Basics of School Finance: Revenues

Transcription

1 Basics of School Finance: Revenues This presentation is to be informative and not to promote specific products, services companies, etc. Illinois ASBO Sponsored Programs are permitted to promote products and services in accordance with the Service Associate Ethics Policy and Code of Conduct.

2 Introductions Name: Brad Goldstein. Role: Moderator - Chief Financial Officer/CSBO, The Winnetka Public Schools District 36 Name: Dan Stanley. Role: Speaker - Assistant Superintendent for Finance/CSBO, Community High School District 128 Name: Myron Spiwak, CPA. Role: Speaker - Director of Business Services, New Trier Township High School District 203

3 ILLINOIS ASBO ETHICS STATEMENT This information is for the presenters only, please remove this slide before your presentation. The Moderator will help ensure the Illinois ASBO Code of Ethics is adhered to throughout the presentation and ensuing audience discussion. Moderators are given the authority to ask any attendee to leave if they become combative with presenters. This presentation is to be informative and not to promote specific products, services, companies, etc. If a vendor is a presenter and uses the presentation as a platform to sell their product or services, the Moderator has the authority to stop the presentation if the presenter refuses to modify their content. Any vendor presenter who violates these regulations may be excluded from presenting at future presentations.

4 Outline Education Funding in Illinois Local Revenues o Property Taxes o Tax Levy Walk-Through State Revenues o Evidence Based Funding Federal Revenues

5 EDUCATION FUNDING IN ILLINOIS

6 Sources of Revenues Illinois United States Local 65% Federal 9% State 26% Local 46% Federal 9% State 45% Revenues and Expenditures for Public Elementary and Secondary Education, School Year (Fiscal Year 2013), Table 1, National Center for Education Statistics (NCES)

7 Suburban Cook Elementary District Revenue by Source

8 Suburban DuPage Elementary District Revenue by Source 6

9 LOCAL PROPERTY TAXES

10 The Property Tax Cycle Assessment Process determine tax base Levy & Extension Process convert tax base into revenue

11 Assessment Process Goal = determine value of taxable property in district Tax exempt property is excluded Government property Not-for-profit property Places of worship, some hospitals Tax increment financing (TIF) district TIF increment is added to district tax base but taxes collected on TIF increment are not paid to district

12 Assessment Process (Cont.) Rule: Property to be assessed at 1/3rd of fair market value Exceptions: Cook County classification system Farmland 1/3rd of contribution to farm s productivity Railroads, mines and certain pollution control devices

13 Assessment Process (Cont.) What is value as of January 1st of tax year? Step 1: Assessor values properties Step 2: Board of Review Hears appeals to assessed values, finalizes assessments Corrects of under, over, and non-uniform assessments

14 Assessment Process (Cont.) Step 3: State Equalization Multiplier to valuations of each county to get to 1/3rd of fair market value Step 4: County Clerk applies multiplier to calculate final Equalized Assessed Value Goal reached! EAV determined.

15 Meanwhile.

16 Levy & Extension Process Levy amount of tax revenue requested Extension amount of tax revenue approved

17 Levy & Extension Process (Cont.) Plan levy (Admin) Analyze and estimate Adopt Levy (Board) Board Action Extension (County Clerk) Determine approved taxes Collection (County Treasurer) Send tax bills to taxpayers Distribution (County Treasurer) Send tax revenues to taxing districts

18 Local Property Taxes Special Considerations PTELL Tax Appeals, Refunds, PTAB

19 Property Tax Extension Limitation Law (PTELL) Tax Cap enacted in Collar Counties in 1991; in Cook County in 1995; and in downstate counties by referendum beginning in 1996 Limits amount of property tax revenue a district may receive by 5% or CPI, whichever is less Consumer Price Index (All Urban Consumers) Essentially rate of inflation Does not limit New Property

20 CPI 10-Year Change in CPI from Dec. to Dec.

21 Equalized Assessed Valuation (EAV) Changes in EAV are made up of two components: Changes in the value of exiting properties Addition of new property to the tax rolls The impact of EAV on revenue for non-capped districts is easy: EAV goes up, tax revenue goes up EAV goes down, tax revenue goes down EAV, generally speaking, does not impact revenue for capped districts

22 PTELL and Limiting Rate Formula = Limiting Rate Prior Yr Extension x (1+lessor of CPI or 5%) Current Year EAV New Property Does not include Debt Service Nor SEDOL IMRF (Lake County) What can be extended is based on what you were extended last year

23 PTELL Summary You are allowed to receive the same amount of money you received last year, adjusted for inflation. New property is added on top Same amount of buying power

24 Effect of PTELL Tax rates fluctuate based on EAV Districts lost revenue Recent history decreasing EAV Districts hitting max rates Over levy for transportation and transfer out

25 Tax Appeals, Refunds, PTAB Township Assessor Board of Review Property Tax Appeal Board (PTAB) Circuit Court Circuit Court (Complaint for Administrative Review Only)

26 Tax Appeals, Refunds, PTAB (Cont.) If individual taxpayers appeal for a reduced assessment and it is granted at the Board of Review, the refund is pre-tax extension; everyone else pays a little more and the district does not lose money. The Property Tax Appeals Board (PTAB) is a protracted, multi-year process; if successful, the refund comes out of current collections, resulting in a loss to the district.

27 Tax Appeals, Refunds, PTAB Township Assessor Don t lose money Board of Review Property Tax Appeal Board (PTAB) Circuit Court Circuit Court (Complaint for Administrative Review Only) Lose money

28 The Levy: Step by Step

29 Plan levy Step 1: Determine tax revenue needed to operate district Develop projected expenditures Estimate revenue from all other sources Difference is the need for property taxes Reality: district needs all revenue it can secure Step 2: Determine if maximum rates will produce desired revenues (can t go over)

30 Plan Levy Cont. Step 3: Estimate Extension Need Variables (PTELL)

31 Levy Year Guide CPI Levy Rec'd Cal Year Rec'd in Fiscal Years & & & & & & 2020

32 Levy Variables Known Variables Prior Year Extension (from County) Not including Debt Service CPI (from BLS) Unknown Variables EAV (estimate from Assessor) New Property (estimate from Assessor)

33 Levy Estimate Prior Year Extension = $30,000,000 CPI = 2.1% Current EAV = $900,000,000 New Property = $10,000,000 30,000,000 x ( ) 900,000,000-10,000,000 = %

34 Levy Estimate (cont.) Extension = EAV x Rate 900,000,000 x 3.442% = 30,978,000 Prior year 30,000,000 % Change = 1.033% o 2.1% CPI + New Property

35 Plan Levy (cont.) Step 3: Estimate Extension Done! Step 4: Allow cushion for error in estimates o Estimates = EAV & New Property

36 Levy Example No Cushion Prior Year Extension = $30,000,000 CPI = 2.1% Current EAV = $850,000,000 (lower) New Property = $20,000,000 (higher) 30,000,000 x ( ) 850,000,000-20,000,000 = %

37 Plan Estimate (cont.) Extension = EAV x Rate 850,000,000 x 3.690% = 31,365,000 (higher) Prior year 30,000,000 Levy = 30,978,000 Loss = $387,000 each year FOREVER (compounded!) o Remember Extension based on last year s extension

38 Plan Levy (cont.) Step 3: Estimate Extension Done! Step 4: Allow cushion for error in estimates o Estimates = EAV & New Property o Levy too high = no penalty (some balloon ) o Levy too low = lost forever (and compounded) o Protect against if (run another scenario) EAV is lower than estimated AND New Property is higher than estimated

39 How high do you levy? Pragmatically, no limit. Politically, may be a limit. Find the balance BUT, Truth in Taxation Levy Strategy

40 Truth in Taxation At least 20 days before adopting levy, Board must estimate the levy If the aggregate estimate is more than 105% of the aggregate extension in the prior year, must have public hearing o Aggregate does not include Bonds, but DOES include SEDOL IMRF (Lake County) Hearing cannot coincide with budget hearing

41 Truth in Taxation (cont.) Must publish notice of hearing o No more than 14 days and no less than 7 days prior to hearing Notice published in English language newspaper of general circulation in District Notice cannot be placed in part of newspaper with legal notices and classified adds

42 Truth in Taxation (cont.) Specifies form of notice if notice includes ANY information in addition to prescribed notice, it is invalid (and so is your levy!) Notice must be at least one-eighth of a page, use no less than 12 point type, and have black border no less than one-quarter inch wide.

43 Levy Example Levy 2016 Extension 2017 Est. Exten 2017 Levy Education 22,000,000 23,000,000 Operations & Maintenance 5,000,000 5,500,000 Transportation 2,000,000 2,200,000 Social Security 400, ,000 IMRF 600, ,000 Truth in Subtotal (Capped) 30,000,000 30,978,000 31,600,000 Taxation? SEDOL IMRF 40,000 45, Bonds 300, ,000 YES Total 30,340,000 32,245,000

44 Adopt Budget Adopt Levy Levy must be approved and filed with County Clerk by the last Tuesday in December Comply with Truth in Taxation Act Complying for some, may mean very little to do Complying for others may mean a lot more

45 How high do you levy? Pragmatically, no limit. Levy Strategy Politically, may be a limit. Levy less than 5% more, Truth in Taxation Hearing OPTIONAL Levy more than 5% more, Truth in Taxation Hearing REQUIRED Find the balance Optional Strategy in current economy you can probably levy with enough cushion and stay under 5%

46 Levy Example (cont.) October 15 th Estimated Levy November 12 th Levy Hearing November 4 th Notice in Paper November 12 th Final Adoption November 13 th File with County Clerk Not due till Last Tuesday in December, but gives an extra month for mishaps.

47 ISBE Form o Lists separate levies Resolutions Adopt Levy (cont.) o Assistance from attorneys File with County (original and keep copy) Do not need to levy for Debt Service (Bonds) already approved

48 County Clerk March April Extension o Finalize EAV (assessment process) Final, known, EAV & New Property plugged in Calculates final tax rate

49 State Revenues

50 Evidence-Based Funding Sources: ISBE

51 Introduction The Evidence Based Funding (EBF) formula performs calculations in three general stages. Stage 1: Determining the cost of educating all students, according to the defined cost factors. The result is the Adequacy Target for each district. Stage 2: Measuring each district s local resources for comparison to the Adequacy Target. Stage 3: Distributing additional state funds to assist districts in meeting their Adequacy Targets. Completing the first and second stages produces a ratio that determines how far away a district is from adequate funding in Stage Three. Base Funding Minimum (Hold Harmless) Tier Funding (New Money) Evidence Based Funding (Total State Contribution) Whole School

52 Base Funding Minimum EBF includes a hold harmless provision called the Base Funding Minimum. The EBF consolidates and replaces five grants received in FY 17 into the BFM: Gross General State Aid + Stop Loss Grant (if applicable) English Learner Education Special Ed Personnel Special Ed Funding for Children Special Ed Summer School Chicago Public Schools will also receive the calculated FY 17 Block Grant Overage. BFM will be recalculated each fiscal year to include additional funds received by each district (the Tier Funding). FY 2018 FY 2019 FY 2020 FY 17 Distributions FY 17 FY 18 + FY 18 Tier Money + FY 19 Tier Money Effective FY 19 $29 M English Learner Administration grant will also be included in the BFM calculation. Whole School

53 STEP 1 Calculate Cost of 27 essential elements STEP 2 Apply essential elements to individual districts based on demographics Enrollment English Learners Special Needs Low-Income STEP 3 Adjust salary-based elements for regional wage differences = DISTRICT ADEQUACY TARGET

54 Adequacy Target Adequacy Target (AT) = Sum of all Education Cost Factors Core Investments Per Student Investments Subject to CWI Per Student Investments Not Subject to CWI Additional Investments = Initial Adequacy Target Whole School

55 STEP 1 Calculate Cost of 26 essential elements Enrollment = Greater of prior year average(collected Oct 1/Mar 1 & Dec 1 for pre-school special ed) or average of prior 3 years. Core Instructional Elements Core FTE 1 Full Day Kindergarten Class Size 2a Core Teachers 1-3 (Low Income) Class Size 2b Core Teachers 1-3 Class Size 3a Core Teachers 4-12 (Low Income) Class Size 3b Core Teachers 4-12 Class Size 4 Specialist Teachers -5 % of Core a 8b 9 10a 10b 11a 11b 12 Instructional Facilitators Core Intervention Teachers Substitutes Core Guidance Nurse Supervisory Aides Librarian Library Aide/Media Tech Principal Asst Principal School Site Staff K-5 K-5 9 Days/FTE K-5 K-5 K-5 K-5 K-5 K-5 K-5 K % 6-8 % 20% % of average teacher or sp ed a If implemented students count 1.0, if not % ide salary %

56 STEP 1 Calculate Cost of 26 essential elements Additional Elements Per Student Gifted Professional Development per Student per Student $40 $125 no CWI no CWI 15 Instructional Materials perstudent $190 no CWI 16 Assessment per Student $25 no CWI $ Computer Technology perstudent no CWI $ Student Activities K $ $675 Central Services 19 Maintenance and Oper perstudent $1,038 Salary = $ Central Offics perstudent $742 Salary = $ Employee Benefits 0% of Salary 30% orm Cost $ - Tier 3 for all districts Diverse Learners 22 Intervention (Poverty/EL) Per DHS N Per EL Pupil Support (Poverty/EL) Per DHS 125 Per EL Extended Day (Poverty/EL) Summer Sch (Poverty/EL) Per DHS Per DHS Per EL Per EL English Learners (EL) Per EL a Special Ed Teachers K b Psychologist K c Special Ed Aides K ISBE will calculate the Adequacy Target for every district and communicate that information annually. 5 6

57 Adequacy Target Core Investments Core Teachers K 3 rd LI 15:1, Non LI 20:1; 4 th 12 th LI 20:1, Non LI 25:1 Specialist Teachers % of Core = E 20%, M 20%, HS 33% Instructional Facilitators E/M/HS = 200:1 Core Intervention Teachers E/M = 450:1, HS = 600:1 Guidance Counselor E = 450:1, M/HS = 250:1 School Site Staff E/M = 225:1, HS = 200:1 Core Investment Cost Factors Nurse E/M/HS = 750:1 Supervisory Aide E/M = 225:1, HS = 200:1 Librarian E/M = 450:1, HS = 600:1 Librarian Aide/Media Tech E/M/HS = 300:1 Principal & Assistant Principal E/M = 450:1, HS = 600:1 Substitute Teachers Average Daily Salary x 5.7% of 176 school days x FTE Whole School

58 Adequacy Target Per Student Investments Gifted E/M/HS = $40/student Professional Development E/M/HS = $125/student Instructional Material E/M/HS = $190/student Per Student Investment Cost Factors Student Activities E = $100, M = $200, HS = $675/student Operations & Maintenance E/M/HS = $1038/student Central Office E/M/HS = $742/student Assessments E/M/HS = $25/student Computer/Tech Equipment E/M/HS = $285.5/student Employee Benefits (% of Salary) E/M/HS = 30% Employee Benefits (Central Office, Maintenance & Operations, and Normal Pension Costs*) CO =$368.48, M&O = $352.92/student *Currently Normal Pension Costs only applies to Chicago Public Schools. Whole School

59 Adequacy Target Additional Investments Additional Investment Cost Factors Low Income Intervention Teacher (125:1) Pupil Support (125:1) Extended Day Teacher (120:1) Summer School Teacher (120:1) English Learner Intervention Teacher (125:1) Pupil Support (125:1) Extended Day Teacher (120:1) Summer School Teacher (120:1) English Learner Core Teacher (100:1) Special Education Special Education Core Teacher (141:1) Instructional Assistant (141:1) Psychologist (1000:1) Whole School

60 Adequacy Target Regionalization Factor A Regionalization Factor is used to determine the Final Adequacy Target. The Regionalization Factor or Comparable Wage Index (CWI) is a measure of regional variations in salaries. Initial Adequacy Target Regionalization Factor (CWI) = Final Adequacy Target Note: EBF sets the lowest Regionalization Factor to Previous EBF models used a highest factor of Whole School

61 STEP 3 Adjust salary-based elements for regional wage differences No Region Is Below 0.9 (this allows districts to be more competitive to recruit and retain highly qualified educators) Adams DeKalb 1.06 Grundy 1.06 Sangamon 0.94 McLean County 0.90 Johnson Cook, Kane, Kendall, DuPage, Will 1.06 Understanding Comparable Wage Index (CWI): CWI compares the salaries of noneducation employees with a bachelor s degree across all counties of Illinois. Then compares those differences and computes an index for the state. I.e. The CWI for Cook County is 6% above the state average, and the CWI for McLean County is 10% below the state average. 9

62 Local Capacity Target Reflects Local Tax Resources That Are Available to Support Education LOCAL CAPACITY To calculate how much a community can contribute to funding from local property taxes the model uses a Local Capacity Target (LCT) plus a portion of real receipts above the LCT. The LCT is the dollar amount a district would ideally contribute towards its Adequacy Target, based on a comparison of all districts in the state. The LCT is not a value that a district can calculate itself. It is intended to provide an ideal measure of effort that is equitable with other districts based on the relationship between the Adequacy Target and local wealth across the state. ISBE will utilize data from 852 districts and communicate the LCT to each district.

63 Step 1: The formula for calculating the ideal property tax extension begins with a comparison of the Adequacy Target to EAV. This results in an unique ratio for every district. ISBE will use: Local Capacity Target Details Lesser of Adjusted EAV or PTELL EAV (same as prior GSA formula) EAV does not include TIF increment values! EAV is adjusted to remove the value of local share of Transportation costs EAV is adjusted to remove the value of unfunded pension liability costs Step 2: All ratios are adjusted based on the grade levels they serve. This allows comparison of all districts. Step 3: All ratios are converted to a normal curve equivalent score to determine a relative % of local capacity. This is a % of the adequacy target that is ideally supported locally through property taxes.

64 Local Capacity Target Details cont. Step 4: If a districts real local property tax receipts exceed the calculated LCT a portion of those receipts are added to the LCT for a more accurate determination of local ability. Real receipts that are recognized are those above what the LCT would produce, multiplied by the LCT%. (i.e. If the real receipts are $100,000 above the LCT and LCT is 40%, then only $40,000 are counted as additional local ability.) This recognizes that there are local resources being used to support educational costs, but also recognizes that these districts are taxing higher than others in comparison and gives them more state funds. This is an opportunity for consideration of lower taxes in the future.

65 Determining Local Resources EBF defines a district s resources as the sum of: Local Capacity Target (LCT) Corporate Personal Property Replacement Taxes (CPPRT) Base Funding Minimum (BFM) (Prior Year Distributions) Dividing a district s resources by its Adequacy Target determines the district s Adequacy Level: Resources Adequacy Target = Adequacy Level (Preliminary % of Adequacy) Increasing any element of the numerator (Resources) means a district appears closer to its Adequacy Target, resulting in less State funding. Whole School

66 That All Leads To: 1. PERCENT OF ADEQUACY YEAH!! WHAT?? % = LCT + BFM + CPPRT ADEQUACY TARGET 2. AND THAT IDENTIFIES A DISTRICT S TIER FOR NEW STATE FUNDING PRIORITY

67 Tier Funding New Funding Flows to the Tiers. Tier % of New Funding Target Ratio Funding Allocation Rate Tier 1 Receives 50% TBD (in modeling ranged from 60 65%) Fixed at 30% Tier 2* Receives 49% (*Includes Tier 1 Districts) 90% TBD (in modeling averaged 5%) Tier 3 Receives 0.9% 100% TBD (in modeling averaged 0.2%) Tier 4 Receives 0.1% >100% TBD (in modeling averaged 0.01%) Target Ratio Impacts the calculation of the tier Funding Gap Funding Allocation Rate Is applied to the Final Adequacy Target to determine the calculated tier funding. Whole School 10

68 Chicago Public Schools The following provisions apply to CPS: Normal Pension Costs of $221.3M to be paid as a separate grant. Block Grant Overage to be included in FY 17 Base Funding Minimum. Unfunded Pension Liability to be included as an adjustment to Local Capacity Target. (As reduction in Local Resources) Whole School 68

69 Other Provisions Spending Plans Minimum Funding Level Property Tax Relief Pool Referendum Opportunity for District at or above 110% of Adequacy Technology Grant for Tier 1 & Tier 2 Districts in FY19 and beyond Mandate Relief $75M Tax Credit $29 M of EL Funding for FY 18 for both Tier 1 & Tier 2 Districts Whole School 69

70 Implementation Process Calculate & Pay Estimated Base Funding Minimum Calculation Complete / Sent to Comptroller for Payment Data Collection / Verification (In Process) ISBE to compile historical data and launch verification tool for districts to review and confirm District Review / Correction (TBD Estimated Late Fall) Districts will have a fixed period of time to review data as reported by ISBE and provide comment Final BFM Reconciliation & Tier Funding Calculation ISBE will proceed with final/confirmed data and complete calculations for payment. Whole School 70

71 Thoughts This is new for everyone, there will be a learning curve GSA had been the same for years knew it in and out. Adequacy Target nothing you can do to change it. Only thing a district can do is to lower its tax levy Referendum for 110%+ of adequacy Once every 6 years For educational purposes GSA Attendance is king EBF Enrollment is king Better. We staff for enrollment.

72 Federal Programs 2017 ISBE Budget (millions) Vocational Programs 55.0 Free & Reduced Lunch 1,062.5 Special Ed (IDEA) NCLB (Title) 1,455.8 Others Total Federal Through ISBE 3,531.4

73 Questions and Answers We thank you for your time!

74 Presenters: MODERATOR INFO: Brad Goldstein, Chief Financial Officer/CSBO; The Winnetka Public Schools District 36 (847) ; PANELISTS INFO: Dan Stanley, Assistant Superintendent for Finance/CSBO; Community High School District 128 (847) ; Myron Spiwak, CPA, Director of Business Services; New Trier Township High School District 203 (123) ;