Components

Combined District Cost (formula)Regular, Guarantee, Supplementary Weighting, Special Education, AEAs

Instructional Support Management Levy Physical Plant & Equipment Levy Public Education and Recreation Levy Debt Service Levy State Sales/Use Tax for School Infrastructure State/Federal Categoricals

9

School District Finance Components (FY 2009)

Combined District Cost: $3,385.9 million Instructional Support: $181.3 million Management Levy: $105.6 million PPEL: $125.9 million PERL: $1.9 million Debt Service Levy: $112.2 million Sales/Use Tax (SILO): $375.0 million Categoricals: $333.7 million

10

School Finance Formula Goals

Equalize educational opportunity Promote high achievement Provide property tax relief Equalize taxation Establish maximum spending control Predictable Simple Pupil Driven Provide for local discretion Provide adequate funding

11

Combined District Cost

Regular Program Cost+ Budget Guarantee (Budget Adjustment)+ Weighted Enrollment Funding+ AEA Program Funding+ State Categoricals (New in FY 2010)+ Modified Allowable Growth Funding

.

Combined District Cost

12

Regular Program District Cost

District Cost Per Pupil

X Number of Pupils

Regular Program District Cost(Basic “pool” of money for the district)

13

$5,721 – Highest (8 Districts)

$5,546 – Lowest (176 Districts)

$175 – Range• District Cost Per Pupil Increases Each

Year by a Per Pupil Amount (Per Pupil Allowable Growth)

• Minimum District Cost Per Pupil = State Cost Per Pupil

District Cost Per Pupil – FY 2009

14

Allowable Growth Rate

• Recommended by the Governor

• Established by the Legislature within 30 days of

the Governor’s budget recommendation.

• Set 18 months in advance – 2009 Legislature

will set the allowable growth rate for FY 2011.

15

Allowable Growth Rate x State Cost Per Pupil = Growth Per Pupil

For example:

2008-2009

4% Allowable Growth Rate X

FY 2008 State Cost Per Pupil ($5,333)

= $213 Per Pupil

Allowable Growth Amount

16

FY 2009:

$5,333 + $213 = $5,546

State Cost Per Pupil (SCPP)

FY 2009 SCPP = $5,546Used to Determine Allowable Growth Per

Pupil for the Next YearUsed to Determine Minimum District Cost

17

Allowable Growth - HistoryAllowable Growth Rate and State Cost Per Pupil Amounts

FY 1995 to FY 2010

$3,503

$5,768

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fiscal Year

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000$

Allow able Grow th Rate SCPP

18

Basic Funding

Pupil Driven System (Pupils x Cost Per Pupil = Regular Program Budget) Pupil Count Pupils Weighted

• Special Education• English Language Learners• Sharing• At-Risk Formula• Reorganization Incentives• Administration Functions Sharing

Budget Adjustment

19

Weighted Enrollment Funding

Pupil Driven System Weightings

• Provide Funding to Cover Additional Cost• Special Education• English Language Learners• Shared Teachers/Students/Regional Academies• At-Risk Students

• Provide Incentives• Shared Teachers/Students/Regional Academies• Iowa Communications Network (ICN) Sharing• Whole Grade Sharing/Reorganization• Shared Administration Functions (new for FY 2009)

20

Weighted Enrollment Funding

Special Education Weighting FY 2009

Level 1 weighting = 0.72 (28,230)Level 2 weighting = 1.21 (16,047)Level 3 weighting = 2.74 (23,957)Generates $380.0 Million

21

Special Education WeightingsFY 1991 Through FY 2009

68,235

41,252

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,00019

91

1993

1995

1997

1999

2001

2003

2005

2007

2009

Fiscal Year

Spec

ial E

duca

tion

Wei

ghtin

gs

22

Weighted Enrollment Funding Supplementary Weighting

English Language Learners (ELL)At-Risk StudentsSharing Teachers/Students/Community Coll.Whole Grade Sharing ICN Operational SharingReorganization Incentives

Total Weighting = 8,903.57 Funding = $49.6 million

23

Budget Adjustment (Previously Called Budget Guarantee)

Regular Program Budget = Pupils x District Cost

Provides an adjustment in the Regular Program Budget for districts with no or low growth in enrollments

Phase-out began in FY 2005

Scale Down Version

101% Adjustment

24

Budget Adjustment FY 2009

Total B.A. $12.1 Million (155 districts)

Scale Down (50% Based on FY 2004)

$4.8 million (64 districts)

101% Adjustment (101% Based on Previous Year)

$7.3 million (91 districts)

25

Budget Guarantee FY 1996 - FY 2004Budget Ajustment FY 2005 - FY 2009

$0

$5

$10

$15

$20

$25

$30

$35

Do

llars

in M

illio

ns

0

50

100

150

200

250

300

Nu

mb

er o

f D

istr

icts

Rec

eivi

ng

Dollars in Millions Number of Districts

26

Area Education Agency (AEA) Program Funding

Funding through the Combined District Cost AEA Funding - $173.4 million

• Pupil Driven• Flows Through Local District• Special Education Support Services - $123.9 million• Media Services - $23.4 million • Educational Services - $25.9 million• AEA Sharing (New in FY 2009) - $220,000• State Categoricals (New in FY 2010)

27

School Budget Review Committee Funding

Five Member Committee • Authority to Grant Budget Increases• Modified Allowable Growth (Property Taxes)• Unique and Unusual Circumstances“Manage” Formula• Special Education Weights• Cash Reserve• Negative Unspent Balances• Grants Budget Authority

28

School District Revenues

Where do the revenues come from?General Fund

Formula Required Discretionary

Miscellaneous Income State categoricals Federal categoricals

Non General Fund/Other

29

Revenue - Foundation Formula

Where do the revenues come from?

Required Local Levy - Uniform Levy

State Aid

Additional Levy

Property Tax Equity Relief (PTER) Fund (New in

FY 2011)

30

State Aid

Increase Funding for Districts

“Fair” Method to Distribute State Aid

Provide Property Tax Relief

Equalize Effort

31

Foundation Formula

Foundation Level

FY 2009:87.5% of State Cost ($5,546) = $4,853 Per Pupil

State Aid

Uniform Levy$5.40 Per$1000 Valuation

Additional Levy

32

Foundation Formula

Property Rich District

Property Poor District

Uniform Levy$5.40

Additional Levy

State Aid

Uniform Levy$5.40

Additional Levy

State Aid

Foundation Level

Foundation Level

33

87.50% Foundation 79%

Level Foundation

Level

State Aid

AEA Special Education Support

Special Education Instruction

Additional Levy

Uniform Levy

Additional Levy

State Aid

State Aid

Additional Levy

Regular Program

Foundation Formula

34

$331.1 million $105.6 million*

$350.9 million

Additional Levy

$47.3 million

Uniform Levy

$617.7 million

Special Education Regular ProgramInstruction

Additional Levy

State AidState Aid State Aid$1,757.3 million

Additional Levy$27.1 million

AEA Special

Education Support

Foundation Formula (FY 2009)

*Does not include the state aid reduction of $10.0 million

35

Revenue - Foundation Formula

FY 2009

Uniform Levy = $617.7 million

State Aid = $2,224.4 million

Additional Levy (Second Effort) =

$561.0 million

36

Additional Levy – Property Tax Adjustment Aid

FY 2009 - $18.0 million appropriated

to buy down rates

FY 2010 - $24.0 million appropriated

FY 2011 and beyond - $24.0 million

plus PTER funds

37

Property Tax Adjustment Aid

Appropriation of FY 2009 $18.0 million for

FY 2009 “buys” 65 districts down to a rate

of $4.14/$1,000 of valuation.

38

Sidebar – PTER Fund

Starting in FY 2009: Statewide 1% sales/use tax

used to fund SILO with remaining going to PTER.

Funds generated in FY 2009 for PTER will be used

for FY 2011 school aid property tax relief for

property tax adjustment aid.

Any remaining PTER funds will be used to increase

the foundation level.

39

FY 2011 - Property Tax Adjustments

$-

$1.000

$2.000

$3.000

$4.000

$5.000

$6.000

$7.000

$8.000

0 50 100 150 200 250 300 350

Tax

Rat

e pe

r $10

00 V

alua

tion

FY 2011 Adj. P.T. Rate Rate After $24M Approp. Rate After PTER Adj. Foundation Level Increase Impact

Unadjusted Prop. Tax Rate

Prop. Tax Rate w/$24M Approp.

Prop. Tax Rate w/PTER Funds

Foundation Level Increase w/PTER

40

Discretionary- General Fund

Instructional Support ProgramUp to 10.0% of the Regular Program BudgetBoard Approved for Five YearsVoter Approved for Ten Years

FY 2009: 339 Districts $181.3 millionState Aid - ($14.4 million [Frozen])Property Tax - ($90.7 million) Income Surtax - ($76.2 million)$46.2 million Additional State Aid to “Fully” Fund

41

State Categorical Funding for FY 2009

Educational Excellence (Phase I, II) - $55.5 million Student Achievement/Teacher Quality - $248.9

millionTeacher Compensation - $210.0 millionProfessional Development - $28.5 millionOther Programs - $10.4 million

Early Intervention/Class Size Reduction - $29.3 million

42

State Categorical Appropriation Amounts FY 2002 to FY 2009

$-

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

Dol

lars

in M

illio

ns

Class Size Reduction Educational Excellence Student Achievement Teacher Quality

43

State Categorical Roll-in (FY 2010)

Educational Excellence and SATQ Teacher Comp = Teacher Salary Supplement ($250.9 million)

SATQ Professional Development = Professional Development Supplement ($28.5 million)

Early Intervention/Class Size Reduction Supplement ($29.3 million)

Beginning in FY 2010 following categorical items will be funded on a per pupil basis with an allowable growth rate established annually beginning in FY 2011:

44

Federal Categorical - Examples

FY 2008:Title I - $63.3 millionTitle II - $20.6 millionIndividuals with Disablilities

Education ACT (IDEA) - $26.4 million

45

Non General FundRevenue Sources:

Management Levy: $105.0 Mill. (357 districts)PPEL: $125.8 Mill. (336 districts) Public Education and Recreational Levy

(PERL): $2.0 Mill. (18 districts)Debt Levy: $112.1 Mill. (207 districts)State Sales/Use Tax for School Infrastructure:

$375 Mill. (All districts)

46

Sales/Use Tax for School Infrastructure

Statewide Sales/Use Tax for School Infrastructure enacted in 2008.

Funding is based on a per pupil distribution and is linked to the School Infrastructure Local Option (SILO) sales tax distribution formula.

By FY 2014, all districts will receive the same per pupil amount.

Any excess will be used for Property tax relief through the school aid formula.

47

Cash Reserve

Property Taxes Levied for:Cash FlowState Aid, Property Tax ShortfallProvides “cash” behind spending

authority$153.6 million320 Districts

48

State Public School Funding

State General Fund Appropriations forPublic Schools:FY 2007 – $2.302 billion (42.7% of State General Fund expenditures)

Estimated FY 2008 - $2.487 billion (42.4%)Estimated FY 2009 - $2.643 billion (43.1%)

49

Recent IssuesRecent Issues Subject of Legislation:

Equalization of Per Pupil Spending Enrollment Changes (Declines/Increases)

Transportation Costs Property Tax Relief/Property Tax Equalization

Technology School Infrastructure

Teacher Compensation Curriculum

School District Fees

50

Questions?