School Finance Puzzle: What Can and Can’t Board Members Influence? Presented by Wisconsin Association of School Business Officials and Wisconsin Department of Public Instruction, School Finance Team 1

2 Today’s Presenters Wisconsin Association of School Business Officials (WASBO) Wisconsin Department of Public Instruction School Finance Team

3 Global Goals Enhance awareness and understanding Raise confidence level of board members in communicating on school finance topics Help foster an environment of trust between citizens and elected officials

4 The Puzzle Pieces Overview Revenue Limits Equalization Aid Tax Levies, Referenda and Tax Bills

5 This Session is Interactive! The first part of this session is an interactive activity designed to give you an overview of the philosophical basis of Wisconsin school finance.

6 This Session is Interactive! Questions – There are index cards on your table. Please write your questions on the cards. They will be picked up throughout the afternoon and addressed as we go or at the end of the session.

7 Session Evaluation This is the tenth year we have offered this session. We look forward to providing continuing education on school finance topics. Please complete the evaluation form at the end of the session. We appreciate your feedback on what worked, what didn’t and what you would like to learn more about. If you need more time you can drop off your evaluation at the WASBO booth - #901.

8 Wisconsin School Finance Overview Emily Koczela, Director of Finance, School District of Brown Deer

9 Revenue Limits Bob Avery, Director of Business Services, Beaver Dam Unified School District

10 Revenue Limits In , the State enacted revenue limits to control the amount of revenue a school district can collect through: –State General Aids –Aid for Exempt Computer Property –Local Property Taxes

Capped vs Uncapped Revenues – Beaver Dam USD BDUSD Annual Budget Hearing, Why Revenue Limits?

Revenue Limits Think of Revenue Limits as a Pie –The Limit itself is the outer crust – this defines the size of the pie. –There are two fillings: state aids and local taxes. As one increases, the other decreases. 12

Revenue Limits 13

Revenue Limit Pie The amount of “filling” from state sources is determined by the state formula (the next section of the presentation). The amount of “filling” from local taxes is based on the space available in the crust of the pie and whether the Board wants to fill the pie. 14

15 Revenue Limits Controlled Revenues do not include other revenues such as: –School Fees –Categorical Aids (Library aid, Transportation aid, Special Education Categorical Aid) –State and Federal Grants –Per Pupil Adjustment Aid –Open Enrollment Tuition Revenue These revenues are in addition to the controlled revenues under the revenue limit.

16 Revenue Limit Factors Critical factors in the revenue limit calculation include: –Base Revenue (Prior Year Revenue Limit) –Membership (Number of Students) –Allowable Annual Change Per Pupil –Allowable Exemptions to the Limit

17 Revenue Limit Membership Membership =/= Students in Seats –Includes Resident Open Enrollment (OE) Students attending elsewhere –Excludes Non-Resident OE students being taught in your district –Pro-rates for part-time students, such as half- day K and 4K.

18 Revenue Limit Membership Revenue Limit Membership is calculated on a three year average. –A three year average is used to minimize the financial impact of a sharp incline or decline in membership. – Revenue Limit Membership = (Sept Sept Sept 2014) / 3

19 Revenue Limit Membership Membership Sept 2011 Sept 2012 Sept 2013 Sept 2014 Sept 2015 Notice how an on-going membership change must be in place for 3 years before the full impact is realized in the revenue limit membership calculation.

20 Revenue Limit Membership DISTRICT “A” Membership , , , , ,955 AVERAGE3,8223,8593,906

Source: DPI and LFB Summary of Biennial Budget Allowable Per Member Adjustment. 21 Prior to , the Adjustment was indexed to inflation Biennium, it was set at a fixed amount ($200.00) * decrease equaled 5.5% per district. The amount shown is the statewide average. Actual amount varied by district Biennium was also a fixed amount ($75.00) Biennium is set for $0.

22 Impact of Per Member Adjustment Allowable Per Member Adjustment –The amount of the per member adjustment will impact how much or how little the revenue limit increases. –A drop in the revenue limit membership may offset any increase, when applicable, generated by the per pupil amount.

Base (Prior) Year Revenue Limit $35,000,000 Base (Prior) Year Membership 3,500 Base (Prior) Year Revenue Limit / Member $10, Revenue Limit Calculation

Annual Per Pupil Adjustment $0.00 Current Year Revenue Limit / Member $10, Current Year Membership 3,500 Current Year Revenue Limit (no exemptions) $35,000, Revenue Limit Factors

Stable Enrollment Declining Enrollment Growing Enrollment Base Rev Limit$35,000,000 Base Membership3,500 Base RL/Member$10, Per Pupil Adj$0.00 CY RL/Member$10, CY Membership3,5003,4503,550 CY Revenue Limit$35,000,000$34,500,000$35,500, Revenue Limit Factors

Revenue Limit Calculation Membership Maximum Revenue / Member Revenue Limit with No Exemptions 26 If Membership or the Maximum Revenue per Member increase, the “Pie Crust” (Revenue Limit) will get bigger.

27 Impact of Exemptions Additional Ways to Expand the Pie Crust: Allowable Exemptions to the Limit –Exemptions typically increase a district’s revenue limit, but the impact is dependent upon whether the exemption is temporary or permanent in nature. –If an exemption is temporary, the district will need a plan to either fund the future expenditures with a different source or eliminate the expenditures.

28 Recurring Versus Non-Recurring Recurring Exemptions – Permanently in Your Base Base Non-Recurring Exemptions – One Year Only Recurring This Year Next Year Base Non-Recurring Base This Year Next Year

29 Allowable Exemptions to the Limit What are the most common Exemptions to expand the pie crust? Non-Recurring Exemptions (one time annual) –Make this year’s pie crust bigger Declining Enrollment “Hold Harmless” Energy Efficiency Non-Recurring Referendum Recurring Exemptions (ongoing permanent) –Makes this + future years’ crusts larger Transfer of Service Recurring Referendum

30 Allowable Exemptions to the Limit Important New Exemption Non-Recurring Exemptions –Adjustment for New Choice Pupils in : Statutes allow for an increase to a district’s revenue limit, calculated on a per pupil basis, for students who are participating in the statewide voucher program. This per pupil amount is higher than the state defined per student voucher amount. The revenue limit exemption and the state aid deduction for this voucher program are calculated by DPI and shared on October 15.

31 Allowable Exemptions to the Limit Which of These Can the Board Control? Non-Recurring Exemptions (one time annual) –Energy Efficiency –Non-Recurring Referendum Recurring Exemptions (on going permanent) –Recurring Referendum

32 Revenue Limit Versus Expenses If a district’s membership and revenue limit both increase, do district expenses: –automatically increase? –increase more than the revenue limit increases? (Ex: increase of 20 students across multiple grade levels in the district)

33 Revenue Limit Versus Expenses If a district’s membership and revenue limit both decrease, do district expenses: –automatically decrease? –decrease more than the revenue limit decreases? (Ex: decrease of 20 students across multiple grade levels in the district)

Revenue Limits Table Discussion Questions 1.In the absence of an increase to the revenue limit formula, how can school districts generate additional resources to fund projects/budget/expenses? 2. What impact will increasing student fees have on overcoming budget shortfalls? 34

Revenue Limits Table Discussion 3. What has your revenue limit trend been in recent years? Why? Why is this important? 4. A majority of school districts have declining enrollments. What is the fiscal implication for these districts? 35

TABLE DISCUSSION QUESTIONS 1.In the absence of an increase to the revenue limit formula, how can school districts generate additional resources to fund projects/budget/expenses? 36 Revenue Limits a.Within revenue cap: exceed the limit referendum or energy efficiency exemption b.Outside cap: grants, fees, open enrollment, etc.

TABLE DISCUSSION QUESTIONS 2.What impact will increasing student fees have on overcoming budget shortfalls? 37 Revenue Limits a.Minimal b.Additional Consideration: statutory limitations to what fees can be used for.

TABLE DISCUSSION QUESTIONS 3.What has your revenue limit trend been in recent years? Why? Why is this important? 38 Revenue Limits a.Look at longitudinal data for lines 6, 11 and 13 on the revenue limit worksheet. b.Answers will vary by district. c.A great question to share with your business manager.

TABLE DISCUSSION QUESTIONS 4.A majority of school districts have declining enrollments. What is the fiscal implication for these districts? 39 Revenue Limits a.Declining revenue limit authority. b.So what are your board’s plans to address school operations with fewer dollars to operate?

Revenue Limits 40 REVENUE LIMITS – STATE AID = PROPERTY TAXES So, how is the State Aid portion calculated?

For more in depth information on revenue limits attend: Revenue Limits Thursday, January 21 – 10:45-11:45 AM Wisconsin Center, 102 AB Presented by Debra Towns 41 For More Information

Equalization Aid Bob Soldner, Director, DPI School Financial Services Team

Handouts 2 Sample Districts - % Method Equalization Aid District-Specific % Method Equalization Aid District-Specific Aid Formula Position Grid

Why Equalization Aid? Recall Article 10 of the Wisconsin State Constitution “ The legislature shall provide by law for the establishment of district schools, which shall be as nearly uniform as practicable….” “Each town and city shall be required to raise by tax, annually, for the support of common schools therein……”

Modern-Day Wisconsin The original funding source for public schools is property tax, but we know that property values across the state are not uniform. The challenge is defining “uniformity.”

What is Uniformity? $1,000,000$2,000,000 $3,000,000 $4,000,000$5,000, mil tax (Example: $1,000,000 x.010) $10,000$20,000$30,000$40,000$50,000 $ $20,000$20,000 $30,000$40,000$50,000$60,000$70,000 (Does it mean that state aid is the same for all districts?)

What is Uniformity? $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 $10,000 $20,000$30,000$40,000$50,000 $20,000 $10,000$ 0$-10,000 $-20,000 $30,000 (Does it mean the “Robin Hood” principle with local property taxes?)

Buse vs. Smith (1976) NOT LEGAL State Cannot Recapture From Local Tax Base and Redistribute

What is Uniformity? $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 $10,000$20,000$30,000$40,000$50,000 $40,000$30,000$20,000$10,000$ 0 $50,000 (How about if state aid is related to local property value?)

More local property value means less aid from the state. Less local property value means more aid from the state. Key Concept in the Equalization Aid Formula Starting To Come Together

$1,000,000$2,000,000$3,000,000$4,000,000$5,000, $100,000 $400,000$250,000$300,000$200,000 Notice how “wealth” changes after incorporating the number of children to educate. Number of Children to Educate

Takes into account property value AND number of children to educate. Property Value per Member Equalization Aid Formula District A: $400,000,000 ÷ 800 = 500,000 District B: $400,000,000 ÷ 1,000 = 400,000 All other factors being the same, District B will receive a greater proportion of its costs reimbursed as state aid even though they have the same total property value base.

Property Value Per Member

Property Tax Yield Because property values vary so greatly across the state, the resources districts can raise from just their tax base also vary. A student should not be unfairly disadvantaged as a result of where he or she lives. Property Tax Base

Equalization Aid Equalizes Resources Property Tax Base Equalization Aid Districts with less property value per member are aided at a higher percentage than districts with higher values per member.

A formula that incorporates: Shared Cost Number of Students to Educate Property Value State Equalization Aid Formula

General Fund Shared Cost Expenditures that are supported by State General Aid and Local Property Tax

Debt Service Funds Shared Cost Expenditures that are supported by Local Property Tax

State Equalization Aid for is based on data. All Prior Year Data

Membership F.T.E. = full-time equivalent 2 halftime (.5) kindergarten students = 1 F.T.E. Average of 3rd Friday F.T.E. – September Residents 2nd Friday F.T.E. – January Residents Summer School = 48,600 minutes of instruction = 1 F.T.E. All Prior-Year Data ( data is used for aid) + Summer School F.T.E. Residents

Property Tax Base Property tax base is used to determine district ability to support expenditures. Uses Equalized Valuation or Fair Market Value, NOT Assessed Value.

3 District Factors Shared Cost (cost supported by General Aid or Property Taxes) Membership (resident F.T.E. pupils) Wealth (property value per member)

3 State Benchmarks Cost Ceilings (thresholds based on statewide data that separate a district’s cost per member into primary, secondary and tertiary costs) Guaranteed Property Valuations Per Member (statewide benchmarks against which a district’s value per member is measured at each aid level) Amount of Money to Distribute (what the Legislature appropriates and the Governor approves as part of the state budget process)

…….is actually 3 individual computations…….. The results of all 3 computations are summed to get the district’s total Equalization Aid. State Equalization Aid Formula

Positive Primary Aid Positive Secondary Aid Positive Tertiary Aid District Value per Member 10%90% 75%25% 50% Equalization Aid – District #1

District #1 Per-Pupil Funding DISTRICT STATE $3,600 + $8,400 = $12,000 25% x $8,000 = $2,000 10% x $1,000 = $100 50% x $3,000 = $1,500 90% x $1,000 = $900 75% x $8,000 = $6,000 50% x $3,000 = $1,500 $3,600 $8,400 $8,400 x 500 = $4,200,000

1.) How would district #1’s aid change if the membership was 10% higher? 10% lower? (everything else same) 2.) How would district #1’s aid change if there was 10% more cost? 10% less? (everything else same) Changing membership will change value per member. More kids = less value per member, which usually means more aid. Less kids = more value per member, which usually means less aid. Which tier changes? Have to look at position in formula. Positive aided. More cost will mean more aid. Less cost will mean less aid. Using What You Know to Learn About Sample District #1

3.) How would district #1’s aid change if the value was 10% higher? 10% lower? (everything else same) Using What You Know to Learn About Sample District #1 Changing value changes value per member. More value = more value per member, which usually means less aid. Less value = less value per member, which usually means more aid.

Positive Primary Aid Positive Secondary Aid Positive Tertiary Aid District Value per Member 30% 70% 25% 75% -50% 150% Negative Tertiary Aid Equalization Aid – District #2

District #2 Per-Pupil Funding DISTRICT STATE $10,800 + $1,200 = $12,000 75% x $8,000 = $6,000 30% x $1,000 = $ % x $3,000 = $4,500 70% x $1,000 = $700 25% x $8,000 = $2, % x $3,000 = -$1,500 $10,800 $1,200 $1,200 x 500 = $600,000

Using What You Know to Learn About Sample District #2 (for table discussion) 1.) How would district #2’s aid change if the membership was 10% higher? 10% lower? (everything else same) 2.) How would district #2’s aid change if there was 10% more cost? 10% less? (everything else same) Changing membership will change value per member. More kids = less value per member, which usually means more aid. Less kids = more value per member, which usually means less aid. Which tier changes? Have to look at position in formula. This district is negatively-aided. More cost means less aid.

3.) How would your district #2’s aid change if the value was 10% higher? 10% lower? (everything else same) Using What You Know to Learn About Sample District #2 (for table discussion) Changing value changes value per member. More value = more value per member, which usually means less aid. Less value = less value per member, which usually means more aid.

Comparison of 2 Districts Per-Pupil Funding District Local Funding State Funding Total Shared Cost $200,000 value$3,600$8,400$12,000 $600,000 value$10,800$1,200$12,000 More local property value means less aid from the state.

Positive Primary Aid Positive Secondary Aid Positive Tertiary Aid District Value per Member Negative Tertiary Aid Negative Secondary Aid No Aid Equalization Aid (districts are all along the spectrum)

Using What You Know to Learn About YOUR District (for table discussion) 1.) How would your district’s aid change if the membership was 10% higher? 10% lower? (everything else same) 2.) How would your district’s aid change if there was 10% more cost? 10% less? (everything else same) Changing membership will change value per member. More kids = less value per member, which usually means more aid. Less kids = more value per member, which usually means less aid. Which tier changes? Have to look at position in formula. If your district is all positive aided, more cost will mean more aid. For negative districts, more cost means less aid.

3.) How would your district’s aid change if the value was 10% higher? 10% lower? (everything else same) Using What You Know to Learn About YOUR District (for table discussion) Changing value changes value per member. More value = more value per member, which usually means less aid. Less value = less value per member, which usually means more aid.

4.) I’ve heard about 2/3rds funding. Does this mean I will get reimbursed for 66% of my shared cost? No. The percentage aid a district will get in the aid formula depends on the district’s shared cost and value per member. 2/3rds NEVER meant any thing that applied directly to districts. This was a calculation done at the state level that added together several revenue sources (total school levies, total state and categorical aid and total levy credit) to determine the “pot” of aid to be distributed by the formula. 2/3rds is no longer law. Using What You Know to Learn About YOUR District (for table discussion)

It is very important to know where your district is “positioned” in the Equalization Aid formula to understand how the formula impacts your district. “Positively-aided” districts that increase shared costs see an increase in state aid, while … “Negatively-aided” districts that increase shared costs see a decrease in state aid! (all other factors being equal) 80 Equalization Aid

What happens when a district’s value per member exceeds the guaranteed value per member? 81 Equalization Aid Review At any tier, if a district’s equalized value per member is greater than the state guarantee value, then: NEGATIVE AID

Joins us for more Equalization Aid discussion: Equalization Aid Thursday, January 21 – 8:45-9:45 AM Wisconsin Center, 102AB Presented by Karen Kucharz Robbe For More Information

Tax Levies, Referenda and Tax Bills 83 Darren Clark, Assistant Superintendent of Business Services, School District of Waukesha

Basic Funding Equation (=) Local Property Tax levy (-) Equalization Aid Revenue Limit Authority 84

85 Tax Levies Limited by the Revenue Limit Fund 10  General Fund  Includes operating referenda, energy and other exemptions Fund 38  Non-Referendum Debt Service Fund Fund 41  Capital Expansion Fund

Basic Revenue Limit Calculation = Revenue Limit Authority X Per Pupil Multiplier Resident Student Membership 86

Revenue Limit Impact on Budget Revenue Limit represents 85 to 95% of a district’s operational revenue. Important to remember: State Equalization does not impact the amount of revenue a district can generate. It is simply used to calculate the property tax levy. (Inverse relationship) 87

Basic Levy Calculation (=) Local Property Tax Levy (-) Equalization Aid (=) Revenue Limit Authority (x) Per Pupil Multiplier Resident Student Membership 88

Sample Levy Calculation (A) Revenue Limit Authority Fund 38 Levy Fund 41 Levy Equalization Aid Fund 10 Levy $25,000,000 (0) (12,500,000) $12,500,000 89

Revenue Limits 90 REVENUE LIMITS – STATE AID = PROPERTY TAXES

Sample Levy Calculation (B) Revenue Limit Authority Fund 38 Levy Fund 41 Levy Equalization Aid Fund 10 Levy $25,000,000 (0) $25,000,000 91

Sample Levy Calculation (C) Revenue Limit Authority Fund 38 Levy Fund 41 Levy Equalization Aid Fund 10 Levy $25,000,000 (500,000) (12,500,000) $11,500,000 92

93 Tax Levies Outside the Revenue Limit Fund 39  Debt Service Fund  Referendum Approved Debt Fund 80  Community Service Fund  Community Programs & Services 

Considerations for Under-Levying The decision by a school district to certify a tax levy amount less than what is allowable by statute and formula. Local political considerations Impact on programming Impact on fund balance Long-Term Funding Impact –Carry-Over Provisions of Revenue Limits 94

Total Levy Calculation Fund 10 (operational budget) Fund 38 ( non referendum debt) Fund 41 (capital expansion) Fund 39 (Referendum approved Debt) Fund 80 (Community Service) Total Property Tax Levy $11,500, ,000 1,000, ,000 $14,000,000 95

Final Levy Calculation (=) Final Certified Property Tax Levy (-) Any Under- Levy Amount (+) Non-Revenue Limit Levies (Fund 39/80) (=) Local Property Tax Levy (-) Equalization Aid (=) Revenue Limit Authority (x) Per Pupil Multiplier Resident Student Membership 96

Private School Voucher Program Beginning in 2015/16, state law directs DPI to calculate a new non-recurring revenue limit exemption for districts with NEW resident students attending a private school through the voucher program. October 15 DPI supplies districts with the financial impacts of voucher students residing in their district. This includes both the revenue limit increase and the state aid deduction. 2015/16 participation impacts 2016/17 Equalization Aid certification. 97

Voucher Program Budget Impact (Waukesha) In 2015/16 participating districts where impacted in two ways by the Voucher Program. Tax Increase: New Revenue Limit Authority of $677,739 ($0.07 rate impact) with no Equalization Aid offset until 2016/17. Budget Impact: Revenue Authority$677,739 Voucher Program Exp.$511,332 Unallocated Budget $166,407 98

Flow of Information to Finalize Tax Levy / Rate Third Friday (Sept) Pupil Count –Revenue Limit Authority October 1 - Property Valuations –Computer Aid / Tax Rate October 15 – Certification of Equalization Aid –Operational Levy / Voucher Program!!!!! 99

100 Exceeding the Revenue Limit  Under current State Statutes the only way for a public school district to exceed their Revenue Limit Authority is via the Referendum process.  Two Types –Capital Referendum –Operational Referendum

101 Referenda to Increase Tax Levy Capital Referendum (Fund 39): –A referendum to authorize borrowing funds to finance capital expenditures related to building and sites New Construction Remodeling Technology –Levy & Repayment of the debt is made from Fund 39, which is outside the Revenue Limit.

102 Referenda to Increase Revenue Limit Authority Operational Referendum (Fund 10): –A referendum to authorize the school district to exceed, by specified amounts, the statutorily mandated limits on revenues available from general state aids and local property taxes. Recurring: Is permanent and built into the revenue limit formula for subsequent years. Non-Recurring: Sunsets after a specified number of years.

103 Why Operating Referenda? Revenues compared to Expenditures

104 Shortfall grows to $500,000 Impact of Recurring $650,000 Recurring Referendum

105 Impact of Non-Recurring Non-Recurring Referendum $200,000 first year; $415,000 second year; $643,000 third year; $885,000 last year. Shortfall after referendum sunsets = $1.15M

106 From School Tax Levy to Property Tax Bill

107 Equalized Valuation Determined by the Department of Revenue to represent market values i.e. treats all property as though it had been revalued each year Equalizes property values to provide “equal” tax distribution across multiple municipalities and districts

108 Distribution of Levy Among Municipalities the municipality’s share of school district levy A municipality’s total equalized value in school district (divided by) The total equalized value for all municipalities in school district City of Hartford$980,687, % School District Total$1,402,211,104 =

109 Why Equalized Value Is Used To Distribute Levy Levy distribution based upon equalized value Treats all municipalities as though they had been revalued during the year Offsets variances in assessment practices between municipalities Updated annually

110 Assessed Valuation Determined by municipalities –Consequently, equivalent properties in different municipalities may not be valued equally (Assessment Ratio) Not required to be updated each year

111 Distribution of Levy Within Municipalities Property Owner’s share of school district levy Property Owner’s total assessed value in municipality (divided by) Total assessed value for all taxable property in the municipality =

112 Assessed Value Reassessment is a means of realigning property assessments with fair market value (Equalized Value) Adjustment is mandated under state law to be within 10 percent of fair market value at- least once during a given four year period. The effect of a re-assessment is…

113

114 Levy and Assessed Value The effect of a re-assessment on the school district’s tax levy or their ability to generate revenue is $0

115 Levy and Assessed Value The assessed value of a property determines the property owner’s portion of the levy certified to the municipality of residence

116 Join us for more discussion: Impact of Vouchers on Wisconsin Public Schools Thursday, January 21 – 1:45-2:45 PM Wisconsin Center, 102DE Presented by Kim Kaukl, Susan Schnorr and Bob Soldner For More Information

So What Does this Mean in My District? Some great questions to continue discussions in your district.

A Referendum – How much help? Your district successfully passed a $10 million referendum to exceed the Revenue Limit. These funds will be used to remodel aging buildings – Hooray! The plan is to borrow the full amount this year for the necessary projects by incurring debt that will be serviced over the next 15 years.

A Referendum – How much help? How will this impact your revenue limit? How will this impact your equalization aid? How will this impact your property taxes?

A Referendum – Revenue Limit There will be no impact on the revenue limit as a referendum, by definition, is outside of the revenue limit requirements. This is true regardless of whether the district is positively aided or struggles with negative aid issues.

A Referendum – Equalization Aid Paying off the debt service will likely have an impact on the district’s equalization aid calculation. This is because debt service payments are legitimate costs SHARED by the state in the equalization aid formula. Shared costs are one of the factors contributing to the equalization aid calculation.

A Referendum – Equalization Aid An increase in shared costs when property values and membership remain the same will result in an increase in per member costs. In other words, it appears to the state as though the district is spending more on each child than previously.

A Referendum – Equalization Aid In a positively-aided district, this will result in additional help (equalization aid) from the state. In a negatively-aided district, this will result in less aid from the state.

A Referendum – Property Taxes The annual debt service on the borrowed funds (principal & interest) will be added to the tax levy until the debt is satisfied. This will increase your local property tax levy.

Student Count Changes Let’s look at how changes in student counts impact  Revenue Limit  Equalization Aid  Tax Levy

Student Count Changes Twelve full time students in your district choose to become home schooled students. This will impact the student membership counts for the public district – even though these students still reside within the district.

Student Count Changes – Revenue Limit Membership is a factor in the Revenue Limit (RL) calculation. But it is an ‘averaged’ factor over the past 3 years. In Year 1 when these 12 children exit the district there will be a loss of 12 FTE in the September count. This loss of 12 will be in the average that includes the previous two years so it will really only reflect a loss of 4 FTE.

Student Count Changes – Revenue Limit Past Year FTE Past Year FTE This Year1788 FTE 5388 Total Divided by 3 years/ 3 RL FTE this year1796 FTE You will be educating 12 fewer FTE but only recognizing a loss of 4 FTE in your RL.

Student Count Changes – Revenue Limit In Year 2 after these 12 children exit the district there will be a loss of 12 FTE in the September count. This loss of 12 FTE will be in the average that includes the previous two years – BUT it was also in last year’s count, so it will really reflect a loss of 8 FTE.

Student Count Changes – Revenue Limit Past Year FTE Past Year FTE This Year1788 FTE 5376 Total Divided by 3 years/ 3 RL FTE this year1792 FTE You will be educating 12 fewer FTE but only recognizing a loss of 8 FTE in your RL.

Student Count Changes – Revenue Limit In Year 3 after these 12 children exit the district there will be a loss of 12 FTE in the September count. This loss of 12 FTE will be in the average that includes the previous two years – BUT the reduction of 12 FTE is also in the count from all 3 years, so it will reflect the full loss in membership to the district.

Student Count Changes – Revenue Limit Past Year FTE Past Year FTE This Year1788 FTE 5364 Total Divided by 3 years/ 3 RL FTE this year1788 FTE You have achieved full recognition of the loss of these 12 students in your district. Multiply this loss by the per member revenue allowed under the RL to identify the total dollars lost.

Student Count Changes – Equalization Aid The Membership factor in the Equalization Aid formula is calculated differently than in the Revenue Limit calculation. **Equalization Aid looks only at the prior school year FTE – and it considers an average of the September & January counts. ** For purposes of this example, we will consider the average of both counts to remain at 1788.

Student Count Changes – Equalization Aid So the FTE count that will be used on the Equalization Aid calculation for this district following the very first year of the district’s loss of 12 students will be 1788 members. The State will recognize that this district is educating fewer children – and if the shared cost and property values remain static – this district is likely to see a decrease in equalization aid.

Student Count Changes – Equalization Aid Shared costs may or may not decrease when these 12 members exit – WHY? If shared costs decrease proportionately to the decrease in membership = shared costs per member remain static in formula. If shared costs are not reduced due to loss of membership = it appears to the State that the district is spending more on each member.

Student Count Changes – Equalization Aid If property values remain static, this district will find itself in the position of educating fewer children, which will net a higher property tax wealth behind each child. Because the State progressively upholds (provides more aid) districts with lower property value per member, this district will likely be eligible for less equalization aid. In comparison to the rest of the districts in the State, they appear stronger & more able to support their school district with their own property tax levy. Conceivably, this district could raise additional tax dollars without increasing the levy mill rate.

Student Count Changes – Equalization Aid What if the property values in the district also decrease? If this happens, the district may not realize any loss in equalization aid because their position of increased membership & spending is likely balanced by their lowered tax wealth per member. The key is what happens in all the other districts in the State – distribution of equalization aid considers your relationship to all other districts.

Student Count Changes – Tax Levy You have probably already answered in your mind what will happen to the tax levy in a district that loses membership FTE. The answer is: It depends The lost membership by itself will not impact the tax levy. The revenue limit and/or the equalization aid changes, however are likely to impact the tax levy.

139 Additional Resources DPI Finance Team - dpi.wi.gov/sfs WASBO – WASBO.com WI Department of Revenue - revenue.wi.gov/ Legislative Fiscal Bureau - legis.state.wi.us/lfb/ Wisconsin Taxpayers Alliance - wistax.org/

140 Thank you for joining us today.