School Finance 101 The Basics of Iowa School Finance. IASB Convention November Iowa Association of School Boards 1

Transcription

1 School Finance 101 The Basics of Iowa School Finance IASB Convention November 2017 Iowa Association of School Boards 1

2 Presenters Shawn Snyder School Finance Director direct (515) Kevin Kelleher President, IASBO SBO at Dubuque CSD direct (563) Welcome! Session Overview/Packet Information Activities/Check Your Understanding Housekeeping items Ground rules Please feel free to ask questions at any time! Iowa Association of School Boards 2

3 Packet Contents Presentation Slides Handout District Specific Information Fiscal Facts Key Indicators District Cost Per Pupil Comparison Regular Program, Budget Guarantee, New Money Unspent Authorized Budget and Solvency Property Tax Rates by Levy Type Taxable Valuations By District Listing Glossary of Terms Survey NOTE: This power point and all handouts are available electronically upon request. Agenda 1. Fiscal Facts 2. School Aid Formula Principles/Operation 3. Spending Authority 4. Funding Accounting Funding Silos 5. Property taxes 6. Trending Issues 7. Wrap up: Other useful information Iowa Association of School Boards 3

4 1. Fiscal Facts Iowa Association of School Boards 4

5 School Districts FY 2016: All Revenues and Expenditures (in Millions) $6,000.0 $5,000.0 $4,000.0 $3,000.0 $2,000.0 $1,000.0 $5,538.0 $5,475.6 $725.5 Revenues Expenditures Total Revenues = $8,292.6 Total Expenditures = $8,258.2 General Fund accounts for 66% $731.0 $655.9 $684.7 $272.0 $270.8 $ AEAs FY 2016: All Revenues and Expenditures (in Millions) $400.0 $350.0 $300.0 $250.0 $200.0 $150.0 $100.0 $50.0 $ $357.9 $359.4 General Fund $6.1 $2.8 $7.5 $1.5 $9.6 $8.7 $6.1 $2.8 $6.3 $1.8 AEA Sp Ed Inst Fund AEA JH Inst fund Revenues Other Capital Project Funds Expenditures Total Revenues = $385.5 Total Expenditures = $385.2 General Fund accounts for 93% Internal Services Funds Other Remaining Funds FY 2016 General Fund Revenues: School Districts Dollars in Millions Federal, $231.8, 4.2% Property Tax, $1,659.7, 30.0% State, $3,083.6, 55.7% Total =$5,538.0 Other Local, $550.8, 9.9% Sources: Iowa Department of Education, CAR file IASB calculations Misc., $12.1, 0.2% FY 2016 General Fund Revenues: AEAs Dollars in Millions Federal, $120.8, 33.8% Property Tax, $91.1, 25.5% Total =$357.9 Other Local, $23.2, 6.5% State, $121.1, 33.8% Misc., $1.7, 0.5% Sources: Iowa Department of Education, CAR file IASB calculations Iowa Association of School Boards 5

6 Misc., $10.0, 0.2% Other, $217.8, 4.0% Property, $33.6, 0.6% Supplies, $282.9, 5.2% FY 2016 General Fund Expenditures by Object: School Districts Dollars in Millions Purchased Services, $602.5, 11.0% Total =$5,475.6 Salaries, $3,292.7, 60.1% Benefits, $1,036.1, 18.9% Sources: Iowa Department of Education, CAR file FY 2016 General Fund Expenditures by Object: AEAs Property, $2.5, 0.7% Misc., $0.6, 0.2% Other, $27.6, 7.7% Supplies, $12.9, 3.6% Dollars in Millions Purchased Services, $50.5, 14.0% Total =$359.4 Salaries, $203.7, 56.7% Benefits, $61.7, 17.2% Sources: Iowa Department of Education, CAR file Property Taxes: School Districts versus Other Taxing Authorities Percentage of Total Property Taxes by Governmental Taxing Authority: FY 1977 to FY % 50.0% 40.0% 30.0% 20.0% 55.2% 20.2% 19.8% K 12 Schools Counties Cities Community College Co Hospitals Other 41.5% 29.0% 22.1% 10.0% 0.0% FY 1977 FY 1978 FY 1979 FY 1980 FY 1981 FY 1982 FY 1983 FY 1984 FY 1985 FY 1986 FY 1987 FY 1988 FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994 FY 1995 FY 1996 FY 1997 FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Iowa Association of School Boards 6

7 State School Aid: Impact on the State s Budget Est. FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 FY 2013 FY 2012 FY 2011 FY 2010 FY 2009 FY 2008 FY 2007 FY 2006 FY 2005 FY 2004 FY 2003 FY 2002 FY 2001 FY 2000 FY 1999 School Aid as a Percentage of Total General Fund Appropriations 43.8% 42.0% 40.7% 40.6% 41.9% 41.2% 43.6% 45.7% 40.4% 36.2% 36.3% 38.0% 39.0% 40.8% 39.4% 38.4% 36.4% 35.8% 35.6% 35.6% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% School Aid Formula Generates Most of the Funding and Spending Authority FY 2018 Combined District Cost (Revenue Sources in Millions) Additional Levy, $612.7, 13.2% Comm/Ind. Prop. Tax Rep. Appop., $45.0, 1.0% FY 2018 Combined District Cost (Funding Amount by Program in Millions) Dropout Prevention, AEA Funding, $217.2, 4.7% Misc., $(0.6), 0.0% $120.1, 2.6% State Categorical Supplements Districts, $502.9, 10.9% Uniform Levy, $862.1, 18.6% State Aid, $3,111.2, 67.2% Special Education Program, $430.3, 9.3% Regular Program, $3,244.1, 70.0% Supplementary Weighting, $93.3, 2.0% Total may not sum due to rounding. Combined District Cost = $4,630.9 Budget Guarantee, $23.6, 0.5% Combined District Cost = $4,630.9 Iowa Association of School Boards 7

8 School Aid Formula Funding is Driven By Enrollments Down over 20,000 students from all time high, but trending up lately But, amounts vary by district. Budget Enrollments: FY 1991 to FY , , , , , , , , , , , Budget Enrollment Last 10 Years: Overall enrollment is up, but most districts are down Iowa Association of School Boards 8

9 Spending Authority Important Concept Maximum Authorized Budget: By law, districts are limited on the amount they can spend each year. This concept applies to the school district general fund only. Overspending the Maximum Authorized Budget leads to sanctions, which includes a workout plan the School Budget Review Committee (SBRC). Unspent Authorized Budget (UAB): The amount of spending authority remaining at the end of a fiscal year. IASB recommends districts maintain a UAB amount that is between 5% - 15% of the Maximum Authorized Budget. Note that the Maximum Authorized Budget amount is the sum of the UAB amount and spending authority generated in for the specific fiscal year. Spending Authority Statewide Look Annual Spending Authority: FY 2007 to FY 2016 (Dollars in Millions) $7,000.0 $6,000.0 $5,000.0 $4,000.0 $3,000.0 $2,000.0 $1,000.0 $ $6,518.8 $4,811.9 $5,475.6 $4,103.9 $708.0 $1,077.8 $1, Max Auth. Budget Expenditures UAB Unspent Authorized Budget as a Percent of Maximum Authorized Budget (UAB %) 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 17.1% 18.2% 17.0% 16.0% 15.8% 16.0% 14.7% 13.5% 13.0% 14.8% Fiscal Year Iowa Association of School Boards 9

10 Dillon s Rule versus Home Rule School Districts Dillon's Rule Doctrine of enumerated powers to construe school board authority. Meaning: Schools can only do what is expressly authorized in law or rule. New HF 573 New law that allows district to exercise any board and implied power not inconsistent with the law (Consider this Home Rule Lite) Meaning: There may be some oppurtunity to innovate if law doesn't prohibit it. Cities/Counties Home Rule Constitutional provision that provides cities/counties a broad interpretation of authority. Meaning: Cities and Counties can manage their own affairs as they deem appropriate long as the law doesn't expressly prohibit it. Fiscal Facts Final Thoughts A district s general fund accounts for the largest portion of revenues and expenditures On average, state aid accounts for about 56% of general fund revenue and property tax accounts for 30% On average, salaries/benefits account for about 80% of general fund expenditures The school aid formula funding accounts most of the general fund revenues (and spending authority) Enrollments drive school district funding amounts School districts operate under Dillon s rule, however, a new law may provide for additional innovation Spending authority is key districts have a ceiling (Maximum Authorized Budget) and spending above that amount violates the law. Iowa Association of School Boards 10

11 2. School Finance Formula: Principles and Operations Iowa s School Aid Formula Basis of current formula created in early 1970 s: Included a uniform levy requirement Established a per pupil funding foundation Established a maximum growth on each district budget Leveled-up of low spending districts Provided a minimum state aid amount Budgets based on enrollments put control on district s budget amount Current formula put in place in FY 1992: Created Chapter 257, Code of Iowa Increased uniform levy and foundation level Decreased variance in district per pupil funding amounts Legislature establishes growth rate Iowa Association of School Boards 11

12 Purpose of the Finance Formula Stated in Code of Iowa, : Equalize educational opportunity, provide a good education for all children of Iowa, provide property tax relief, decrease the percentage of school costs paid from property taxes, and to provide reasonable control of school costs. Principles and Goals School Finance Formula Equity in Expenditure Property Tax Relief Equalization in Taxation Provide Uniform State Aid Allocation Formula Predictable Simple Pupil Driven Provide for Local Discretion/Incentives Establish Maximum Spending Control Spending Authority Does Iowa s school aid formula meet these criteria? Iowa Association of School Boards 12

13 State School Foundation Program Iowa s School Aid Formula: Impacted by legislative policy decisions (Supplemental State Aid and others) Implemented by the Department of Management (Aid and Levy Worksheet) Determines generated spending authority Determines the state aid and property tax mix based on the foundation levels Driven by district enrollments/weightings and per pupil funding levels Allows for some local discretion School Aid Formula - Supplemental State Aid (SSA) Major policy decision made by the legislature Impacts per pupil funding that drives school aid formula Governor recommends a state percent of growth rate, but legislature actually sets the rate Rate is multiplied by the state cost per pupil amounts and that per pupil increase is called Supplemental State Aid (SSA) Note this growth rate DOES NOT guarantee a districts funding will increase by that rate Iowa Association of School Boards 13

14 SSA Calculation Calculation-State Cost Per Pupil (SCPP) FY 2017 State Cost Per Pupil (SCPP) $6,591 FY 2018 State Rate of Growth X 1.11% FY 2018 State Cost Per Pupil (SCPP) = $6,664 Allowable growth in District Cost Per Pupil (DCPP) $ 73 Example: FY 2017 DCPP Dollar Value Rate of Growth FY 2018 DCPP District A $6,591 $73 $6,664 District B $6,623 $73 $6,696 This same methodology used for all 10 per pupil amounts State Percent of Growth From FY FY % State Percent of Growth Rate: Formula Driven Rate vs. Legislative Action (FY 1973 through FY 2018) 14.00% 12.00% 13.59% 10.00% 8.00% 6.00% 4.00% 4.00% 2.00% 0.00% 2.54% 0.00% 1.11% State Percent of Growth: Formula Driven State Percent of Growth: Legislative Action Iowa Association of School Boards 14

15 Regular Program District Cost (RPDC) RPDC is largest portion of: Combined District Cost (CDC) Spending authority No strings attached (education/operations) Two factors in RPDC calculation: District Cost Per Pupil (DCPP): Per pupil increases based on SSA amounts Enrollment - changes impact RPDC Budget guarantee: Provides a buffer for districts with enrollment decreases Funded with property taxes and requires board approval Regular Program Amount and Budget Guarantee District A District B FY 2017 Budget Enrollment: Enr. Change: 10 (10) FY 2018 Budget Enrollment: FY 2018 DCPP: X $ 6,664 X $ 6,664 FY 2018 Reg. Program Amount: $ 3,398,640 $ 3,265,360 FY 2017 Reg. Program Amount: $ 3,295,500 $ 3,295,500 FY 2018 RPC Vs. FY 2017 RPC: 3.1% 0.9% If < 1.0%, Budget Guarantee Amount: N.A. $ 63,095 FY 2018 Reg. Program Amount w/b.g.: $ 3,398,640 $ 3,328,455 "New Money": $ 103,140 $ 32,955 "New Money Percent": 3.1% 1.0% District A: Enrollment increase Not on budget guarantee New money of 3.1% District B: Enrollment decrease On budget guarantee New money of 1.0% Iowa Association of School Boards 15

16 New Money is a Key Concept Change in Total Regular Program What s available for additional expenses Impacted by enrollments and SSA Multiple years of budget guarantee mean low or negative new money Enr. = 4.0% Enr. = 4.0% Enr. = 4.0% SSA = 4.0% SSA = 2.0% SSA = 0.0% Budget Guarantee: YES YES YES New Money: 1.00% 1.00% 1.00% Enr. = 2.0% Enr. = 2.0% Enr. = 2.0% SSA = 4.0% SSA = 2.0% SSA = 0.0% Budget Guarantee: NO YES YES New Money: 2.00% 1.00% 1.00% Enr. = 0.0% Enr. = 0.0% Enr. = 0.0% SSA = 4.0% SSA = 2.0% SSA = 0.0% Budget Guarantee: NO NO YES New Money: 4.00% 2.00% 1.00% Enr. = 2.0% Enr. = 2.0% Enr. = 2.0% SSA = 4.0% SSA = 2.0% SSA = 0.0% Budget Guarantee: NO NO NO New Money: 6.00% 4.00% 2.00% Enr. = 4.0% Enr. = 4.0% Enr. = 4.0% SSA = 4.0% SSA = 2.0% SSA = 0.0% Budget Guarantee: NO NO NO New Money: 8.00% 6.00% 2.00% Example Declining Enrollments Impact on Regular Program Funding Year 1 Year 2 Year 3 Year 4 Year 5 Enrollment District Cost Per Pupil $ 6,591 $ 6,664 $ 6,731 $ 6,866 $ 7,003 Regular Program $ 3,295,500 $ 3,198,720 $ 3,101,645 $ 3,037,299 $ 2,973,987 Budget Guarantee 0 $ 129,735 $ 129,062 $ 95,363 $ 93,685 Total Regular Program $ 3,295,500 $ 3,328,455 $ 3,230,707 $ 3,132,661 $ 3,067,672 New Money $ 32,955 $ (97,748) $ (98,046) $ (64,990) New Money % 1.00% 2.94% 3.03% 2.07% Declining Enrollments Example: Total Regular Program Funding $3,400,000 $3,300,000 Down over $260,000 $3,200,000 $3,100,000 $3,000,000 $2,900,000 $2,800,000 $2,700,000 Year 1 Year 2 Year 3 Year 4 Year 5 Regular Program Budget Guarantee Iowa Association of School Boards 16

17 Regular Program Funding, Budget Guarantee, New Money Table Discussion: How are your enrollments trending Impact on regular program funding Is your district on budget guarantee and if so, how many years? What s the new money for your district? District Per Pupil Amount Sidebar Issue: Variances in the DCPP FY 2018 District Cost Per Pupil Amounts # of Districts % of Districts Top of Category over SCPP $6, % $0 $6,665 to $6, % $35 $6,700 to $6, % $70 $6,735 to $6, % $105 $6,770 to $6, % $140 $6,805 to $6, % $174 $6, % $175 State Cost Per Pupil (SCPP) = $6,664 in FY 2018 Iowa Association of School Boards 17

18 Sidebar Continued DCPP Issue School Aid Formula - Enrollments Remember that formula funding is pupil driven Important to understand the terminology: Certified enrollment = resident students Budget enrollment = prior year s certified enrollment used for formula funding Served enrollment = students in classrooms Weighted enrollment = additional student FTE s for specific purpose Enrollment Count date = October 1 each year Iowa Association of School Boards 18

19 Sidebar Open Enrollment School Aid Formula - Weightings Pupil Driven System Weightings Add pupils on an FTE basis Reasons for additional weightings: Increase student opportunities Provide incentives for desired actions Provide funding for additional costs Weightings x District Cost Per Pupil adds spending authority and funding Iowa Association of School Boards 19

20 School Aid Formula - Weightings FY 2018: Total Funding Generated from Weightings (Dollars in Millions) At Risk, $16.0, 3.1% ESL, $30.1, 5.8% Reorganization Incentives, $2.6, 0.5% Sharing, $44.6, 8.5% Special Education, $430.3, 82.2% Totals may not sum due to rounding. Total = $523.6 School Aid Formula Categorical Funding What are they? Formula generated funding for specific purpose, determined on a per pupil basis, includes: Teacher Salary Supplement (TSS) Professional Development Supplement (PDS) Early Intervention Supplement (EIS) Teacher Leadership Supplement (TLS) Dropout Prevention (DOP) Important to know: Per pupil amounts vary between districts (except TLS) Per pupil amounts impacted by SSA Must be used for designated purpose TSS, PDS, EIS, and TLS funded with state aid only DOP funded with property tax only Iowa Association of School Boards 20

21 School Aid Formula AEA Programs and Support What is it? Funding for AEAs is generated through district s budget because AEAs have no taxing authority (Think Flow-Through ) AEA Programs that generate funding: Special Education Support Media Services Educational Support Teacher Salary Supplement Professional Development Supplement Important to know: Funding generated based on enrollments/weightings on a district-by-district basis Shows up as spending authority for district, but also will be reflected as an expenditure School Aid Funding Combined District Cost FY 2018 Combined District Cost (Funding Amount by Program in Millions) Dropout Prevention, $120.1, 2.6% AEA Funding, $217.2, 4.7% Misc., $(0.6), 0.0% State Categorical Supplements Districts, $502.9, 10.9% Special Education Program, $430.3, 9.3% Regular Program, $3,244.1, 70.0% Supplementary Weighting, $93.3, 2.0% Budget Guarantee, $23.6, 0.5% Combined District Cost = $4,630.9 Iowa Association of School Boards 21

22 School Aid Formula Revenue Foundation formula determines the mix of revenue sources Uniform levy $5.40/$1,000 taxable valuation all property owners pay Serves as the base of the foundation level State aid Funds up to the foundation levels Funds the state categorical supplements Funds statewide preschool program Funds school aid formula property tax relief Additional Levy Funds per pupil amounts above foundation level Also funds budget guarantee, dropout prevention, AEA Media, and AEA Ed. Support Commercial and Industrial Replacement based on an appropriation amount outside the school aid formula School Aid Formula Funding and Revenues School Aid Formula Funding by Program Area and Revenue Source FY 2018 Program Revenue Sources State Uniform Levy Additional Levy Total Regular Program State Aid Property Tax $ 1,968.1 $ $ $ 3,244.1 Budget Guarantee Property Tax NA NA $ 23.6 $ 23.6 Weightings State Aid Property Tax $ $ 1.3 $ 67.1 $ Dropout Prevention Property Tax NA NA $ $ Teacher Salary Supplement (TSS) State Aid $ NA NA $ Prof. Development Supplement (PDS) State Aid $ 31.7 NA NA $ 31.7 Early Intervention Supplement State Aid $ 34.5 NA NA $ 34.5 Teacher Leadership Supplement State Aid $ NA NA $ AEA Special Ed. Support State Aid Property Tax $ NA $ 35.5 $ AEA Media Services Property Tax NA NA $ 28.3 $ 28.3 AEA Ed. Support Property Tax NA NA $ 31.3 $ 31.3 AEA TSS State Aid $ 15.7 NA NA $ 15.7 AEA PDS State Aid $ 1.8 NA NA $ 1.8 Statewide Vol. Preschool State Aid $ 78.2 NA NA $ 78.2 School Aid Formula Property Tax Relief $ 88.9 $ (88.9) $ Note: Property tax amounts not adjusted for C&I or utility replacement Iowa Association of School Boards 22

23 School Aid Funding Foundation Formula FY 2018 In theory and based on Iowa code this is what per pupil funding under the formula looks like: SCPP = $6,664 But for 4-years the SSA property tax relief provision replaced additional levy with state aid so this is what it looks like for FY 2018 Addidtional Levy 12.5% = $833 Addidtional Levy = $750 Property Tax Relief Payment = $83 State Aid State Aid 87.5% Foundation Level = $5,831 Uniform Levy Uniform Levy Foundation Formula Equalizes Tax Effort (somewhat) District A: Higher valuation per pupil More in uniform levy Less in state aid Additional levy rate lower District B: Lower valuation per pupil Less in uniform levy More in state aid Additional levy rate higher Real District A Real District B Enrollment= 1,219.8 Enrollment= 1,215.8 Tax. Valuation Per Pupil= $ 611,043 Tax. Valuation Per Pupil= $ 218,645 Total Tax Rate= $ Total Tax Rate= % 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Uniform 11.3% Levy % Uniform 11.3% Levy ## State Aid State Aid ## 1.2% 90.0% 1.2% PTRP DCPP = $6,664 DCPP = $6, PTRP 83 ## 80.0% Additional Levy 750 Additional Levy 750 ## 38.0% 70.0% Additional 6664 Levy 60.0% Additional 6664Levy PTRP PTRP 50.0% 69.8% State Aid State Aid Uniform Levy 40.0% Uniform Levy 30.0% 49.5% 20.0% 10.0% 17.7% 0.0% Iowa Association of School Boards 23

24 School Aid Funding Pupil Driven State Cost Per Pupil Amounts for FY 2018: Regular Program Special Ed. Instruction $6,664 $6,664 Key = Additional Levy = Uniform Levy = State Aid Teacher Salary Supplement $ Early Prof. Dev. Supplement Intervention Supplement $ $ Teacher Leadership Supplement $ Area Education Agency State Cost Per Pupil Amounts for FY 2018: AEA Sp. Ed. Support $ AEA Media Services AEA Ed. Support Teacher Salary Supplement Prof. Dev. Supplement $ $ $ $ 3.47 School Aid Formula Property Tax Relief Four property tax relief provisions that increase state aid and reduce the additional levy: Property Tax Adjustment Aid (1992): Eventual phase-out 284 districts - $8.5 million Property Tax Replacement Payment (PTRP FY 2014): Picks-up property tax portion that results from SSA All districts receive - $46.8 million ($83 per pupil) Property Tax Equity and Relief (PTER FY 2007): Targeted tax relief 61 districts (FY 2018) - $33.7 million PTER Foundation Level Increase: Provision in place that hasn t been used if certain requirements meant from PTER fund, excess funds would be increase foundation level Iowa Association of School Boards 24

25 School Aid Revenues Combined District Cost FY 2018 Combined District Cost (Revenue Sources in Millions) Additional Levy, $612.7, 13.2% Comm/Ind. Prop. Tax Rep. Appop., $45.0, 1.0% Uniform Levy, $862.1, 18.6% State Aid, $3,111.2, 67.2% Total may not sum due to rounding. Combined District Cost = $4,630.9 School Aid Formula Final Thoughts Generates largest portion of a district s overall funding and spending authority Impacted by enrollments and legislative decision (SSA) SSA state percent of growth increases the per pupil funding amount Regular program funding accounts for largest portion of school aid funding New Money is a good measure of the annual change in funding levels AEAs funding flows-through school districts State aid is the largest portion of school aid revenues Iowa Association of School Boards 25

26 3. Spending Authority Spending Authority Key Concept Maximum a district is allowed to spend annually Applies to school district general fund Calculated by the Department of Management Monitored by the School Budget Review Committee (SBRC) and the Department of Education Provides funding equity places a cap on overall budget Is NOT a measure of cash not an accounting concept Overspending the maximum authority = VIOLATION OF THE LAW Iowa Association of School Boards 26

27 Spending Authority Key Terms to Note Maximum Authority: Maximum a district may spend in a year Unspent Authorized Budget (UAB): Amount of spending authority remaining at the end of fiscal year (carries over to the next year) Unspent Balance: Same as UAB UAB Ratio or Unspent Balance Ratio: UAB amount divided by Maximum Authority Annual UAB Ratio: Measure of spending authority generated in a year versus expenditures in that year Note: not all spending authority comes with revenue Accounting Terms Key Terms to Note Accounting Terms GAAP: Cash Balance: Represents the cash on hand, can in bank, and investments at any given time Assigned Fund Balance: Internal designation to set aside general funds for a specific purpose Unassigned Fund Balance: Cash net of receivables earned and payables due Solvency Ratio: Measure of district s available revenue. Sum of assigned/unassigned fund balances divided by general fund revenue (w/o AEA flow-through) Iowa Association of School Boards 27

28 Building Blocks to Determine District s Maximum Spending Authority SPENDING AUTHORITY VS. CASH Spending Authority Component Revenue Source Regular Program District Cost D State Aid & Property Tax Supplementary Weighting D State Aid & Property Tax Special Ed District Cost D State Aid & Property Tax Teacher Salary Supplement State Aid D Prof Dev Supplement D State Aid Early Intervention State Aid D Teacher Leadership Compensation D State Aid AEA Support State Aid & Property Tax D SBRC Modified Amounts No Cash Source D Preschool Foundation Aid State Aid D Instructional Support Authority D Income Surtax & Property Tax Ed Improvement Authority D Income Surtax & Property Tax D All Revenues, except State Other Miscellaneous Income Aid/Property Tax Unspent Authority Budget - Previous Year No additional cash No Spending Authority Cash Reserve Levy D D Spending Authority More Important Things to Know School Budget Review Committee: May grant additional spending authority but it doesn t come with revenue Modified Supplemental Amount (MSA): This is the granted spending authority approved by the SBRC Cash Reserve Levy: Board approved levy that helps with cash flow and can provide revenue for added MSA. But levying for cash reserves DOES NOT increase spending authority Iowa Association of School Boards 28

29 Sidebar SBRC and MSA The SBRC may grant MSA (adding spending authority) Class action items: On-time funding Open enrollment after count day Added costs for ELL Special Ed. Deficit Unusual circumstances (many outlined in Code) Comparison of Concepts KEY MEASURE DEFINITION TARGET QUESTION TO BE ANSWERED? Solvency Ratio Percent of unobligated funds (cash) 5% - 15%, recommended not to exceed 25% Can we manage short and long term unexpected demands on cash? Unspent Percent of Authorized remaining Budget (UAB) spending authority Ratio 5% - 15%, recommended not to exceed 25% (< 0%: report to SBRC ) Are we within legal minimums? What do trends tell us? Required SBRC workout plan if negative. Annual Unspent Spending Authority Percent of annual authority that is spent in current year Build to UAB Ratio goal stabilize at 0% Are we spending authority generated for a given year, using prior years spending authority, or building levels too high? Iowa Association of School Boards 29

30 Dubuque UAB Example $17,000,000 $16,000,000 $15,793,205 $15,664,138 $15,000,000 $14,000,000 $13,000,000 $13,231,544 $12,000,000 $11,000,000 $10,000,000 $9,000,000 $8,000,000 $8,340,070 $11,926,704 $8,676,305 $8,819,457 $8,972,349 $8,724,457 $11,855,431 $11,129,370 $10,627,941 $9,987,313 $10,509,744 $10,514,007 $10,507,021 $9,323,912 $7,000,000 $6,000,000 $5,000,000 $4,000,000 $4,882,548 $3,000,000 $2,000,000 $1,000,000 $0 $1,377,930 $679, Represents 1/12 of annual expenditures IASB Report UAB and Solvency FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Unspent Authorized Budget (UAB) $ 1,395,535 $ 907,458 $ 469,961 $ 529,613 $ 462,518 UAB Percentage 16.8% 10.8% 5.7% 7.0% 5.8% Annual Spending Authority Generated $ 6,979,139 $ 7,002,528 $ 7,364,504 $ 7,123,065 $ 7,412,801 General Fund Expenditures $ 6,916,177 $ 7,490,605 $ 7,802,001 $ 7,063,413 $ 7,479,896 Difference (Generated vs. Expended) $ 62,962 $ (488,077) $ (437,497) $ 59,652 $ (67,095) Annual UAB 0.9% -7.0% -5.9% 0.8% -0.9% Unassigned Fund Balance $ 504,163 $ 106,448 $ 124,513 $ 474,416 $ 513,522 Assigned Fund Balance $ - $ - $ - $ - $ - AEA Flow-Through $ 285,627 $ 276,319 $ 291,344 $ 302,675 $ 301,015 Solvency Ratio 7.3% 1.6% 1.7% 6.6% 7.0% Cash Reserve Levy $ 270,000 $ 270,000 $ 385,000 $ 410,000 $ 355,000 Iowa Association of School Boards 30

31 UAB and Solvency What position is your district in? Spending Authority Final Thoughts Exceeding maximum authority violates the law Spending authority is a calculation, not a measure of cash, and not an accounting measure (won t be on an audit report) Applies to school districts but not AEAs Important to know the UAB trend in your district The school aid formula generates most of a district s spending authority The SBRC may grant districts a modified supplemental amount (MSA) this adds additional spending authority (but they don t provide revenue) Iowa Association of School Boards 31

32 4. Fund Accounting Funding Silos FUND ACCOUNTING KEY CONCEPT! FUNDING SILOS Iowa Association of School Boards 32

33 Lots of different funds, BUT Dillon s Rule these funds are separate can t mix TYPE GOVERNMENTAL FUND PROPRIETARY FUND FIDUCIARY FUNDS FUND GENERAL MANAGEMENT PUBLIC STUDENT CAPITAL PHYSICAL PLANT DEBT ENTERPRISE INTERNAL TRUST & AGENCY FUND FUND EDUCATION & ACTIVITY PROJECTS & EQUIPMENT SERVICE FUND SERVICE FUNDS RECREATION LEVY FUND FUND LEVY FUND FUND (PERL) SALES TAX (PPEL) (Health & Dental ) (Flowers) ADMISSIONS FEDERAL ACTIV. FEES SALES TAX STATE REVENUES PROP. TAXES PROP. TAXES PROP. TAXES STDNT DUES PROP. TAXES PROPERTY MEAL SALES GENERAL DESIGNATED STATE AID FUND RAISING TAXES FUND GIFTS MISC INCOME (Max $.135) CO-CURRIC. TUITION AND EXTRA- TRANSFERS CURRICULAR (PPEL & Sales Tax) ACTIVITIES SALARIES GEN LIABILITY PURCHASE AND FOOD SERVICE SELF INSURED EMPLOYEE INSURANCE RECREATION IMPROVEMENT OF PAYMENT BREAKFAST & HEALTH SPECIFIC BENEFITS PLACES SUPPORT GROUNDS OF LUNCH INSURANCE PURPOSES EXPENDITURTES SERVICES UNEMPLOYMENT & CO-CURRIC. CAPITAL BUILDING PRINCIPAL GOODS OR AND MATERIALS PLAYGROUNDS ACTIVITIES PROJECTS CONSTRUCTION AND SERVICES PROJECTS SUPPLIES EARLY RETIRE REPAIR INTEREST PROVIDED CPTL OUTLAY BENEFITS COMM. ED REMODELING COMM. ED. FROM ONE DEPT EQUIP > $500 TO ANOTHER Dubuque Fund Overview Iowa Association of School Boards 33

34 Governmental Proprietary Fiduciary General Special Revenue Capital Projects Debt Service Enterprise Internal Service Trust Agency Management Student Activity PERL Special Rev. Trust PPEL Local Option Sales/Statewide Sales and Services Tax Child Care Scholarship Trust Pension Trust Investment Trust GAAP Fund Structure GAAP = Generally Accepted Accounting Principles Accounting rules promulgated by: GASB Governmental Accounting Standards Board Fund types: Governmental - account for most governmental functions Proprietary - account for organizations and activities that are similar to the private sector Fiduciary - account for assets held by the district that belong to others Iowa Association of School Boards 34

35 Governmental Funds General Fund Special Revenue Funds Capital Projects Funds Debt Service Fund Governmental: General Fund Money In: State aid Property taxes from: School Aid Formula Levies Instructional Support Taxes Cash Reserve Levy Grants Most miscellaneous Income Money Out: Most wages and benefits Supplies Equipment Utilities Purchased services Iowa Association of School Boards 35

36 Categorical Funding (within the General Fund) Also treat as Silos only Accounts, not Funds Teacher Salary Supplement Professional Development Iowa Early Intervention Statewide Voluntary Four Year Old Preschool SPED Special Education At-Risk Home School Assistance Dropout Prevention Beginning Teacher Mentoring Beginning Administrator Mentoring Nonpublic Textbook Services Gifted and Talented ELL English Language Learners Teacher Leadership Compensation Sidebar: HF 564 Added Categorical Flexibility Categorical Professional Development Dropout Prevention Preschool Program GF/Student Activity Fund Adds Uses/Eliminates Restrictions Textbooks/curriculum materials that include PD Administering assessments that include PD Eliminates percent that was to be used for Iowa Core Guidance counselors Programs aimed at high absenteeism, truancy, tardiness Removes 5% limitation for district/building/grade specific programs Supplies Translation services Playground equipment and repair Student food and beverages Rental fees Allows transfer for protective and safety equipment for extracurricular interscholastic athletics Iowa Association of School Boards 36

37 Sidebar: HF 565 Flexibility Account Balances from: SVPP PD Home School Expired/repealed programs Program requirements met? Flexibility Account Balances to: SVPP Start Up PD Home School DOP / At Risk Any GF purpose Board Resolution to spend? Deference will be given to decisions made by a school board Governmental: Special Revenue Management Fund Money In Board approved property tax Money Out Liability insurance Early retirement Unemployment claims Tort payments Arbitration/Mediation Costs Iowa Association of School Boards 37

38 Governmental: Special Revenue Public Education and Recreational Levy (PERL) Money In Voter-approved levy ($0.135/$1,000) Fees Money Out For the purchase & construction of playground equipment Community wide efforts like community swimming pool, community tennis courts, adult education Governmental: Special Revenue Student Activity Fund Money In Activity admissions; gate receipts Student fundraising events Picture money New - general fund (transferred to SAF) for protective/safety equipment Money Out Co-curricular Activities Iowa Association of School Boards 38

39 Governmental: Capital Projects Physical Plant and Equipment Levy (PPEL) Money In Regular PPEL (Board approved) Up to $0.33/$1,000 Voter approved PPEL Requires 50% approval Up to $1.34/$1,000 Property tax or combination of property tax and income surtax Approve for up to 10- years Allowed to borrow against property tax portion of proceeds Money Out Purchase grounds, construct sidewalks, roadways, Construction of buildings Purchase, lease, leasepurchase of buildings Repair of buildings Technology equipment over $500 Buses and bus repair over $2500 Governmental: Capital Projects Secure an Advanced Vision for Education (SAVE) Money In Bond proceeds SAVE Funds From state sales tax revenue Distributed monthly (about $950 per pupil) Money Out Directed by Revenue Purpose Statement (RPS) For the purpose for which the bonds or indebtedness was incurred Any school infrastructure authorized by Iowa Code 423F May be used for any PPEL purpose Iowa Association of School Boards 39

40 Sidebar: Save SAVE? Things to know about SAVE Replaced the School Infrastructure Local Option (SILO) tax as if July 1, 2008 Sunset 12/31/2029 Extension and diversion of some of these funds a hot topic in the legislature Can t use for salaries, but can help ease burden on a district s general fund Certificate of Need required for using funds on new construction for districts below 250 enrollment or below 100 in high school State Penny revenue must be on hand to lower debt can t anticipate next year s revenue Governmental: Debt Service Debt Services Levy Money In Property tax for general obligation bonds Requires 60.0% voter approval 20 years max Up to $2.70 unless voters approve separate measure allowing up to $4.05 max Debt amount cannot exceed 5.0% of assessed valuation Transfers from other funds Money Out Principal and interest payments on debt for voter approved levy for construction and renovation of school buildings, sites and other school facilities Iowa Association of School Boards 40

41 Governmental Proprietary Fiduciary General Special Revenue Capital Projects Debt Service Enterprise Internal Service Trust Agency Management Student Activity PERL Special Rev. Trust PPEL Local Option Sales/Statewide Sales and Services Tax Child Care Scholarship Trust Pension Trust Investment Trust Proprietary: Enterprise School Nutrition Fund Money In Lunch fees State/federal reimbursements Money Out Expenses related to the hot lunch/nutrition program Child Care Fund Money In Fee for service revenues Money Out Any expenditure related to the Child Care program (note that this is not the statewide voluntary preschool program) Iowa Association of School Boards 41

42 Money Out Proprietary: Internal Service Internal Service Funds Money In Departmental reimbursements and charge-backs Purchasing or production of goods and services Examples Self-insurance fund Risk management fund Print shop Governmental Proprietary Fiduciary General Special Revenue Capital Projects Debt Service Enterprise Internal Service Trust Agency Management Student Activity PERL Special Rev. Trust PPEL Local Option Sales/Statewide Sales and Services Tax Child Care Scholarship Trust Pension Trust Investment Trust Iowa Association of School Boards 42

43 Fiduciary: Trust and Agency Private Service Trust Funds Money In Benefactor gifts Money Out Both principal and interest spent on the trust s intended purpose Possible Types: Scholarship funds Agency Funds Money In Individuals Private organizations Money Out Funds held in a custodial capacity on behalf of the owner Possible Types: PTAs; PTOs; Booster Clubs In what fund do you normally account for: 1 State aid revenue 2 Property tax revenue Fund Accounting Recap Answer 3 Early retirement expenditures 4 Playground equipment expense 5 Gate receipts 6 Bond proceeds revenue 7 Technology expenditures > $500 8 Sales tax revenue 9 Self insurance health premiums 10 PTOs; Booster Clubs revenue and expenditures Bonus: Benefactor funded scholarships expenditures Iowa Association of School Boards 43

44 In what fund do you normally account for: Fund Accounting Recap Answer 1 State aid revenue General fund; School Nutrition 2 Property tax revenue General, Management, PPEL, PERL or Debt Service fund 3 Early retirement expenditures Management fund 4 Playground equipment expense PERL, PPEL, Capital Projects or General fund 5 Gate receipts Student Activity fund 6 Bond proceeds revenue Capital Project Fund or PPEL 7 Technology expenditures > $500 PPEL, Capitals Project fund or General fund 8 Sales tax revenue Capital Projects fund 9 Self insurance health premiums Internal Service fund 10 PTOs; Booster Clubs revenue and Agency fund expenditures Bonus: Benefactor funded scholarships expenditures Trust fund 4. Property Taxes Iowa Association of School Boards 44

45 Property Taxes- Timeline Budget Year (or FY 2018): Taxable valuations used Calendar year 2016; January 2016 School budgets certified April 15, 2017 Tax levies certified - based May/June (2017) upon 2016 valuations Property taxes paid September 2017 and March 2018 General Fund Property Taxes FY 2018 (In millions) School Aid Formula Levies: Discretionary General Fund Levies: Total General Fund Levy Uniform Levy Additional Levy Cash Reserve Ed. Improvement* Instructional Support(ISL)* $862.1 $612.7 $224.7 $ 0.8 $138.1 $1,838 *Districts can use an income surtax for this also will cover later Iowa Association of School Boards 45

46 Non-General Fund Property Taxes FY 2018 (In millions) Management Levy $137.0 Regular PPEL $55.4 Voter PPEL* $139.8 PERL $2.7 Debt Service $180.1 Total Non-General Fund Levies $515.0 *Districts can use an income surtax for this also will cover later School District Discretionary Levies FY 2018 Code Section School Disrict Discretionary Levies Approval Number of Districts with Levy Amount Levied (in Mill.) Cash Reserve Board Approved 231 $ N.A. Income Surtax Amount (in Mill.) Board Approved for up to 5 Years Instructional Support 330 $ $ 91.2 Voter Approved for up to 10 Years (majority approval) Voter Approved (in place until Board rescinds or reverse referendum) Educational Improvement levy 3 $ 0.8 $ 0.1 However, no new districts can implement this Regular Physical Plant and Equipment Levy (PPEL) Board Approved 328 $ 55.4 N.A Voter Approved PPEL Voter Approved (Up to 10 Years requires majority approval) 263 $ $ Public Education and Recreation Levy (PERL) Voter Approved (in place until Board rescinds or reverse referendum) 22 $ 2.7 N.A Management Board Approved 325 $ N.A Debt Services Voter Approved (requires 60.0% approval) 168 $ N.A. # of Districts = 333 Totals $ $ Iowa Association of School Boards Sources: Iowa Department of Management, School Aid file, IASB analysis and calculations Iowa Association of School Boards 46

47 School Property Taxes - Types FY 2018 School District Levies (Millions of Dollars) $1,000.0 $900.0 $800.0 $700.0 $600.0 $500.0 $400.0 Schl. Aid Formula Levies $862.1 $612.7 Total School Levy = $2,353.0 M Non-General Fund Levies $300.0 $200.0 $224.7 $138.1 $137.0 $139.8 $180.1 $100.0 $- $0.8 $55.4 $2.7 Sidebar Cash Reserve Levy Purpose is to build up GF reserves to handle the unexpected; or fund SBRC modified supplemental amount (think special education deficits) Used to fund spending authority but does not generate spending authority Funded with property tax via school board action annually Iowa Association of School Boards 47

48 Property Taxes What property taxes are being collected on behalf of your district? Do you have: Cash Reserve Levy? Instructional Support Levy? PPEL Board? PPEL Voter? PERL? Debt Service? Iowa Association of School Boards 48

49 Property Taxes - Terminology Assessed vs. Taxable Valuations Rollbacks (% of assessed that is taxed) Ag/Residential tie Assessed growth limitation Commercial/Industrial forced rollback Taxing Districts vs. Taxing Authorities Tax Rate X Taxable Value = Taxes Levied Lag between assessments and budgets Tax Increment Financing (TIF) FY 2018 Property Valuations - Classifications Utilities W/O G & E, 1.7% Railroads, 1.2% Other, 0.0% % Taxable Valuation by Class Multi-Residental, 2.3% Industrial, 3.7% Commercial, 15.6% Ag Buildings, 1.0% Ag Land, 19.1% Gas & Electric Utility, 3.1% Residential, 52.5% Residential Ag Land Ag Buildings Commercial Industrial Multi-Residental Railroads Utilities W/O G & E Other Gas & Electric Utility Iowa Association of School Boards 49

50 Property Wealth of a District Property valuation characteristic of school districts (why we care): Property Rich large valuations with lower student population Property Poor - lots of residential with higher student population How is it calculated? Total Property Valuation / Enrollment = Value per student Interaction: High value per student = lower property tax rate Low value per student = higher property tax rate Effort to levy taxes varies Iowa Association of School Boards 50

51 Property Taxes Table Discussion What s the property wealth make-up of your district? Why is this important to know? What is it? Income Surtax A tax levied based on an individual s state income; used in lieu of property tax levy for: Instructional Support ($91.2 million) Voter-approved PPEL ($10.1 million) Educational Improvement ($0.1 million) Programs Aggregate surtax rate can t exceed 20% 282 (84.7%) school districts imposed for FY 2018 Iowa Association of School Boards 51

52 P Property Taxes/Income Surtax Final Thoughts Formula generated property taxes account for largest portion and board doesn t have control over those (with minor exceptions) Levying for cash reserve does not create spending authority The taxable valuation wealth of a district has an impact on the effort to levy taxes Income surtax can be used in combination with property tax to manage property tax rates Iowa Association of School Boards 52

53 6. Trending Issues School Finance Trending Issues Equity Issues District Cost Per Pupil Transportation Funding Instructional Support Program Funding Special Education Funding Deficits Extension of Shared Operational Functions Early Intervention/Class Size Reduction Sunset Extension of Reorganization Incentives Reduction to Commercial and Industrial Back-fill Dollars Additional Flexibility SAVE Extension - set to expire at the end of 2029 Property Tax Relief using school aid formula to accomplish this Reductions to AEAs AEA budgets have been reduced for a number of years Added Funding for At-Risk Students English Language Learners (ELL) and Free/Reduced Price lunch students PPEL and Management Levy Use Expansion Iowa Association of School Boards 53

54 Equity Issue Differences in Per Pupil Amounts Equity Issue Transportation Cost Differences Iowa Association of School Boards 54

55 Equity Issue Instructional Support Program Funding Issue - SPED Deficits Are Increasing Over Time Modified Supplemental Amount for Special Education Deficits: Total Amount (in Millions) and Percentage of Districts FY 2010 through FY 2016 $120.0 $100.0 $80.0 $60.0 $40.0 $ % $ % $ % $ % $ % $ % $ % $ % 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% $ % FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 Modified Supplemental Amount for Special Education Deficit (left axis) Percentage of Districts (right axis) Source: Iowa Department of Education, SBRC Modified Supplemental Amount files Iowa Association of School Boards 55

56 7. Wrap-Up: Other Helpful Information IASB Data Resources Financial Focus District specific information on key financial items School Finance Data wealth of finance data that always for comparisons between specific districts Visualizing Data Maps with key finance data Budget Planning and Monitoring Documents that will help understand the boards role regarding the district budget School Finance Basics Presentation materials Salary/Benefit Data Always for comparisons of many types of positions More can t find what you re looking for, then give us a call Iowa Association of School Boards 56

57 Homework questions for you when you get home What is our enrollment trend? Are we on a budget guarantee? What are our plans? What is our special education deficit? (or surplus?) What are the components of our tax rate? Why do/don t we have a cash reserve levy? Is the district property poor or property rich? Do we have a positive or negative unspent spending authority? What s the trend look like? School Finance Web Resources IASB: Dept. of Education: educateiowa.gov Legislature - bills, amendments, etc. Legislative Service Agency: Dept. of Revenue: Dept. of Management: State Auditor: auditor.iowa.gov State Treasurer: Iowa Association of School Boards 57

58 Vision & Voice for Public Education Iowa Association of School Boards 58