Impact of Private School Vouchers on Wisconsin Public Schools Kim Kaukl, Executive Director, Wisconsin Rural Schools Alliance Sue Schnorr, Director Business Services, Oshkosh Area School District Bob Soldner, Director, DPI, School Financial Services Team January 21, :45 p.m. – 2:45 p.m., Wisconsin Center 102 DE

Overview of Session Bob Soldner o General overview of school finance. o Financial impacts of both regular education (effective ) and special education (effective ) private school vouchers. Sue Schnorr o Discussions by the Oshkosh Area School District and Actions of the Oshkosh School Board related to the regular education and special education private school vouchers. Kim Kaukl o Discussion of impacts on School Districts. 2

Category % of State Budget 1. K-12 General and Categorical School Aids32.1% 2.Medical Assistance16.8% 3.State Correctional Operations 6.4% 4.University of Wisconsin System 6.3% 5.School Levy/First Dollar Tax Credits 5.8% 6.Shared Revenues 5.1% 7.State Debt Obligation Bonds 3.5% 8.Technical College System Aids 3.1% 9.*Choice and Charter School Programs (DPI Combined) 2.0% 10.State Judicial/Legal Services 1.7% All Other State Funding 17.2% Source: Legislative Fiscal Bureau ( Biennial Budget Summary-Table 11) Top Ten State General Fund Programs and % Share of State’s General Fund Budget 3

“State Support” for K-12 Education Funding General Equalization/High Poverty Aids$4,492,790,500 (71.8%) School Levy/First Dollar Tax Credits$1,003,000,000 (16.0%) Categorical Aids$ 751,749,900 (12.0%) State Residential Schools$ 11,237,900 (0.2%) Statewide Total$6,258,778,300 (100%) School Finance and “State Support” 4

Overall % change in “State Support” categories between to

Revenue Limits, School Aids, and Property Tax Levies Property Tax Levy State Aid (General Aid + High Poverty Aid + Computer Aid) Revenue Limit 6

Revenue Limit Overview Revenue Limits: Were implemented in Were designed to restrict the amount of revenue a school district can raise through local property taxes and state general school aids annually on a per pupil basis. Do not include state categorical aids, federal aids, local receipts, and most debt service tax levies. Have often been allowed to increase annually on a per pupil basis. o No increase in per pupil adjustment in both and  This is the first time this has occurred since revenue limits were implemented in Are calculated based upon a school district’s three-year rolling membership average by each district individually and are not dependent on changes in other districts. Allow for multiple adjustments for certain purposes. Can be exceeded if approved through local referendum. 7

Declining Enrollment: Districts in declining enrollment receive an adjustment equal to 100% of what the decline in their three-year rolling average enrollment would have generated revenue limit authority. Base Revenue Hold Harmless: Districts in severely declining enrollment situations receive no less than their prior year base revenue limit when starting their succeeding year’s revenue limit calculation. Energy Efficiency: Districts may increase their revenue cap by the amount they spend on energy efficiency measures that result in a reduction of their energy costs. Community Services: Districts may adopt a separate tax levy for certain community service activities that is not included in its’ revenue limit calculation. Unused Revenue Limit Authority: Eligible districts may carry-over up to 100% of unused revenue limit monies from the prior year to the following year. Low Revenue Ceiling: All districts may raise their per pupil revenue to $9,100 in without having to go to referenda. Transfers of Service: All districts may receive increases and decreases to their revenue limit for transfer of service responsibilities between themselves and other districts or other local units of government upon approval from DPI. Reorganizations: Districts electing to consolidate may receive additional state general aid that is outside of their revenue cap for five years after consolidation takes effect. Non-Recurring Revenue Limit Adjustments 8

Base Revenue Limit Per Pupil Highest Overall District-North Lakeland (K-8)--$18,990 per pupil Highest K-12 District-Gibraltar--$15,955 per pupil Lowest Overall District-New Holstein--$9,172 per pupil 90 th Percentile District-Mineral Point--$11,173 per pupil 10 th Percentile District-Mondovi--$9,206 per pupil Statewide Average--$9,921 per pupil Revenue Limit Data 9

Approximately 99.5% of overall school district revenue limit authority was used by districts in ; however, there was $44.8 million in unused authority. Districts exceeding their revenue cap in any year are penalized under current law, resulting in the return of state general equalization aid to the state’s general fund in that same year. In , 249 (59%) of the state’s 424 districts were eligible to receive the 100% declining enrollment exemption Revenue Limit Information 10

Declining Enrollment--Revenue Limit Definition 11

Since revenue limits were implemented in 1993, school districts have been allowed to exceed their revenue cap through local referenda. Two types of referenda questions, both of which can be for multiple years: – Recurring-Additional revenue limit authority is permanently added to the district’s base revenues for future years. – Non-recurring-Additional revenue limit authority is temporarily added to the district’s revenues, but not included in the base for future years. Recurring referenda data from July 1, 1993 through August 15, 2015 – 161 Questions Passed (35.6%) vs. 291 Questions Failed (64.4%) Recurring referenda data from July 1, 2011 through August 15, 2015 – 18 Questions Passed (58%) vs. 13 Questions Failed (42%) Non-recurring referenda from July 1, 1993 through August 15, 2015 – 362 Questions Passed (58.7%) vs. 255 Questions Failed (41.3%) Non-recurring referenda data from July 1, 2011 through August 15, 2015 – 115 Questions Passed (71.9%) vs. 45 Questions Failed (28.1%) School District Referenda 12

State School Aid Appropriation Funding 1.General Equalization Aid*$ 4,475,960,500 2.Special Education Aid $ 368,939,100 3.Milwaukee Parental Choice Program (MPCP)**$ 198,300,000 4.SAGE (Class Size Reduction in Grades K-3) Aid$ 109,184,500 5.Independent Charter School Program (ICSP) ***$ 72,783,000 *Includes equalization aid ($4,390.4 billion), integration aid ($62.5 million), and special adjustment aid ($23 million). General aid funding is estimated to be reduced by $57.2 million for the MPCP and $72.8 million for the ICSP. **71.2% of funding is from state and 28.8% from Milwaukee Public Schools (MPS) general equalization aid reduction. ***All funding is from a general aid reduction to all 424 districts Largest GPR-Funded State School Aid Programs (July 1 st Aid Estimate) 13

General Equalization Aids Overview General equalization aids contain three different components: – Equalization Aids – Integration (Chapter 220) Aids – Special Adjustment (85% Hold Harmless) Aids General equalization aids are received within school district revenue limits, thus increases or decreases in such state aids directly affect school district property tax levies. General equalization aids may be used by school districts for any purpose. Changes in any one school district’s “factors” (membership, costs, property value) affect the distribution of general equalization aid in most other school districts. 14

General Equalization Aids-Background Our current “school aid” formula’s goal is to distribute funding so school districts that spend the same amount per pupil will have a similar tax rate, regardless of their amount of property wealth per pupil. However, Wisconsin’s “school aid” formula does not seek to guarantee all school districts will have the same tax rate; rather, it attempts to achieve the equalization of each school district’s total property tax base. There is an inverse relationship between state general equalization aids and property wealth as districts with the lowest property valuations per pupil receive the highest percentage of state aid and vice versa. In , state cost sharing (July 1 aid estimate) through equalization aids alone ranges from 0% (19 districts) to roughly 82% (Beloit) of eligible shared costs. 15

General Equalization Aid Formula-Factors District Factors (all from the prior year): Membership-September/January Full-Time Equivalent (FTE) average plus Summer School. Pupils are counted by the district in which they live. Shared Cost-Eligible aided costs that have not been offset by other revenue sources such as state categorical aid, federal aid or local (non- property tax) receipts divided by the # of FTE pupils. Equalized Valuation-Total property valuation divided by # of FTE pupils. State Factors: State General Aid-The amount of state general aid appropriated. State Guaranteed Property Valuations and Cost Ceilings-State determined figures regarding property wealth and spending (shared cost) per pupil. 16

Categories of Districts Receiving General Equalization Aid in (Using July 1 st aid estimate) 17

Integration Aid ( data from July 1 st aid estimate) Integration aid was implemented in and is part of the general aid formula so it is received within a district’s revenue limit. Integration aid is provided by the state as an incentive for some districts to voluntarily improve racial balance within and between school districts Act 55 implemented a phase-out of integration aid by prohibiting new enrollees after and created a hold harmless provision for eligible district’s integration aid entitlements beginning in Two Types of Integration Aid Inter-District Aid (22 districts totaling $19.3 million in ) Resident district counts pupil as 75% FTE and receiving district receives state payment equal to its average net cost per pupil for each pupil transferred between districts. Intra-District Aid (4 districts totaling $43 million in ) Eligible districts receive an additional 25% of their equalization aid per pupil for each pupil transferred within the district. 18

Special Adjustment Aid ( data from July 1 st aid estimate) Special adjustment aid is fully funded within the general aid formula and often referred to as “hold harmless” aid. Special adjustment aid works within the general aid formula to assure that no school district’s overall general aid eligibility is less than 85% of its prior year general aid eligibility. Special adjustment aid is received within a district’s revenue limit. In , 72 districts are eligible for special adjustment aid totaling $23.0 million. This year, 19 districts (included in the 72 above) are estimated to only receive special adjustment aid as they are not eligible for any equalized aid. 19

High Poverty Aid High poverty aid is a separately funded general school aid and received within a school district’s revenue limit. Thus, it reduces eligible districts’ property tax levies. Districts are eligible for high poverty aid if at least 50% of their enrollment is economically disadvantaged. Eligibility is determined every two years for the succeeding biennium. State aid per pupil is determined by dividing the total of amount of state high poverty aid by the total membership of all eligible districts. In , 103 districts will receive high poverty aid totaling $16.8 million. Eligible districts receive $66.17 per student. 20

Categorical Aids There are currently 29 “categorical” aid programs that reimburse school districts for specific purposes and programs. Categorical aids are distributed without regard to a district’s property wealth or overall spending per pupil. Categorical aids are paid on either a formula basis or awarded as grants and may be prorated if appropriated funds are insufficient to fully fund a categorical aid program. Categorical aids are received outside of revenue limits. Not all districts are eligible for all categorical aids. 21

Milwaukee Parental Choice Program (MPCP) Background State funds provide vouchers to students residing in Milwaukee choosing to attend private schools anywhere in the state (most are in MKE). $190 million for 25,750 FTE students in 110 private schools in State payment is $7,214 per FTE (grades K-8) & $7,860 (grades 9-12) in Student Eligibility Student must be resident of City of Milwaukee and family income cannot exceed 300% of the federal poverty level ($72,696 for a family of four). Funding State pays 71.2% of program cost while MPS pays 28.8% of the cost in through a reduction in its state general aid. MPS can increase its property tax levy to replace the reduction in state general aid but cannot count MPCP students for state general aid and revenue limit purposes. 22

Racine Parental Choice Program (RPCP) Background State funds provide vouchers to students residing in Racine choosing to attend private schools anywhere in the state (most are in Racine). $12.2 million GPR for 1,660 FTE students in 15 private schools in State payment is $7,214 (grades K-8) and $7,856 per FTE (9-12) in Student Eligibility Student must reside in City of Racine, meet certain prior year enrollment criteria, and family income cannot exceed 300% of federal poverty level ($72,696 for a family of four). Funding Continuing Students-State GPR funds will directly pay for those students enrolled in the RPCP in and thereafter until they exit the program. Incoming Students-Racine Unified School District (RUSD) pays for new RPCP students enrolled in program in and thereafter through a reduction in their state general aids. RUSD fully “counts” these students under revenue limits in and thereafter and for state general aid purposes beginning in

Background State funds provide vouchers to students residing anywhere in the state except Milwaukee and Racine to attend private schools in Wisconsin. $7.3 million GPR for 1,000 FTE students in 31 private schools in State payment is $7,214 (grades K-8) and $7,856 per FTE (9-12) in Student Eligibility Student must reside in Wisconsin and family income cannot exceed 185% of the federal poverty level ($44,828 for family of four). Funding Continuing Students-State GPR funds will directly pay for those students enrolled in the WPCP in and thereafter until they exit the program. Incoming (new) Students-Each school district with a WPCP student residing in it will pay for new students enrolling in the program in and thereafter through a reduction in their state general aids. School districts fully “count” these students under revenue limits in and thereafter and for state general aid purposes beginning in Wisconsin Parental Choice Program (WPCP) 24

Wisconsin and Racine Private School Voucher Programs Financial Impacts Beginning in , state law directs DPI to include NEW students attending a private school with a state funded voucher for the purpose of: (a) determining a new non-recurring revenue limit exemption (Line 10.H.); (b) reducing a district’s state aids payment in June 2016; and (c) increasing a district’s membership used for state aid purposes in Funding: o Private Schools: State law requires private schools to receive voucher payments ($7,214 for students in grades K-8 and $7,860 for students in grades 9-12) based on current year information. For payments, the 3 rd Friday in September 2015 and the 2 nd Friday in January 2016 are the student count dates used to calculate the payment for NEW or “incoming” pupils. The voucher schools are paid 1/2 the annual payment based on the 3rd Friday in September student count and 1/2 the annual payment based on the 2nd Friday in January student count. Private schools have annual student membership audits and DPI will adjust the payments based on audited information. 25

Wisconsin and Racine Private School Voucher Programs Financial Impacts Funding: o Student Counts: The private school voucher funding mechanism is complicated. DPI will make the membership adjustments and calculate the revenue limit and state aid impacts. Districts do NOT report the private school voucher student counts to DPI. Districts do NOT calculate the financial impacts related to the private school voucher students. DPI will provide both the membership and financial details to the school districts State law. o Revenue Limits: It is important to note that if a school board chooses to levy less than the private school voucher non-recurring revenue limit authority, the following year’s revenue limit carry-over total will be reduced dollar for dollar. In other words, this new non-recurring revenue limit exemption is treated the same way as other non-recurring revenue limit exemptions if a school board chooses to levy less than the maximum allowed. o State Aid Factors: How the expenditure for the state aid reduction for the private school vouchers impacts a district’s shared costs will depend on how much additional tax is levied per the non-recurring exemption. In addition, DPI will adjust a school district’s aid membership to include the final audited private school voucher students. 26

Wisconsin and Racine Private School Voucher Programs Financial Impacts Funding: o Statewide Impacts: $16.1 million estimated state general aid deduction to occur in June In addition, $21.4 million increased property tax authority granted to school boards. Total estimated tax impact of $37.5 million in o Detail state aid deductions and non-recurring revenue limit authority increases by each of the 142 school districts can be accessed at: 15.docx 15.docx Funding: o Each year, starting with the school year, “incoming voucher students” will increase a school district’s revenue limit calculation along with a corresponding reduction in the state aid the district will receive. Because each student who qualifies under this program is part of a nonrecurring revenue limit exemption in the current year, the student must qualify again in the coming school years. If that same student qualifies for this program in the future they will be included again in the same manner. 27

Wisconsin and Racine Private School Voucher Programs Financial Impacts Funding: o Beginning in , state law directs DPI to increase each of the 142 districts’ membership used for state aid purposes by the number of “incoming voucher students”. The addition of an estimated 2,181 FTE private school voucher students to state aid membership will result in a redistribution of the state aids that could impact all school districts. Other Issues: o If the school district did not receive an equalization aid payment sufficient to cover the voucher aid reduction, the balance would be reduced from other state aid received by the district. o In and , the total number of pupils residing in the district who could participate in the choice program from each district is limited to no more than 1% of the district’s prior year membership. Beginning in the school year, the enrollment limit will increase by one percentage point in each year until the enrollment limit reaches 10% of the district’s prior year enrollment. In the year after the limit reaches 10%, no enrollment limit would apply. 28

Special Needs Scholarship Program (Special Education Vouchers) Beginning in , allow a child with a disability to attend a participating private school of their choice, if that child has previously been rejected from attending a school in a nonresident school district under the public open enrollment program. State provides a $12,000 voucher to private school. Funding DPI: o Pays $12,000 to the private school for each child participating in the program. o Reduces the resident school district’s equalization aid amount by a corresponding amount. If insufficient equalization aid, DPI will reduce other state aids received. o Increases a school district’s student membership for revenue limits and general school aid purposes. School Boards: o Prohibited from “back filling” the aid reduction with property tax levy increase. o Count private school students receiving voucher as part of federal set aside. 29

Funding--Pre Act 55 Authorizers All school districts in the state have their general equalization aid reduced to pay for students attending these charter schools. These students are not counted by any school district for state general aid or revenue limit purposes. Under revenue limits, school districts may increase their property tax levy to offset this state general aid reduction if their school board elects to do so. In , state payments totaled $67.9 million for 8,413 FTE students. Each district’s state general aid was reduced by 1.5% for this program in The FTE payment per student is $8,079 in Funding--New Act 55 Authorizers Students will be counted by the school district of residence for state general aid and revenue limit purposes similar to how current public school students are counted (one year delay for aids and three year phase in for revenue limits). DPI will reduce the resident school district’s state general aid by the per student FTE amount ($8,188 per FTE in ). The district may not raise its tax levy to replace this state aid reduction. Independent Charter Schools (ICS)--Funding 30

Increased general equalization and categorical school aids by $206 million, which is equal to a 2% increase over base funding. o Increased general school aids by $108.1 million over the biennium, which is equal to a 1.2% increase over base funding. o Increased categorical school aids by $97.6 million over the biennium, which is equal to a 6.5% increase over base funding. Increased funding for private choice programs by $67 million, which is equal to a 15.8% over base funding. Increased funding for independent charter schools by $10 million, which is equal to a 7% over base funding. Provided no per pupil increase to revenue limits in each of the next two years. Increased funding for five categorical aid programs, eliminated CESA categorical aid and created one new program Biennial Budget (2015 Wis Act 55) Overview 31

For more information contact: DPI School Financial Services Team at Or visit our web site at: Department of Public Instruction (DPI) 32