STATE EQUALIZATION AID Karen Kucharz Robbe School Finance Consultant Department of Public Instruction July 20 2016 Constitutional Underpinnings Formula Inputs factors Equalization Aid Computation ID: 673376
Download Presentation The PPT/PDF document "SCHOOL FINANCE ESSENTIALS" is the property of its rightful owner. Permission is granted to download and print the materials on this web site for personal, non-commercial use only, and to display it on your personal computer provided you do not modify the materials and that you retain all copyright notices contained in the materials. By downloading content from our website, you accept the terms of this agreement.
Slide1
SCHOOL FINANCE ESSENTIALS
STATE EQUALIZATION AID
*
Karen Kucharz Robbe
School Finance Consultant
Department of Public Instruction
July 20, 2016Slide2
Constitutional Underpinnings
Formula Inputs (factors)
Equalization Aid ComputationLook at Where Your District is in the Formula, and Where it Might Be HeadedRunning “What-Ifs” Aid Scenarios
Roadmap for TodaySlide3
Sample District #1 (positive aid) & #2 (negative aid) Simplified Percentage Method
Equalization AidDistrict-Specific 2015-16 % Method October 15 Equalization AidDistrict-Specific 2015-16 October 15 Aid Certification
District-Specific Aid Formula Positioning (grid)
District-Specific Value as % of State AverageFlorence & Sun Prairie Longitudinal Equalization AidDistrict-Specific Longitudinal Equalization Aid
HandoutsSlide4
Equalization Aid
Why do you need to know how to calculate aid when DPI calculates it for you?Understand the various inputs and how district aid is generated.Recognize what factors can cause aid to change.
Identify your district “position” in the formula.
Identify what factors are affecting your district aid.Understand what is happening to your district over time.Enable you to explain the formula to your board members, constituents, and the media.
Calculate estimates and run “what if” scenarios.Slide5
Under Article 10 of WI State Constitution,
the State Legislature is responsible
for establishing school districts which are to be: “as uniform as practicable … ” “free and without charge for tuition to all children”
“each town and city shall be required to raise by tax, annually, for the support of common schools therein……”
How does the Legislature achieve this?Constitutional UnderpinningsSlide6
There is significant variation in property value across the State.
A student should not be unfairly disadvantaged
as a consequence of where he or she lives.
Constitutional UnderpinningsSlide7
The State provides financial assistance in the form of Equalization/General Aid to school districts in order to:
Reduce the reliance upon the local property tax as the sole source of revenue for educational programs.
Guarantee that a basic educational opportunity is available to all pupils regardless of the local fiscal capacity of the district in which they reside.
Constitutional UnderpinningsSlide8Slide9
Property Value, Property Taxes, & Mil Rate
Property taxes are stated in terms of “mils.”
…….from Latin per
mīlle
, "in each thousand”
$200,000/1,000 = 200 thousands
10 mils (per thousand) = $10 x 200 =
$2,000
$200,000 x .010 =
$2,000Slide10
$3,000,000 x .010 = $30,000
Property Value
& Fiscal Capacity$200,000 x .010 = $2,000
$1,000,000 x .010 = $10,000Slide11
Formula Equalizes Revenue to Mitigate Differen
ces
Property Tax Base
Equalization AidSlide12
The
fundamental
purpose of the Equalization Aid formula is to “level the playing field” by providing assistance (distributing State general aid) to make up for what districts can’t get from their property tax base.
Equalizes the revenue.
In general, districts with a higher property tax base receive less aid from the State.
District property value is a key factor.
Equalization Aid Slide13
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
Incorporating the Number of Children To Educate
20
10
5
6
10
$100,000
$400,000
$250,000
$500,000
$400,000
Notice how the tax base, as a measure of fiscal capacity (wealth), changes after incorporating the number of children to educate.Slide14
District
Equalized Value per Member
Lomira
New Berlin
MilwaukeeSheboyganSouth Milwaukee Washington-Caldwell
Burlington
Campbellsport
Elkhorn
Beloit
Coleman
Mequon
North LakelandSlide15
District Factors
(prior-year data) - equalized property value - membership - spending (shared cost)
State Factors - cost ceilings - guaranteed valuations per member
What determines
how much aid
a
district
receives?
Equalization AidSlide16
Formula Equalizes Revenue to Mitigate Differen
ces
Property Tax Base
Equalization AidSlide17
Property tax base is used to
determine district wealth and ability to
support district expenditures.
Uses
Equalized
Valuation
or
Fair Market Value
.
(
NOT
Assessed Value)
Property va
lues for each district are
certified in May each year
by the WI Dept. of Revenue
are used in the subsequent year’s aid
calculations.
Factor: Equalized Property ValueSlide18
Who
is counted for aid
membership? Generally, residents for which you are
financially
responsible - i.e. you are paying for the student’s education. Is a “process” to help districts determine who qualifies. - Start with who is in your seats on the count date
.
- Subtract non-residents being educated in your seats.
- Add in your residents who are elsewhere (and for which you are financially responsible
).
Factor: Membership
Assign your best and brightest to do the membership count.Slide19
1,100 kids counted in your seats on count date -40 non-resident open enrolled-in kids
+20
resident open enrolled-out kids 1,080 residents you can count for aid (and revenue limit purposes)Your district will receive Open Enrollment revenue
from the resident districts for the 40 kids attending your district.
Your district will have to pay an Open Enrollment expense to the non-resident districts for your 20 residents attending elsewhere.Membership Example – Open EnrollmentSlide20
Aid membership also includes:
- Youth Challenge Students
- Second Chance Partnership Students - Part-time Attendance F.T.E. of Resident and Non-Resident Private/Home-Schooled Students - Foster Group Home Students
See:
http://dpi.wi.gov/sfs/children/enrollment/membership-info-reportingFactor: MembershipSlide21
Average of
3rd Friday
September Resident F.T.E.2nd Friday January Resident F.T.E.
+
100% Summer School F.T.E.F.T.E. = full-time equivalent
2 halftime (.50) 4K students = 1 F.T.E.
Summer School = 48,600 minutes
of instruction =
1 F.T.E.
Factor: MembershipSlide22
A district gets all types of revenue to fund their educational programs:
Local Property Tax State Equalization Aid State Categorical Aid (transportation, library, bilingual aids)
Federal Aid (Title Programs, IDEA)
State Grants Fees (be careful with what fees you charge)Factor: Spending (Shared Cost)Slide23
General Fund (10)
Shared CostSlide24
Debt Service Funds (38 & 39)
Shared
CostSlide25
State “shares” in district costs funded by state aid and local levy.Aid is based on a district’s ability to fund expenditures, as measured by its property wealth per member.
Basic premise:
The
more property wealth per member a district has, the
lower the equalization aid and vice versa.
Equalization AidSlide26
District Factors (prior-year data)
- equalized property value
- membership - spending (shared cost) State Factors
- cost ceilings - guaranteed valuations per memberWhat determines how much aid a district receives?
Equalization AidSlide27
The aid computation is actually 3 individual computations…….
The results of all 3 are summed to get the district’s total Equalization Aid.
Equalization AidSlide28
Positive Primary Aid
District Value per Member
10%
90%
Equalization Aid – District #1Slide29
TAX
BASE
FUNDING10% x $1,000=$100
STATE AID
90% x $1,000
=
$900
Sample District #1
(per-member)Slide30
Positive Primary Aid
District Value per Member
30
%
70
%
Equalization Aid – District #2Slide31
TAX BASE FUNDING
30% x $1,000
=$300
STATE AID
70% x $1,000
=
$700
Sample District #2
(Higher Property Value)
(per-member)Slide32
Sample District #2
Funding Results
(Reminder what #1 looked like…….)Slide33
Positive Primary Aid
Positive Secondary Aid
District Value per Member
10%
90%
75%
25%
Equalization Aid – District #1Slide34
TAX BASE FUNDING
10% x $1,000
=$10025% x $8,000
=
$2,000
STATE AID
90% x $1,000
=
$900
75% x $8,000
=
$6,000
Sample District #1
(per-member)Slide35
Positive Primary Aid
Positive Secondary Aid
District Value per Member
10%
90%
75%
25%
50%
50%
Positive
Tertiary
Aid
Equalization Aid
Secondary Cost Ceiling
Primary Cost CeilingSlide36
TAX BASE FUNDING
10% x $1,000
=$10025% x $8,000
=
$2,00050% x $3,000=$1,500$3,600
STATE AID
90% x $1,000
=
$900
75% x $8,000
=
$6,000
50% x $3,000
=
$1,500
$8,400
Total Shared Cost = $6,000,000 (500 x $12,000)
Tax Base = $3,600 State Aid = $8,400
X 500 membership
Tax Base = $1,800,000 State Aid = $4,200,000
Sample District #1
(per-member)Slide37
Positive Primary Aid
Positive Secondary Aid
District Value per Member
30
%
70
%
75%
25%
Equalization Aid – District #2Slide38
TAX BASE FUNDING
30% x $1,000
=$30075% x $8,000
=
$6,000
STATE AID
70% x $1,000
=
$700
25% x $8,000
=
$2,000
Sample District #2
(Higher Property Value)
(per-member)Slide39
Positive Primary Aid
Positive Secondary Aid
District Value per Member
30
%
70
%
75%
25%
Positive
Tertiary
Aid
Equalization Aid
Negative Tertiary Aid
150
%
-50
%
$600,000/$400,000 = 150%Slide40
TAX BASE FUNDING
30% x $1,000
=$30075% x $8,000
=
$6,000150% x $3,000=$4,500$10,800
STATE AID
70% x $1,000
=
$700
25% x $8,000
=
$2,000
-50%
x $3,000
=
-$1,500
$1,200
Sample District #2
(Higher Property Value)
Total Shared Cost = $6,000,000 (500 x $12,000)
Tax Base = $10,800 State Aid = $1,200
X 500 membership
Tax Base = $5,400,000 State Aid = $600,000Slide41
Sample Districts
Comparison
#2
STATE AID
$700$2,000
$-1,500
$1,200
X 500 = $4,200,000
#1
STATE
AID
$900
$6,000
$1,500
$8,400
X 500 = $600,000Slide42
SIMPLIFIED
%
DETAILEDPrimary Tier–State Portion
Line G5
Secondary Tier–State PortionLine G10Tertiary Tier–State PortionLine G15Total Equalization AidLine H1
October 15, 2015 Certification ComparisonSlide43
Aid Worksheet
All data is from prior year
:Membership is computed from submitted PI-1563 reports.(membership reports
)
$$ amounts are from your financial ledger, as verified by your auditor.Slide44
Aid Worksheet
All data is from prior year
:Property value is certified to the DPI by the Department of Revenue.Slide45
“October 15, 2015
Equalization Aid Computation – Percentage Method – Algebraic Format
”“October 15, 2015 Equalization Aid Computation – Percentage Method – Bar Graphs”
SFS
Homepage > Statistical > Longitudinal Data > Equalization Aidhttps://dpi.wi.gov/sfs/statistical/longitudinal-data/equalization-aidhttp://dpi.wi.gov/sfs/aid/general/equalization/worksheets-general-aid“2015-2016 October 15 Certification of General Aid Worksheet”
SFS
Homepage >
District Budget Development and Planning > General Aid Worksheets
*
Equalization Aid Resources on the School Financial Services WebsiteSlide46
Positive Primary Aid
Positive Secondary Aid
Positive
Tertiary
Aid
Negative Tertiary Aid
Negative Secondary Aid
No
Equalization Aid
Equalization Aid – Where is Your District?
250
113
42
19
Lomira
Milwaukee
Sheboygan
South Milwaukee
Brown Deer
Burlington
Campbellsport
Coleman
Elkhorn
New Berlin
Wash-Caldwell
MequonSlide47
Equalization Aid Resources on the School Financial Services Website
SFS
Homepage > Statistical > Longitudinal Data > Equalization Aid
“2015-16 Equalization Aid Formula Position”
https://dpi.wi.gov/sfs/statistical/longitudinal-data/equalization-aidSlide48
Positive Primary Aid
Positive Secondary Aid
Positive
Tertiary
Aid
Negative Tertiary Aid
Negative Secondary Aid
No
Equalization Aid
Equalization Aid –
What is Happening O
ver Time to Your District?
State Average Value Per Member
Based on $$ in Pot
In StatuteSlide49
Crucial Statistic:Value per Member =
Total Equalized Value ÷ Membership
(Compared to what all other districts are doing.)
$200,000,000 ÷ 1,000 = 200,000
$200,000,000 ÷ 800 = 250,000Watch Value Per Member Over TimeSlide50
Watch Value Per Member Over Time
1.) Severely Declining Enrollment
2.) Property Value Significantly IncreasesSlide51
Special Adjustment Aid – can’t lose more
than 15
% of prior year aid. Slide52
1.) Exploding Enrollment
2.) Property Value Significantly DecreasesSlide53Slide54
SFS Homepage >
Statistical > Longitudinal
Data > Property Valuation“Longitudinal EqualizationAid
Value-Per-Member
History”Equalization Aid Resources on the School Financial Services Websitehttp://dpi.wi.gov/sfs/statistical/longitudinal-data/property-valuationSlide55
How can I explain changes in my district’s aid?
Multi-Year History on the Website
Longitudinal Excel Spreadsheethttps://dpi.wi.gov/sfs/statistical/longitudinal-data/equalization-aidA listing of the pertinent Equalization Aid factors that explain what is happening in your district.
Equalization Aid Resources on the School Financial Services WebsiteSlide56Slide57Slide58Slide59
One (1) pot of money is split over
424
school districts based on district values, membership, and expenditures. Changes in individual district’s data affect each other’s aid.Equalization Aid membership is an average of the September & January FTE counts, plus 100% of the Summer FTE. (includes resident and non-resident parttime
attendance)
It’s important to know where your district is in the formula. Negative Tertiary districts that increase shared cost see a decrease in state aid. Positive Tertiary districts that increase shared cost see an increase in state aid. (all things being equal)Be aware of what is happening to your district over
time and where you might be headed.
Equalization Aid – ReviewSlide60
Equalization Aid – Scenarios
http://dpi.wi.gov/sfs/finances/budgeting/executable-worksheetsSlide61
1.) How would a district’s aid change if the membership
was 5%
higher? 5% lower?2.) How would a district’s aid change if there
was 10
% more cost and same number of kids? 10% less cost?Value per member would change.
All things being equal, more membership,
less value-per-member, more aid
…and vice versa.
Which tier changes
? For all but 10 districts, the third tier.
Positively-aided would get more aid, negatively-aided would
get less aid
...and vice versa.
Equalization Aid – RecapSlide62
3.) How would a district’s
aid change if the value
was 10% higher? 10% lower?Value per member would change.
All things being equal, more value would
mean more value-per-member and less aid…and vice versa.Equalization Aid – RecapSlide63
4.) What happens when a district’s value per member exceeds the guaranteed value per member?
At any tier, if the district value
per member exceeds the state guaranteed value per member, negative aid is generated.
Equalization Aid – RecapSlide64
Visit our website:
http://dpi.wi.gov/sfs
… or call us (all 608 area code):
Robert Soldner, Director 266-6968
Debi Towns, Asst. Director 267-9209 Bruce Anderson, Consultant 267-9707 Carey Bradley, Consultant 267-3752 Dan Bush, Consultant 267-9212
Karen Kucharz Robbe, Consultant 266-3464
Gene Fornecker, Auditor 267-7882
Brian Kahl, Auditor 266-3862
Kim Robertson-Richmond, Auditor 267-9218
Victoria Chung, Accountant 266-9205
SFS Team Resources