School Finance Formula Where do we go from here?

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2 School Finance Formula Where do we go from here? IASB Annual Convention November 19, 2015 Iowa Association of School Boards

Team IASB Shawn Snyder Finance Support Director email ssnyder@ia-sb.

3 Team IASB Shawn Snyder Finance Support Director direct (515) Patti Schroeder Finance Support Director direct (515)

4 Addressing Equity Issues - Timeline School Finance Formula Task Force Task Force Report Published Nov School Finance Formula Recommendations Workgroup Recommendations To Update the Dec School Finance Formula Published Presentation to Legislative Interim Dec Committee on Recommendations

5 IASB Legislative Resolutions Committee (LRC) Offer solutions based proposals Identify specific issues Develop specific proposals to address specific issues Review proposals with LRC and IASB Board

6 Addressing Two Equity Issues Transportation Costs Differences in the District Cost Per Pupil (DCPP)

7 Issue Transportation Equity Transportation Costs: every district transports students to and from school Every district pays for transportation out of the regular program These costs vary significantly between districts and are paid from the regular program

8 Transportation Cost Issue Transportation Costs - The Impact on the Regular Program District Cost Per Pupil - The Amount Remaining $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- $6,119 $5,857 $5,602 $5,747 $5,090 $1,154 $556 $377 $264 $104 Min Q1 Median Q3 Max Cost To Transport Students Remaining for Regular Program Costs After taking out the costs of transporting students to school the amount left over varies significantly (from $5,090 to $6, data)

9 Transportation Cost Issue 2014 District Cost Per Pupil After Transportation Costs are Removed $7,000 $6,000 $5,000 $4,000 Min = $5,090 Every District - Sorted from low to high Max = $6,119 $3,000 $2,000 $1,000 Range from low to high = $1,029 (20.2%) $0 This is what is remaining after the transportation costs

10 Issue

11 Issue DCPP Equity Differences in the District Cost Per Pupil (DCPP): There is a $175 difference in the maximum and minimum DCPP 164 districts at the minimum level ($6,446) 172 districts above the minimum level (up to $6,621)

12 District Cost Per Pupil Issue $7,000 $6, District Cost Per Pupil - Across the State $175 Difference $6,621 $6,498 $6,446 $6,446 $6,449 $6,000 $5,500 Min Q1 Median Q3 Max Neighbor districts may have differences in DCPP

14 PROPOSALS Transportation Funding Provide Equity #1: Transportation - Supplemental Weighting Cost Per Student Equalization #2: Equalize Regular Program District Cost Per Student

15 Proposal Goals: Provide Equity in Transportation Funding and Equalize the DCPP Amounts $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $- $6,621 $6,621 $6,621 $6,621 $6,621 $1,154 $41 $264 $377 $556 Min Q1 Median Q3 Max Future DCPP Levels Equalized Transportation Funding - Funded Outside of the Regular Program Goals: Every district has an equal per pupil funding level for education purposes Every district gets transportation funding based on the situation and needs of that district, but costs are not taken out of the district s general education budget

16 Note: Limitations on Estimates Cost estimates provided in these options are based on a variety of assumptions, policy variables that may change, and the most currently available data. Variations in any of these factors will have an impact on estimates.

17 1. Proposal #1 Transportation Supplementary Weighting

18 Issue Districts are using regular program dollars to get students to and from school costs vary across districts

19 Proposal #1 Provides supplementary weighting designated for transportation funding through the school aid formula Three factors Net operating transportation costs to regular program costs Enrollment factor Student population density factor Funding Net operating trans. costs = $150 million in 2014 Weighting set to generate a specific level of funding per year Can be phased-in over a period of years Funding based on weighting level, and state cost per pupil. Level of funding in future years could be increased based on increasing the weighting factor.

20 Proposal #1 (cont d) Frees-up regular program funds Creates simple mechanism to increase funding for transportation Promotes efficiency: Local tax dollars included in the funding mechanism Provides a budget framework for districts to work within

21 Proposal #1 (cont d) Propose $30.0 million for 5 years Phase-in beginning in 2017 Subject to the school aid formula: State cost for this provision is about $26 million and $4 million in property taxes Phase-in complete by 2021 ($30.0 million increase each year total transportation funding about $150 million by Every district will get this funding, but districts with higher costs will get more funding (as a percentage of their regular program).

22 Proposal #1 how it works (at SSA of 2%) Factors (adjustable) Desired Amount of Funding for Initial Year ( 2017) $ 30,000,000 SSA State Percent of Growth Rate for % Increase in Weighting Factor for Year 2 ( 2018)* 2 SSA State Percent of Growth Rate for % Increasing in Weighting Factor for Year 3 ( 2019)* 3 SSA State Percent of Growth Rate for % Increase in Weighting Factor for Year 4 ( 2020)* 4 SSA State Percent of Growth Rate for % Increasing in Weighting Factor for Year 5 ( 2021)* 5 SSA State Percent of Growth Rate for % Foundation Level for Transportation Costs 87.50%

23 Proposal #1 how it works (at SSA of 2%) Proposal Fiscal Impact Transportation Supplementary Weighting Total Transportation Funding State Aid Portion Property Tax Portion , $ 29,999,991 $ 26,249,998 $ 3,749, , $ 61,204,559 $ 53,557,418 $ 7,647, vs , $ 31,204,568 $ 27,307,420 $ 3,897, , $ 93,641,065 $ 81,937,642 $ 11,703, vs , $ 32,436,506 $ 28,380,224 $ 4,056, , $ 127,355,128 $ 111,440,297 $ 15,914, vs , $ 33,714,063 $ 29,502,655 $ 4,211, , $ 162,387,833 $ 142,083,639 $ 20,304, vs , $ 35,032,705 $ 30,643,342 $ 4,389,363

24 Proposal #1 Estimated Annual Costs Annual Proprosal Cost Added Impact of 2.0% SSA Total Annual Cost Total State Aid Property Tax Total State Aid Property Tax Total State Aid Property Tax 2017 $ $ $ 3.75 $ - $ - $ - $ $ $ $ $ $ 3.75 $ 1.20 $ 1.06 $ 0.15 $ $ $ $ $ $ 3.75 $ 2.44 $ 2.13 $ 0.31 $ $ $ $ $ $ 3.75 $ 3.71 $ 3.25 $ 0.46 $ $ $ $ $ $ 3.75 $ 5.03 $ 4.39 $ 0.64 $ $ $ 4.39 Dollars in Millions

25 Proposal #1 Pros and Cons Pro: Provides additional funding to ALL school districts Pro: Frees-up regular program dollars for ALL school districts Con: Cost to provide full equity is at least $150 million Con/Pro: This proposal can be phased-in over time softening any one-year state budget impact Pro: Flexible school aid funding mechanism to adjust to desired level of funding

26 Proposal #1 Additional Thoughts Funding designated for nondiscretionary transportation costs Will need oversight Recommend a five-year review (every 5 years) Phase-in period can be adjusted Foundation level can be adjusted for this provision May need to adjust weightings during phase-in

27 2. Proposal #2 Equalize the Regular Program District Cost Per Pupil

28 Proposal #2 Increases the floor (SCPP) up to $20 per year until all DCPP amounts are equal Nine year phase-in Add $20 from 2017 through 2024 Add $15 in 2025 How are District s Impacted All districts get per pupil growth resulting from SSA Districts that are less than $20 above the SCPP will have their DCPP increased to the new SCPP level up to an additional $20 increase Districts above the SCPP will have the benefit of property tax relief due to the added increase in the foundation level per pupil

29 2016 Cost Per Pupil District A 6,446 Proposal #2 how it works Current Law Scenario: 2017 SSA Rate 2.0% 2016 SCPP $ 6, Per Pupil Growth $ SCPP $ 6,575 Proposal $ 20 New 2017 SCPP $ 6, Growth Per Pupil 2017 Cost Per Pupil Is the 2017 DCPP Less than the New 2017 SCPP? This process continues over 9-years By 2025 all districts DCPP = SCPP Amount Needed for DCPP = SCPP Proposed 2017 DCPP $ $ $ 129 $ 6,575 Yes $ 20 6,595 District B $ 6,456 $ 129 $ 6,585 Yes $ 10 $ 6,595 District C $ 6,621 $ 129 $ 6,750 No $ - $ 6,750

30 Proposal #2 Year 1 how it works 16 Cost Per Pupil 2017 SSA Increase 2017 Proposal Increase $6,800 $6,600 SCPP District A District B District C DCPP = $6750 DCPP = $6750 $129 $129 SCPP = $6575 SCPP = $6595 DCPP = $6595 DCPP = $6595 DCPP = $6585 $20 DCPP = $6575 $20 $10 $129 $129 $129 $129 $129 $129 $6,400 $6,621 $6,621 $6,200 $6,446 $6,446 $6,446 $6,446 $6,456 $6,456 $6,000 SCPP - Current Law SCPP - Proposal District A - Current Law District A - Proposal District B - Current Law District B - Proposal District C - Current Law District C - Proposal This process continues over 9-years By 2025 all districts DCPP = SCPP

31 Proposal #2 Nine Year Phase-in (at 2.0% SSA Each year) $8,500 $8,000 District A District B District C Gap between all districts closed in by Year 9 $7,500 $7,000 Gap between Dist. A and Dist. B closed in by Year 1 $6,500 $6, This process continues over 9-years By 2025 all districts DCPP = SCPP

32 Proposal #2 Nine Year Phase-in (at 0.0% SSA Each year) $8,500 District A District B District C $8,000 $7,500 $7,000 Gap between Dist. A and Dist. B closed by Year 1 Gap between all districts closed by Year 9 $6,500 $6, Proposal works no matter the SSA Percent By 2025 all districts DCPP = SCPP

33 Proposal #2: Current Law vs. Proposal SSA Rate Per Pupil Increase Current Law Scenario State Cost Per Pupil (SCPP) Number of Districts where SCPP = DCPP Number of Districts Above SCPP Additional Increase* State Cost Per Pupil Proposal Number of Districts where SCPP = DCPP Number of Districts Above SCPP Foundation Level Change - Property Tax Relief Current Law Scenario - Per Pupil Level Proposal Per Pupil Level Pupil Property Tax Relief % $ 80 $ 6, N.A. $ 6, $ 5,640 $ 5,640 $ % $ 129 $ 6, $ 20 $ 6, $ 5,753 $ 5,771 $ % $ 132 $ 6, $ 20 $ 6, $ 5,869 $ 5,904 $ % $ 134 $ 6, $ 20 $ 6, $ 5,986 $ 6,039 $ % $ 137 $ 6, $ 20 $ 7, $ 6,106 $ 6,178 $ % $ 140 $ 7, $ 20 $ 7, $ 6,228 $ 6,318 $ % $ 142 $ 7, $ 20 $ 7, $ 6,353 $ 6,462 $ % $ 145 $ 7, $ 20 $ 7, $ 6,479 $ 6,609 $ % $ 148 $ 7, $ 20 $ 7, $ 6,609 $ 6,759 $ % $ 151 $ 7, $ 15 $ 7, $ 6,741 $ 6,906 $ 165

34 Proposal #2 Estimated State Cost Factors Proposal Versus Current Law Annual Change in Proposal SSA Rate Additional Increase* Total Funding Change Total State Aid Change Total Property Tax Change Total Funding Change Total State Aid Change Total Property Tax Change % $ 20 $ 6,799,306 $ 11,099,461 $ (4,300,155) $ 6,799,306 $ 11,099,461 $ (4,300,155) % $ 20 $ 14,647,313 $ 19,424,114 $ (4,776,801) $ 7,848,007 $ 8,324,653 $ (476,646) % $ 20 $ 23,760,155 $ 29,413,658 $ (5,653,503) $ 9,112,842 $ 9,989,544 $ (876,702) % $ 20 $ 33,989,498 $ 39,958,248 $ (5,968,750) $ 10,229,343 $ 10,544,590 $ (315,247) % $ 20 $ 45,022,475 $ 49,947,735 $ (4,925,260) $ 11,032,977 $ 9,989,487 $ 1,043, % $ 20 $ 56,827,009 $ 60,492,200 $ (3,665,191) $ 11,804,534 $ 10,544,465 $ 1,260, % $ 20 $ 69,393,795 $ 72,146,707 $ (2,752,912) $ 12,566,786 $ 11,654,507 $ 912, % $ 20 $ 82,071,015 $ 83,246,192 $ (1,175,177) $ 12,677,220 $ 11,099,485 $ 1,577, % $ 15 $ 92,014,229 $ 91,570,827 $ 443,402 $ 9,943,214 $ 8,324,635 $ 1,618,579

35 Proposal #2 Pros and Cons Pro: All districts get something every year either an additional per pupil increase or added property tax relief Pro: Equalizes the district cost per pupil across the state Con/Pro: Cost although the additional cost is spread over nine years. Con: Takes nine years to achieve objective

36 Proposal #2 Final Thoughts Phase-in period could be adjusted (shorter or longer) If done in one-year, cost would be about $97 million in state aid, but would include a property tax reduction of $12.0 million Future year costs will be impacted by an extension of the SSA Property Tax Replacement Payment (PTRP) provision that is in place through 2017

37 Questions, comments, thoughts on proposals?

38 Learn More. Do More. ISFLC December 16-17, 2015 Prairie Meadows Conference Center On-line Learning Budget 101 Available in January, 2016 Webinar - Budget 101

39 Learn More. Do More. Webinar: Igniting Your Advocacy Efforts December 2, p.m. Action in Advocacy Workshops Cedar Rapids December 15 Sioux City January 13 Waverly January 14 Council Bluffs February 17 Coralville Date TBA Des Moines Date TBA

40 Vision & Voice for Public Education

Team IASB Shawn Snyder School Finance Director direct (515)

School Finance Terminology The Short Version (Yes, there is such a thing!) IASB Annual Convention November 16, 2017 Team IASB Shawn Snyder School Finance Director email ssnyder@ia-sb.org direct (515) 247-7054