State Funding Comparisons: Where do we stand? Margaret Buckton

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1 State Funding Comparisons: Where do we stand? Margaret Buckton

2 2 Iowa Funding Comparisons: Iowa s position in the Nation Significant conversations about student achievement comparisons ACT Iowa students 2 nd in the nation of those states which test more than 50% of students (21 states now use ACT for 11 th grade assessment we may not stay there) AP participation 9.7% of Iowa grads have a 3 or better compared to 18.1% of USA grads NAEP used to be the top in most, now in the middle on most benchmarks with a very large special education gap What about expenditures?

3 Iowa Funding: what s been happening? 3

4 4 Iowa Funding: what s been happening? Dropout Prevention Modified Allowable Growth History FY FY ,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

5 Iowa Funding: what s been happening? 5

6 6 $700 Actual ISL Amount Funded Per Pupil $600 $500 $400 $300 $318 $265 $200 $227 $100 $108 $69 $0 FY 1992 FY 1997 FY 2002 FY 2007 FY 2012 Maximum Average Minimum Range (gap per pupil)

7 7 Iowa Student Needs are Increasing: Special Education: deficits have exceeded $30 million in each of the last four years. Poverty: More Iowa students are living in poverty. Average % of Iowa students eligible for free and reduced lunch was about 27% ten years ago, now nearing 40% in FY District with the highest % of students eligible for FRL is nearing 80% of enrollment in FY The range or gap between the lowest and the highest percentages has also increased over the same period. ELL: The growth in number of English Language Learners in Iowa is also significant. School districts are on task to educate all students, but increasing student need requires resources and training.

8 8 Iowa Funding: Compared to the Nation? Iowa Education Funding is not keeping pace with the Nation: Iowa s per pupil expenditures in ranked Iowa as 31 st in the nation, $970 per pupil below the national average (over $450 million annually). According to the LSA s 2011 Iowa FACTBOOK, published in February 2012: Total Expenditures per pupil Percent of USA Average USA Average $10, % Rank Iowa $ 9,856 91% 31 Per Pupil Shortfall $970 Total State Dollars to reach national average $459 million

9 9 Iowa Funding: Compared to the Nation? Iowa school funding is not overly dependent on property taxes. Iowa is about average in the percent of total revenue from state and local funding (FY 2011) also from the LSA FACTBOOK: State Funding Local Funding Federal Funding USA 45.8% 43.7% 10.5% Average Iowa 44.8% 44.8% 10.4% Iowa ranks 24 th in % of local funding Footnote: If the state assumed the last 12.5% of cost per pupil in the formula, Iowa would rank 36 th in the % of local funding.

10 Source: LSA 2012 Factbook Note: numbers are NEA estimates sited in the Factbook 10

11 2010 Iowa ranking fell to 28 th. This calculation expresses Iowa s relative tax burden based on ability to pay, or per capita personal income. Source: www.taxfoundation.

11 Iowa ranking fell to 28 th. This calculation expresses Iowa s relative tax burden based on ability to pay, or per capita personal income. Source: Tax Foundation calculations based on data from the Bureau of Economic Analysis, the Census Bureau, the Council on State Taxation, the Travel Industry Association, Department of Energy, and others.

12 % Iowa State-Local Tax Burden Compared to U.S. Average 10.5% 10.0% 9.5% 9.0% 8.5% USA up to 9.9% in 2010, Iowa stayed at 9.6% 8.0% USA Average Iowa Iowans traditionally spent a greater proportion of per capita personal income on state and local taxes prior to 1996, but below the national average ever since.

13 % Iowa State-Local Tax Burden Compared to U.S. Average 10.5% 10.0% 9.5% 9.0% 8.5% USA up to 9.9% in 2010, Iowa stayed at 9.6% 8.0% USA Average Iowa Iowans traditionally spent a greater proportion of per capita personal income on state and local taxes prior to 1996, but below the national average ever since.

14 14

15 State of Iowa General Fund Condition

16 16 Context Requests for many items have been denied citing There s no money, which was true a few years ago. Is it still the case? Data from the nonpartisan Legislative Services Agency Let s look at the numbers

17 17 Iowa Law: Legislature may legally appropriate 99% of revenues...

18 State of Iowa General Fund 18

19 Include Cash Reserve Fund 19

20 Include EEF 20

21 21 Include Oct REC Revision YTD $255 up

22 22

23 23 What if Revenues Continue Growth Rate for FY 2013?

24 24

25 25 What will you hear next? 1. Ending balance is one-time money we can t count on Except if there s a surplus every year, as has been the case for the last three, then it seems to be somewhat stable. 2. We need to have funds for contingencies OK, but when will we use them if we must always spend no more than we take in for every year? 3. We ve overtaxed, so return it to the taxpayer State budget was balanced in the downturn by underfunding K-12. Smart property tax reform invested in K-12 ( in addition to AG) can accomplish both purposes. 4. Invest it wisely in things that benefit the economy in the long term education and smart, affordable tax relief.

26 State Policy Implications: Ed Reform and Property Taxes

27 27 Education Reform Ideas on the Table for 2013 Legislature Education Reform is necessary and UEN is committed to making it work Funding and state support challenges: Allowable Growth not yet set for FY14 or FY15 Weightings all depend on that number Bargaining is related to that number 3 rd Grade retention/summer school tied to $$$ Lengthening school day/year costs $$$ Teacher pay/career pathways costs big $$$

28 28 Education Reform Ideas on the Table for 2013 Legislature Education Reform is necessary and UEN is committed to making it work Career Pathways elevating teacher leadership has merit (must include funding, professional development, local flexibility to transition thoughtfully) Assessment (ACT or other 11 th grade test, more relevant, aligned to common core standards, and more useful assessment (formative) Some element of student learning tied to teacher evaluation (not the only thing, more then one measure, growth trumps proficiency)

29 29 Policy Sweet Spot: solve two problems with one state dollar Property tax reform in the context of school finance reform can deliver both taxpayer and student equity. FY 2013 Total school tax rates vary from a low of $8.33 to a high of $23.06 per $1,000. Efforts to address inequities in the property tax system should first solve inequities within classes of property. Since student needs tend to be more extreme in districts with relatively lower property values supporting each student, efforts to address taxpayer inequity will also serve students.

30 30 Why Not? Consider last year s property tax reform efforts $200-$350 million for commercial, $750 million to eliminate the additional levy Targeted at commercial tax relief, lowered the tax base, made some effort to hold local governments and taxpayers harmless Likely a negative impact on school district valuations, which means increased tax rate unless school finance is also reformed. Why not use school finance changes to deliver property tax equity and relief?

31 31 Picture Two Identical Businesses $8.33 /$1,000 $23.06 /$1,000 Both commercial property taxed at market value (although no M&E property tax, corporations get depreciation, and pay little corporate income tax) Same square footage, similar FTE and sales Okoboji to Ballard, almost $15/$1,000 difference This inequity is greater than the difference between residential and commercial burden

32 32 FY 2013 Total Property Tax Rate Woodbury County FY 2013 Total Property Tax Rate w/o income surtax

property owners in low tax districts Homeowners in high tax

33 33 Residential vs. Commercial Residential property is taxed at around half of market value Homeowners in high tax rate school districts pay greater property taxes than similarly assessed commercial property owners in low tax districts Homeowners in high tax school districts pay 3X the property taxes of homeowners in low tax school districts for similarly assessed residential property

34 34 Policy Suggestions to promote taxpayer equity/relief and student equity Continued investment in Property Tax Equity and Relief Fund lowers high taxes first, then delivers tax relief to all taxpayers: PTER Fund Stats Data from DOM Web Site: ols/index.html Final FY 13 Additional Levy Rate AFTER PTER FY13 Additional Levy Rate Average $ $ Median $ $ Maximum $ $ Minimum $ $ Range $ $ Number of Districts Receiving Aid 84 Funds Available: State Appropriation 24,000,000 Property Tax Equity and Relief Fund 7,380,825 31,380,825

35 35 Policy Suggestions to promote taxpayer equity/relief and student equity See one page handout summarizing all of the possible ways that the state could contribute to school funding to promote: Dropout prevention or at-risk English-language learner year 5 or costs exceeding the weighting Other property tax funded school costs: on-time funding, special education deficit, budget guarantee, cash reserve or management levies, PPEL Benefits to This Approach: Taxpayers in low valuation districts receive greater benefit in terms of tax rate reduction Commercial taxpayers get twice the benefit School districts (and cities and counties) don t suffer the consequence of lower valuations (avoids shift to residential and ag)

36 36 Sum it up: Education Reform is important and necessary Education Reform takes resources to support significant change Iowa Education has been funded at a noncompetitive level compared nationally at the very time students in other states are making great gains and surpassing Iowa students Sensible property tax reform can help taxpayer and student equity

37 37 Resources Share these materials at your board table, discuss/share with the press, press release on condition of state funding for education ISFIS Conference Presentation on the myth of commercial tax reform UEN Legislative Digest includes UEN advocacy history ISFIS Legislative Digest includes policy and funding data to help Tools for advocacy and budgeting the budget projection tool on ISFIS website and Issue Briefs UEN Legislative Web Page

38 The best ways to contact us: Text us Be sure to include your name in the message Larry s cell Margaret s cell us Larry.sigel@isfis.net Margaret.buckton@isfis.net Traci.giles@isfis.net Sean.gibson@isfis.net Susie.olesen@isfis.net Call the office Traci will grab the call if we re not in at the moment Option 1 for Margaret, Option 2 for Sean, Option 3 for Larry, Option 4 for Traci When we re on the road and out of the office, texting is the best way to get in touch with us.

State Funding Comparisons: Where do we stand? Margaret Buckton

State Funding Comparisons: Where do we stand? Margaret Buckton 2 Iowa Funding Comparisons: Iowa s position in the Nation Significant conversations about student achievement comparisons ACT Iowa students