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1
Finance Overview: AEA’s/LEA’s
Barb HarmsBusiness ManagerGrant Wood Area Education AgencyManagement 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
3
Other AEA Revenues:
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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Special Education $16,754,381
Media Services $ 2,927,692
Educational Services $ 3,213,132
State Reduction $ (1,999,562)
“Controlled Funding” $20,895,643
Finance Formula (cont’d):
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2006-2007 Budgeted Revenues%
Controlled Funding 20,895,643$ 53.7%Federal Revenues 15,189,010$ 39.1%Sale of Services 2,797,650$ 7.2%Other State Revenues 471,979$ 1.2%
Total 38,882,303$ 100.0%
2006-2007 General Fund Revenues
38.6%
53.1%
1.2%7.1%Controlled Funding
Federal Revenues
Sale of Services
Other State Revenues
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Funding for LEA’s: 5 basic principles
1. Funding based on number of students2. State “equalizes” funding through a mix of
state aid & property taxes3. Legislature sets allowable growth – the
annual increase in the “cost per student”4. Local property taxes are a critical part of the
formula5. 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 FormulaProperty Poor District Property Rich District
Additional Levy Additional Levy
State Aid State Aid
$5.40 Uniform Levy
$5.40 Uniform Levy
87.5% of Total
Cost Per
Pupil$4,067
Total Cost Per
Pupil
$4,648
Total Cost Per
Pupil
$4,648
87.5% of Total
Cost Per
Pupil$4,067
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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
Why important?– Districts cannot exceed spending authority– Not the same as cash
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Term Explanation Analogy TypeSpending Authority Total amount a school district can legally spend
during a year.Income + credit cards Recurring
Unspent Balance Remaining amount of spending authority at end of year (Spending Authority minus Actual Expenditures).
Credit cards One time
Term Explanation Analogy TypeCash On Hand Total cash on hand. Savings account One timeState Aid Amount received by a district from state General
Fund.Paycheck Recurring
Property Taxes Amount received by a district from local property taxes.
Paycheck Recurring
Miscellaneous Income
Any income which is not property tax or state aid (must be actually received).
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: # 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:
# 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
20
Funding for LEA’s:
# 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
21
LEA Funding - FacilitiesFacility 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
22
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.
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 IASB: www.ia-sb.org 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
Iowa Association of School Boards (IASB)– Larry Sigel, School Finance Director
515-288-1991 ext. 235