Basics of School Finance in Iowa

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Basics of School Finance in Iowa

• Larry Sigel, IASB School Finance Director

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Pre-Test
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Working with the clickers

• Were going to ask a few introductory questions.
• First, press the button on the lower left labeled
  GO
• The light on the upper left should blink red and
  green for a few second and youre ready to go!!!
• Lets do one for practice

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My favorite animal is

• Dog
• Cat
• Bird
• Cow
• Iguana

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1. School district General Fund revenues are
primarily driven by

• Enrollment
• Local school boards
• School district patrons
• The state Department of Education

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2. School district tax rates are good indicators
of how well a district is managed

• True
• False

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3. The primary factor in determining a school
districts General Fund tax rate is

• The overall budget of the school district
• Total property valuation
• The local school board
• Property valuation per pupil

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4. Generally, school districts may respond in
shortfalls in the General Fund by transferring
funds from the Physical Plant and Equipment Levy
or the State Penny sales tax

• True
• False

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5. On a statewide basis, property taxes
represent about how much of school district
General Fund revenues

• None
• One-third
• One-half
• Two-thirds

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6. School districts are like cities and counties
in that they can do anything not expressly
prohibited by state law

• True
• False

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7. School bond votes must pass by what
percentage (plus one vote)

• 50 percent
• 60 percent
• Two-thirds

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8. High property valuation per pupil districts
receive

• Less state aid per pupil than property poor
  districts
• The same state aid per pupil as property poor
  districts
• More state aid per pupil than property poor
  districts.

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9. School district total General Fund spending is
limited by

• How much money the district can raise and what
  they have in the bank.
• How much local patrons are willing to pay in
  property taxes.
• The spending authority of the district.
• School district spending is not limited.

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10. The Allowable Growth rate is determined by

• Formula
• The Department of Education
• The Department of Management
• The Iowa Legislature

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End of Pre-test
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School Finance Basics
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School Finance - Background

• Dillons rule
• School districts only have those powers expressly
  authorized by the Code of Iowa.
• Home rule
• Cities and counties can do anything not expressly
  prohibited.

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School Finance - Background

• The school foundation formula relies on two
  sources of revenue
• State General Fund appropriations
• Locally raised property taxes

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School Aid - Basics

• Purpose of foundation formula
• Code of Iowa, 257.31
• equalize educational opportunity, to provide
  good education for all children of Iowa, to
  provide property tax relief, decrease the
  percentage of school costs paid from property
  taxes, and to provide reasonable control of
  school costs.

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School Aid - Basics

• The Bright Line in School Finance
• Educational program expenditures are funded and
  equalized by the state foundation formula.
• Facility expenditures are funded locally (with
  some state assistance) and are not under the
  finance formula.

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School Aid - Basics

• Foundation formula - ceiling v. floor
• The foundation formula results in a maximum
  expenditure per pupil and therefore a maximum
  amount a district can raise and spend (note not
  every district has the same ceiling).
• Other states school aid formulas have created a
  minimum spending per pupil.
• This has led to a number of lawsuits nationwide.
• Iowas Constitution does not guarantee
  educational equity.

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School Aid - Basics

• Basic Principles
• The school aid formula is a child-based formula.
• The formula provides funding on a per child
  basis.
• The total amount of foundation formula revenue is
  the number of children times a cost per child.

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Operation of 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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Operation of Foundation Formula
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Operation of Foundation Formula

• Two factors affecting district Regular Program
  budgets
• 1. Enrollment - increases or decreases in
  enrollment affect district budgets.
• 2. Combined district cost changes (Allowable
  Growth).
• Changes in growth in valuations - uniform levy
  rate (5.40) or foundation percentage have no
  effect on Regular Program.

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School Aid - Basics

• Basic Calculations - Budget Guarantee
• Principle Was Districts receive what they
  received in the prior year for the Regular
  Program Budget regardless of enrollment
  reductions. Now revenues will decrease when
  enrollment falls.
• Base Calculation (the way it was)

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School Finance - Weightings

• Why Weight?
• Some populations have higher costs than others.
  Two choices pay more per student or count
  students at value greater than 1.
• Special education has three weightings .72,
  1.21, 2.74 depending on severity.
• These are in addition to the 1.0 weight.

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School Finance - Spending Authority

• Spending authority is the sum of
• Combined District Cost (property tax and state
  aid)
• Miscellaneous income anything not above
• Unspent balance from previous years
• Why important?
• Districts cannot exceed spending authority
• Not a measure of cash
• Why allow districts to carry forward unused
  spending authority?

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Building Blocks of Spending Authority
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School Aid - Funding Programs

• Educational Program Levies
• Instructional Support Levy (ISL)
• Only levy available to schools to increase
  General Fund budget.
• 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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School Aid - Funding Programs

• ISL may be used for any General Fund purpose
  except
• Dropout prevention programs
• Talented and Gifted programs
• PPEL uses
• Management levy uses
• Special education deficits
• ISL generates nearly 140 million statewide
• 11 state / 36 income surtax / 52 property tax

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School Aid - Facilities

• Levies Outside General Fund
• Facility Related Levies
• Board-Approved Physical Plant and Equipment Levy
  (PPEL). Maximum 0.33 / thousand.
• Voter-Approved PPEL. Maximum 1.34 / thousand.
  Maximum 10 years. Caution - allowable uses
  slightly different (simple majority). Can use
  income surtax as well.
• Public Education and Recreation Levy (PERL).
  Maximum 0.135 / thousand. Public use
  playgrounds/recreation facilities.

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School Aid - Facilities

• Facility related levies (cont.)
• Library Levy (AKA Amana Library Levy). Maximum
  of 0.20 / thousand. Used for joint library
  facilities if no local public library available.
• State Penny for School Infrastructure
• Need valid Revenue Purpose Statement if borrowing
  or before expiration of existing vote.
• Effective through Dec. 31, 2029
• Borrow by board action

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School Aid - Facilities

• Facility related levies (cont.)
• Bonded Debt
• Requires 60 majority - onetime election to go up
  from 2.70 to 4.05
• Maximum of 4.05 / thousand
• Maximum 20 years

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School Aid - Other Levies

• Management Levy-
• Used to pay unemployment benefits, insurance (not
  employee benefits), judgements against the
  district, early retirement benefits.
• Cash Reserve Levy
• Reserve 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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Four Questions

• Why do we have enough money to pave the parking
  lot but cant pay teachers?
• Why cant we just levy whatever we need to
  support the school?
• Why dont schools become more efficient?
• Why dont property taxes ever decrease?

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Ways to Increase Spending Authority

• Increase authority
• At-Risk
• Efficiency incentives
• Sharing incentives
• Decrease or shift expenditures
• Early retirement
• SILO/PPEL expenditures
• Sharing (reduce costs)

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School Aid - Contacts

• Iowa Association of School Boards (IASB)
• Larry Sigel, School Finance Director 515-288-1991
  ext. 235 or 515-490-9951 (cell)
• lsigel_at_ia-sb.org
• Website www.ia-sb.org

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Post-test
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1. School district General Fund revenues are
primarily driven by

• Enrollment
• Local school boards
• School district patrons
• The state Department of Education

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2. School district tax rates are good indicators
of how well a district is managed

• True
• False

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3. The primary factor in determining a school
districts General Fund tax rate is

• The overall budget of the school district
• Total property valuation
• The local school board
• Property valuation per pupil

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4. Generally, school districts may respond in
shortfalls in the General Fund by transferring
funds from the Physical Plant and Equipment Levy
or the State Penny sales tax

• True
• False

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5. On a statewide basis, property taxes
represent about how much of school district
General Fund revenues

• None
• One-third
• One-half
• Two-thirds

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6. School districts are like cities and counties
in that they can do anything not expressly
prohibited by state law

• True
• False

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7. School bond votes must pass by what
percentage (plus one vote)

• 50 percent
• 60 percent
• Two-thirds

51
8. High property valuation per pupil districts
receive

• Less state aid per pupil than property poor
  districts
• The same state aid per pupil as property poor
  districts
• More state aid per pupil than property poor
  districts.

52
9. School district total General Fund spending is
limited by

• How much money the district can raise and what
  they have in the bank.
• How much local patrons are willing to pay in
  property taxes.
• The spending authority of the district.
• School district spending is not limited.

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10. The Allowable Growth rate is determined by

• Formula
• The Department of Education
• The Department of Management
• The Iowa Legislature

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End of Post-test
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Summary/wrap-up/reflection

• Lets do the Evaluation right now!!!

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Select your role

• Board member
• Superintendent/Chief Administrator
• School business official
• Other

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How long have you served in your role

• 0 to 2 years
• 2 to 4 years
• 4 to 6 years
• 6 to 10 years
• 10 to 15 years
• More than 15 years

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Enrollment category

• 0 to 249
• 250 to 499
• 500 to 749
• 750 to 999
• 1,000 to 1,499
• 1,500 to 2,499
• 2,500 to 4,999
• 5,000 or more

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How many times have you seen this presentation

• First time
• 2 times
• 3 times
• 4 times
• 5 times
• 6 times
• 7 times
• 8 times

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Value of Content

• Excellent
• Good
• Fair
• Below Average
• Poor

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Method of Instruction

• Excellent
• Good
• Fair
• Below Average
• Poor

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How well did we meet your expectations?

• Met all of my expectations
• Met most of my expectations
• Met some of my expectations
• Met a few of my expectations
• Met none of my expectations

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Overall, I would rate this presentation

• Excellent
• Good
• Fair
• Below Average
• Poor

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• Thanks for coming let me know if you have any
  questions!