2013 WASB Spring Academy May 4, 2013 A Tour of Wisconsin’s House of School Finance Tour Guide: David Carlson Building Inspector: Bambi Statz Homeowners: School Board Members

School Finance  Some think the house is too large; others say it is too small.  The quality of construction varies from room to room.  Some think the house is ugly, others say it is functional and beautiful in its own unique way.  Some believe we should burn the place down; others believe we need some major remodeling; and some think all it needs is a fresh coat of paint.

The purpose of this session is to provide a basic overview of Wisconsin’s System of School Funding (The House). Additionally, this presentation will identify some of the concerns and issues that have been raised about the key components (Rooms) of the system. Our goal is to empower you with an understanding of the finance house, how it was built, perceived flaws and what if any, modifications you would make if you were to able to make changes.

Home Inspection: School Finance House  The Location and Lot Size: Overview  The Appraisal: Level of Funding  The Great Room: General Aid (Equalization)  Utility Room: Categorical Aid  Semi-Attached Garage: School Levy Credit  Bedrooms: Student Learning Options  The Kitchen: Revenue Limit

School Finance  Overview (The Location and Lot Size)  Public education is a function of the state  School boards are authorized by the legislature to administer public education within their geographical boundaries (chapters Wisconsin Statutes)  Boards levy a local property tax but the state provides additional revenue

School Finance  Overview  State aid is intended to reduce the reliance on the local property tax  State aid is also intended to guarantee a basic education opportunity that is available to all students as required by the state Constitution  How does the state assist districts financially? Directly and Indirectly

Humke Elementary School Nekoosa, WI Direct Aid to Schools Property Tax Credits Property Tax Relief State Support for K-12 = General Aids Categorical Aids

General Aid = $4,811,500, = $4,671,200, = $4,671,200, = $4,285,000, = $4,310,488, = $4,353,424,600* Sources: LFB Paper #26, WISCONSIN ACT 32 and March 2013 LFB Budget Summary Categorical Aid = $650,900, = $644,200, = $653,800, = $608,500, = $653,902, = $612,022,500* 3 Largest School Levy Credit = $822,400, = $892,400, = $897,400, = $897,400, = $897,400, = $897,400,000* * = Governor’s Budget

The Appraisal: Level of Funding There have been STEEP CUTS IN STATE FUNDING FOR SCHOOLS Findings: Elementary and high schools are receiving less state funding in the great majority of states. Specifically, 21 of the 24 states analyzed are providing less funding per student to local school districts than previously, and 17 of the 24 are providing less than they did before the recession (after adjusting for inflation). The cuts may have particularly affected school districts with high concentrations of children in poverty. WI is among states where school funding is below 2008 levels. WI is among the states with the highest cuts in spending In per pupil dollar terms, WI has had the highest cuts of all. Source: by Phil Oliff and Michael Leachman ~ Updated 9/9/11

$ Change % Change Change from FY08 to FY 12

% Change $ Change Change from FY11 to FY 12

State Support for K-12 Education $ in Millions State Funding Gov Budget Gov Budget General Aids $4,811.5$4,671.2 $4,285.0$4,310.5$4,336.6$4,379.9 Categorical Aids School Levy/1 st Dollar Credits State Residential Schools Total $6,296.3$6,219.5$6,234.2$5,802.1$5,873.0$5,873.6$5,982.9 Partial School Revenues $9,574.1$9,731.9$9,899.7$9,398.7 State Share 65.76%63.91%62.97%61.73%61.9%61.3%61.7% Source: LFB Estimated State Support for School Districts published Oct 11, 2012 and Sept 28, 2011 and March 2013 LFB Budget Summary

School Finance General Aid (The Great Room)  General aid is defined as equalization, integration, special adjustment  Equalization aid is by far the largest state education annual appropriation of $4.19 billion dollars ( school year)  Equalization aid formula has been used to distribute state support since 1949

General Aid is made up of Equalization, Integration (Chapter 220), Poverty Aid, and Special Adjustment Aids Eligibility for Integration (Chapter 220), and Special Adjustment (85% Hold Harmless)Aids are fully paid as first draws from the appropriation and the remainder is distributed as Equalization Aid 404 districts are eligible for $4,193.2 million in equalization aid; 18 districts are eligible for Special Adjustment aid only

Special Adjustment Aid For , districts were guaranteed 90% of the aid received in the prior year. Before and after that year, the guarantee = 85%

School Finance  Equalization Aid  Tax base equalizing formula  Districts that spend at the same level will tax at the same rate Example: All districts that spend $11,000 per student will tax 9.8 mills regardless of the differences in property values between districts Click on Icon for More Info 

School Finance  Equalization Aid  Based upon a reimbursement of costs from the prior school year  Factors include: student membership and district property values per student  Does not mandate how much the district spends per student

Based on October Aid Run Based on October Aid Run Between Two Different WI SDs both spending $10,005 but with different valued taxbases: Between Two Different WI SDs both spending $10,005 but with different valued taxbases: - District A has $350,000 in property value/Pupil - District B has $700,000 in property value/Pupil Comparisons in State Equalization Aid Eligibility due to state versus local factors

PRIMARY AID Primary Cost LOCAL STATE $350,00018%$180$1,580,00082%$820 $1,930,000 PRIMARY GUARANTEE $1,000 Primary Cost Ceiling $350,000 $1,930,000 District A: Spends $10,005 Prop Val = $350,000/P

SECONDARY AID Secondary Cost LOCAL STATE $350,00032% $2,882 $2,882 $ 755,090 68%$6,123 $ 1,105,090 SECONDARY GUARANTEE $9, ,000 = $8,005 Secondary Cost $350,000 $1,105,090

TERTIARY AID Tertiary Cost LOCAL STATE $350,00063% $630 $630 $ 205,356 37%$370 $ 555,356 TERTIARY GUARANTEE Any Amt. Over $9,005 Tertiary Cost e.g. $1,000 $350,000 $555,356 Primary Aid = 820 or 82%; Secondary Aid = 6,123 or 68%; Tertiary Aid = 370 or 37% For Overall Sharing = $7,313 or 73%

PRIMARY AID Primary Cost LOCAL STATE $700,00036%$360$1,235,20064%$640 $1,930,000 PRIMARY GUARANTEE $1,000 Primary Cost Ceiling $700,000 $1,930,000 Negative Aid: How it works District B: Like 116 WI SDs that receive (-) Tertiary state aid District B: Spends $10,005 Prop Val = $700,000/P

SECONDARY AID Secondary Cost LOCAL STATE $700,00063% $5,043 $5,043 $ 405,090 37%$2,962 $ 1,105,090 SECONDARY GUARANTEE $9, ,000 = $8,005 Secondary Cost $700,000 $1,105,090

TERTIARY AID Tertiary Cost LOCAL STATE $700, % $1,260 $1,260 ($ 144,644) -26%-$260 $ 555,356 TERTIARY GUARANTEE Any Amt. Over $9,005 Tertiary Cost e.g. $1,000 $700,000 $555,356 Primary Aid = 640 or 64%; Secondary Aid = 2,962 or 37%; Tertiary Aid = -260 or -26% For Overall Sharing = $3,342 or 33%

Comparison in State Equalization Aid Eligibility Comparison in State Equalization Aid Eligibility between Two Different WI SDs, $10,005 both spending $10,005 different Property Values but with different Property Values Equalization AidDistrict A Prop. Val = $350,000/P Positive P, S, and T Aid (232 SDs) District B Prop. Val = $700,000/P (-) Tertiary Aid (116 WI SDs) Primary Aid$820 or 82%$640 or 64% Secondary Aid$6,123 or 68%$2,962 or 37% Tertiary Aid$370 or 37%($260) or -26% Total State Equal. Aid$7,313 or 73%$2,754 or 33%

The Great Room: General Aids Reduced by $501M or 10.4% from to = $4,811,500, = $4,671,200, = $4,671,200, = $4,284,984, = $4,310,488, – 14 = $4,353,424,600 Gov Budget Distribution within the Equalization Aid Formula is impacted by less money and by modifications to the formula.

General Aids actually distributed to schools include:  Equalization Aid = $4.193B  Integration Aid = $68.8M  Special Adjustment Aid = $31.7M  High Poverty Aid = $16.8M 27 Note: 272 or 64% of WI pubic SDs are receiving less school aid for than they did last year. Source: DPI Oct 15, 2012 State Aid Certification and Press Release (NR )

$200,000 $600,000 $1,000,000 $1,400,000 $1,800,000 $400,000 $800,000 $1,200,000 $1,600,000 $2,000,000 PROPERTY TAX BASE SECONDARY COST CEILING= $ 9,496 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 COSTS Tertiary Guarantee (TGVM) = $564,023 reduced from $581,087 Secondary Guarantee (SGVM) = $ 968,337 reduced from $1,243, – 12 THREE-TIER EQUALIZATION AID FORMULA State Aid Graph Oct PRIMARY COST CEILING = $ 1,000 PRIMARY GUARANTEE (PGVM) = $1,930,000

$200,000 $600,000 $1,000,000 $1,400,000 $1,800,000 $400,000 $800,000 $1,200,000 $1,600,000 $2,000,000 PROPERTY TAX BASE SECONDARY COST CEILING= $ 9,005 $14,000 $13,000 $12,000 $11,000 $10,000 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 COSTS Tertiary Guarantee (TGVM) = $555,356 Secondary Guarantee (SGVM) = $ 1,105, – 13 THREE-TIER EQUALIZATION AID FORMULA State Aid Graph Oct PRIMARY COST CEILING = $ 1,000 PRIMARY GUARANTEE (PGVM) = $1,930,000

Recent history of state aid factors Note: Since the Secondary Guarantee has DECREASED by $270,901 or 20%! Why has that happened? Note: The Tertiary Guarantee has declined as well. Why is that? Note: The Secondary Cost Ceiling has fluctuated as well. Why?

Formula Factor Changes 1970s (2-Tier) = 105 – 110% of state average 1990s (94–95) (2-Tier) = 100% of state average (cpi adj) (3-Tier) = 90% of state average 1990s (94-95) (2-Tier) = 106% of state average (3-Tier) = 100% of state average Cost Ceiling Guarantee Was meant to be a disincentive for excessive spending – AT 90% of AVERAGE?

Equalization Aid TERTIARY: Over $9,005 per pupil. Positive Aid Negative Aid SECONDARY: Above $1,000 up to $9,005 per pupil. Positive Aid Positive Aid Positive Aid Negative Aid PRIMARY: Up to $1,000 per pupil. Positive Aid Positive Aid Positive Aid ZERO AID Up to $555,356 per pupil. Above $555,356 up to $1,105,090 per pupil. Above $1,105,090 up to $1,930,000 per pupil. Above $1,930,000 per pupil. DISTRICT EQUALIZED VALUE PER PUPIL DISTRICT SHARED COST PER PUPIL Source: (Oct DPI Aid Cert.) 20 or 5%23 or 6%31 or 7%124 or 29%226 or 53% Change in # SDs from

School Finance Categorical Aid (The Utility Room)  State Supreme Court Decision of Vincent v. Voight concluded that the state’s system of funding was constitutional; however, it provided a warning that districts were not “fungible”  Fungible means interchangeable

School Finance  Categorical Aid  Vincent v. Voight “An equal opportunity for a sound basic education acknowledges that students and districts are not fungible and takes into account districts with disproportionate numbers of disabled students, economically disadvantaged students, and students with limited English language skills.”

School Finance  Categorical Aid  Many categorical aids are intended to recognize the need for additional resources for these populations ( ) school year)  Special Education $ million  SAGE $ million  High Cost SE $ 14.9 million  Sparsity $ 13.4 million  High Poverty $ 16.8 million  Bi-lingual/Bi-cultural $ 8.5 million

School Finance  Categorical Aid  Also provides additional resources for required programs to offset local tax burden  Transportation $ 23.7 million  Library $ 37 million  Provide resources as incentives  School Breakfast $2.5 million  4K Start Up Grants $1.35 million  Categorical aid calculations can be based upon such prior year factors as the number of students, teacher costs, miles transported, district size, % students in poverty

School Finance  Categorical Aids  Susceptible to change  Elimination such as Driver’s Education aid/Children at Risk  “Sum certain” rather than “sum sufficient”; result is often % reimbursement drop; example is special education aid; once 67% now 26%

Utility Room: Categorical Aids Fluctuates with periodic reductions At slightly above level = $650,900, = $644,200, = $653,800, = $608,500, = $653,875, – 14 = $612,022,500 Gov Budget

: In 2000, the WI State Supreme Court established an educational standard which provides that: 1. “Wisconsin students have a fundamental right to an equal opportunity to a sound basic education... that will equip students for their roles as citizens and enable them to succeed economically and personally.” 2. The Court also required that “... districts with disproportionate numbers of disabled students, economically disadvantaged students, and students with limited English language skills...” be taken into consideration. The effect of this decision is to demand that the legislature revise our school finance system to assure that every child has an equal educational opportunity. Is that the case in today’s climate?

Categorical Aids that impact several programs for disabled students, economically disadvantaged students, and students with limited English language skills have either been flat funded or reduced. Program * * High Poverty Aid $18,700,000$16,830,000 Special Education ,100 Add. Special Education for High Cost 3,500,000 Supplemental Special Education +16% of Expends in district < 2,000 pupils 1,750,000 SAGE 109,184,500 SAGE - Debt Service 148,500133,700 Bilingual-Bicultural Education 9,544,2008,589,800 P-5 Grants (high concentrations of disadvantaged /low performing– Beloit, Kenosha, Milwaukee, Racine) 7,096, Head Start Supplement 6,960,1006,264,100 English for Southeast Asian Children 96, Sparsity Aid (20% Free/Reduced) 14,948,10013,453,300 Sources: LFB Paper 26, January 2011 and WI Act 32 Budget and LFB Budget Summary dated March 2013

State Reimbursement Rates Categorical Aid Actual Estimate Special Education, SpEd Transp, Psych/SW, Room & Board 35.79%33.66%31.87%30.45%29.95%28.84%28.70%28.82%28.67%27.85%28.08%26.00% Hospital100% % Bilingual/ Bicultural 17.95%16.50%12.80%12.74%11.41%11.49%11.59%11.26%10.79%9.68% Sparsity Aid 45.0%23.0%94.0%80.29% Source:

Eligibility Criteria:  SD membership less than 725  Less than 10 members per square mile  At least 20% of members qualify for free or reduced Sparsity Aid Sample Districts Proration Factor: %23.0%94.0%80.29% Alma $ 19,190$ 18,629$ 76,595$ 60,216 Athens 36,63536,983146,713127,900 Blair-Taylor 47,23646,781186,700160,657 Cashton 37,10439,467159,948146,205 Gilman 64,94932,705131,507113,689 Port Edwards 31,33432,636130,943110,078 Princeton 26,77125,805109,54295,864 Randolph 33,34734,085142,489123,323 Washburn 39,38537,949152,908126,454 Wauzeka-Steuben 21,87322,63196,02581,653 Wonewoc-Union Center 27,37528,496111,79599,477 Source: DPI Website

Statewide Special Needs Vouchers Private Schools Students are not guaranteed services, and Families surrender their legal recourses under IDEA. Public Schools 119,262 (13.7% ) of all Wisconsin students receive special education services State reimbursement has dropped from 44% to 26% in the past two decades. Special Ed vouchers are funded by a deduction in general aid. Public schools will have to meet maintenance of effort for SwD voucher students State Budget Proposal *Note: this budget provides no new special education categorical aid for public schools. Source: DPI

School Finance School Levy Credit (Semi Attached Garage)  Property tax relief program  Direct offset to individual property tax bills  Appropriation was $469.3 million in and $897.4 million in  Calculated by Department of Revenue and paid to municipalities/counties 4 th Monday in July  The school levy tax credit is distributed based on each municipality's share of statewide levies for school purposes during the three preceding years

School Finance  School Levy Tax Credit  Statewide, the credit reduced the school portion of 2010(11) property tax bills by an average of 15.4%  Given the same tax rate, the taxpayer with a higher valued home would receive a proportionally larger school levy credit as compared to a taxpayer with a lower valued home

School Finance  School Levy Tax Credit  On a home with a full market value of $150,000 subject to the average statewide levy rate for school purposes, school taxes of $1,464 would have been reduced by a credit estimated at $226.  Higher-valued homes would receive a proportionately higher credit. For example, a $250,000 home taxed at the same rate would have a school tax bill of $2,440 and would receive a credit estimated at $377.

Levy Credits Municipality’s 3-Year Average School Levies Statewide 3-Year Average School Levies DISTRIBUTION Distributed based on each municipality’s share of statewide levies for school purposes during the preceding three years. Source : LFB Papers #21 & #27, January 2009

Levy Credits Source: LFB Papers #21 & #27, January 2009 Local Factors: Local Spending (Higher spending means more credit) Local Levy (Higher taxes means more credit) Direct State Aid (Lower state aid means higher local levy, means more credit)

Semi-Attached Garage School Levy Credits  Lack of Transparency  Complicates Tax Bills  Funding for Levy Credits (School Levy Credits and First Dollar Credits) has proliferated while direct aid to school districts has diminished.  Distribution – opposite of equalization

Levy Credit Challenges for School Districts Transparency –School districts are not notified of levy credit amounts as the information and funds go directly to municipalities. –Below the Line application credits (First Dollar) – presented as an offset all local levies, not just school levy. Communication with constituency –Certified levy is artificially high and the true net tax rate is not known at the time of levy certification. –Differences in how the various credits are applied and shown on tax statements. Cash flow –Timing of funds – unlike property tax receipts which become available in the spring, the school levy credit dollars are not provided to school districts until after the fiscal year closes, in August.

GROSS SCHOOL LEVY $1, Cert. Levy Schl Levy Cr $1, Gross Levy CALCULATE NET SCHOOL LEVY $1, Gross Levy School Levy Credit $1, First Dollar Credit $1, Lottery & Gaming Credit $1, Net School Levy paid by Taxpayer

SCHOOL LEVY & 1 st Dollar TAX CREDITS Prior to 1990, Credits = $169 M and were equalized $ 319m m Nearly a Decade = $ 469m m $ 593m m $ 672.4m m $ 822.4m m m $ 892.4m and after+ 5.0 m and after+ 5.0 m $ 897.4m

Annual Appropriations State Budget Act to $ Chge % Chge General School Aids $4,613.9 $4,722.7 $4,731.7 $4,811.5 $4,671.2 $4,285.0$4,310.5-$ % Categorical Aids $545.2$571.1$608.5$650.9$644.2 $653.8 $608.5 $653.9$ % School (Property Tax) Credits $469.3$593.1$672.4$822.4$892.4 $897.4 $ % State Resident Schools $10.4 $11.5 $11.8$11.2 $.87.6% Total State Funding $5,638.8$5,897.9$6,024.1$6,296.3$6,219.5$6,234.2$5,802.0$5,873.0$ % State Funding for K-12 Education to ($ in Millions) Source: ACT 32 State Budget - LFB 73.3% of Total 81.8% 8.3%15.2% of Total

State Budget (Act 32) to $ Incr (Dcr) % Incr (Dcr) General School Aids $4,613.9 $4, , ,811.5$4,671.2 $4,285.0$4,310.5($303.4)(6.6%) Categorical Aids $545.2$571.1$608.5$650.9$644.2$653.8$608.5 $653.9$ % School Levy & First Dollar Credits* $469.3$593.1$672.4$822.4$892.4$897.4 $ % Funding for K-12 Education Trend from through ($ in Millions) Sources include: WISCONSIN ACT 32, AEF Fall 2009 Newsletter and LFB Paper #26 January 2011 *This includes First dollar credits that were added in for $75M, $70M in 09-10, and $5M in [Note: $10M was to have been added for from previous biennium and was not.

Differing Effects of the 2 Largest Forms of State Support (Aids v. Credits) on Local Taxes ● Property poor/low spending districts will receive more state support when funds are channeled as Equalization Aid ● Property wealthy/high spending districts will receive more state support when funds are channeled as School Levy Tax Credit ● Taxpayers in every district gain from First Dollar Credits (Disequalizing) Why is this important? There has been a shift from Equalization Aids to Levy Credits – Per LFB analysis, Disadvantages 70% of WI SDs

School DistrictLoss School DistrictGain Appleton +.35-$2,460,110Crivitz (1.34)$1,199,074 Baraboo +.50-$812,613Drummond (.76)$1,020,634 Waunakee $352,788Elcho (.99)$806,260 Delavan-Darien $919,700Elmbrook (1.56)$12,132,922 East Troy +.46-$698,069Gibraltar (.44)$1,605,973 Fond du Lac +.37-$1,313,439Green Lake (.98)$1,034,812 Hudson +.51-$1,823,001Hayward (1.02)$3,194,244 Kenosha +.30-$2,842,143Mequon-Thiensvl (1.62)$7,487,810 Marshfield +.54-$1,053,006Northland Pines (1.01)$3,657,577 Mosinee +.41-$418,468Phelps (1.30)$550,762 Mukwonago +.41-$1,355,671Sevastopol (.90)$1,291,729 Oak Crk-Frank +.46-$1,711,559Spooner (1.21)$2,117,850 Owen-Withee +.44-$89,065Three Lakes (.96)$1,495,773 Racine +.65-$6,299,947Webster (.97)$1,432,684 Waukesha +.31-$3,031,465Weyerhaeuser (1.50)$296,963 Wauwatosa +.46-$2,475,613Williams Bay (1.23)$1,429,572 West Bend +.59-$2,784,119Wisconsin Dells (.89)$2,070,942 Total No. of SDs295 = 70%Total No. of SDs130 = 30% LFB Analysis: Shift of $747.4M School Levy Credits vs. Equalization Aid to in Source: LFB Paper dated February 2, 2010

School District Equal. Value per Pupil Total Exps per Pupil Tax Rate Equal Aid per Pupil Property Tax per Pupil Levy Credit per Pupil Sheboygan $ 372,028 $ 13,013$ 10.58$ 5,897$ 4,497 $ 659 Green Lake$ 3,503,363$ 20,375$ 4.85$ 131$16,977$2,938 Nekoosa$ 840,458$ 12,100 $ 9.15$ 3,105$ 7,693$1,153 Three Lakes$ 2,830,586$ 15,636$ 4.99$ 202$14,125$2,579 Stevens Point$ 530,206$ 12,310$ 9.48$ 5,574$ 5,027$ 763 Mequon-Thiensville$ 1,298,892$ 12,614$ 8.73$ 597$11,340$2,038 Wisconsin Rapids$ 383,030$ 11,899$ 8.93$ 6,679$ 3,422$ 563 Wisconsin Dells$ 1,374,392$ 11,970$ 6.77$ 461$ 9,309$1,600 State Average (K-12) $ 560,976$ 12,366$9.18$ 5,373$ 5,144$847 School District Comparisons Sources: School Facts ‘10 by WTA and Feb 2010 LFB analysis Above Average CreditBelow Average Credit

Who Pays & Who Benefits from Levy Credits? All WI residents contribute to GPR through income and sale taxes. Only 51% of the total school levy credit reduces property taxes of WI homeowners on their primary residences. 9% of the levy credits go to WI residents who own vacation property 26% go to owners of nonresidential property and non-Wisconsinites who own vacation homes in the state “Property owners in the poorest school districts (in terms of property wealth) received an average credit equal to $375 per student. The size of the average credit going to taxpayers in school districts with higher levels of property wealth per student increases with district wealth. Property owners in the state’s 21 property- richest districts received average per student credits of $2,596, nearly seven times the average credit going to taxpayers in the poorest school districts.” Source: Andrew Reschovsky's study of levy credits:

School Finance Student Learning Options (The Bedrooms)  Have provided many unique and individual learning opportunities for students  Examples: Open Enrollment, Milwaukee Parental Choice Program, Charter Schools including Virtual Charter Schools, Youth Challenge Academy, Youth Options, Youth Apprenticeship, Integration (Chapter 220)

School Finance  Student Learning Options  Each option has its own requirements and funding formula  Open Enrollment (chapter of statutes)  Open enrollment regular and special needs students; regular student tuition is a set amount ($6,445 est. for ); special needs is the set amount plus actual additional student associated costs (Doe v. Burmaster, U.S. District Court Eastern District 03- CV-892) Note: districts can mutually agree to an OE amount for special education students –

School Finance  Student Learning Options  Charter Schools – Chapter of State Statutes  District Charter for district students  District counts students for equalization aid and revenue limit  District Charter for district and OE students  District counts students for equalization aid and revenue limit and receives OE tuition for other districts’ students

School Finance  Student Learning Options  Charter Schools  District Virtual Charter for district and OE students  District counts resident students for equalization aid and revenue limit and receives OE tuition for other districts’ students  No limit on district resident and non resident students attending district’s virtual charter schools in

School Finance  Student Learning Options  Charter Schools – Milwaukee/Racine  Schools chartered under chapter (2r)  Authorizing entities  The common council of the city of Milwaukee  The chancellor of the University of Wisconsin – Milwaukee  The chancellor of the University of Wisconsin – Parkside  The Milwaukee area technical college district board

School Finance  Student Learning Options  Charter Schools (2r)  Milwaukee/Racine (2r) charters receive a payment from the state based upon a prescribed funding formula (est. for of $ 7,775 per student for 7,600 students)  Sum sufficient appropriation of $ 59.8 million for taken from every school district’s general aid eligibility (equalization, special adjustment, integration)

School Finance  Student Learning Options  Charter Schools (2r)  1.39% general aid reduction for each district  Districts have the authority to levy for the aid loss due to the charter reduction  Complex array of funding formulas/district costs complicates the accurate counting of students for aid and revenue limi t

Bedrooms: Student Learning Options Choice and Independent Charter Programs impact funding for public schools

ALL WI School Districts Fund these Programs Under the Milwaukee and Racine charter school program, the City of Milwaukee, UW-Milwaukee, and UW- Parkside operate (or contract to operate) charter schools The operators of these charter schools are paid a statutorily-determined per pupil yearly ($7,775 in ). By law, DPI is required to proportionally reduce the general aid for which each school district is eligible by an amount totaling the estimated payments under the program. Based on the 10/15/12, general school aids estimate, in , general aid statewide will be reduced by a total of $59.8 million for the charter program. Each district's general aid will be reduced proportionately by 1.39%. Source: LFB 11/22/ General School Aids Memo and analysis

General Aids increased $31.7M or 0.7% over last year - still down 7% from two years ago. And yet, increased payments to pubic schools are actually less due to enhanced aids to choice and charter schools:  Milwaukee Parental Private School Choice Program = $59.4M taken from MPS  Racine Parental Private School Choice Program = $1.236M taken from Racine Unified SD  20 Independent Charter Schools in Milwaukee and one in Racine = $59.8M taken from all WI SDs 70 Source: DPI Oct 15, 2012 State Aid Certification and Press Release (NR )

Funding Comparison Public Schools Independent Charters Voucher Schools Enrollment864,00010, ,500 students over school year 30, ,000 students over school year Revenue (How much schools can spend) Per-Pupil Increase$0/student+ $156/student+ $608/ K-8 student + $1,414/ 9-12 student State School Aid (How much the state pays) Net Increase$39 Million*$23 Million$73 Million Per-Pupil Increase$45/student$2,190/student$2,433/student Because the revenue limit is frozen, the increase in general school aids will reduce local property taxes (not increase student spending). There are no revenue limit restrictions for independent charter and voucher schools, so they can spend whatever is allocated. *Note: All $39 million will go to property tax relief. See DPI’s net state school aid increase calculation. Additionally, only some school districts will be eligible for the $64 million performance funding, which is included in the “net increase” state school aid number State Budget Proposal Source: DPI

State Charter Authorizing Board The proposed state board would approve authorizing entities (non-profits, local gov’ts, etc.) New authorizers can then approve independent charter schools anywhere. Undermines local control. Funded through a statewide cut to general school aids –Sum sufficient state appropriation. –School districts can tax to make up the cut State Budget Proposal Source: DPI

State Charter Authorizing Board The general aid reduction for independent charters was - 1.4%* = Average district cut = -$140,000 Not all districts treated the same! That could be backfilled on the local property tax. This is a local tax increase. Lost Aid and increased taxes! State Aid Reductions due to Independent Charters State Budget Proposal *Note: the general aid reduction percentage changes annually, depending on the number of students enrolled in independent charters, although DPI projects that this number will increase under te state budget. Source: DPI District Aid CutDistrict Aid Cut Chippewa Falls$ 383,640Gibraltar$.00 Green Bay 1,803,875Green Lake.00 Madison818,966Three Lakes.00 Sheboygan943,008Elmbrook37,046 Stoughton204,979Mequon16,960 Sun Prairie491,872Wisconsin Dells8,512

School Finance Revenue Limits (The Kitchen)  Arose out of the early 1990’s when many tax levies were increasing at over 10% a year  Effective as Chapter of state statutes  Revenue limit law controls the levy authority of school boards both for operations and long term debt

School Finance  Revenue Limits  Since equalization aid is considered in calculation, over 85% of a district’s revenue is controlled  Not a set levy amount per district; rather a conversion was made from actual individual district expenditures to a revenue control for

School Finance  Revenue Limits  Through the years there has been numerous proposed and enacted changes to this calculation  Examples: declining enrollment, summer school, exempt computer aid, allowable per pupil increase, energy efficiency  It is now the state’s most complex calculation for districts and for the state to administer

School Finance  Revenue Limits  Over levies reduce district equalization aid eligibility and over taxed residents do not get a refund so accuracy is critical  Provides state with significant control over the spending and taxing authority of school districts

School Finance  Revenue Limits  Causes districts to do revenue based budgeting  Referendum option for operations and capital expenditures

The Kitchen: State-Imposed Revenue Limits The Revenue Caps were unfairly implemented resulting in many school districts and their students being disadvantaged ever since.

Source: DPI and LFB Summary of Biennial Budget Equal Access to Resources stymied by: State-Imposed Revenue Caps

Change in Revenue Limit Over Time State Budget Proposal A historic decline in revenue limit over the last four years Source: DPI

Per-Pupil Revenue by School Type State Budget Proposal * For high school students An issue of fairness: No growth in public school spending Source: DPI

Closing Gaps the Wrong Way State Budget Proposal * High school students $3,781$1,975 Source: DPI

Inspection Summary Some of the ways WI’s school finance system has been revised over the past two decades that interfere with equal access to resources and equal educational opportunities include: Inconsistent and Declining Level of State Funding Modifications to General Aid Formula Factors Lack of Commitment to Funding for disabled students, economically disadvantaged students, and students with limited English language skills Changes in State Funding between Direct State Aids and Credits Other Public Policy & Funding Decisions including the introduction and expansion of Private School Choice, Public School Open Enrollment, and Charters Imposition of State-Imposed Revenue Limits

The purpose of this session was to provide a basic overview of Wisconsin’s System of School Funding (The House). Additionally, this presentation identified some of the concerns and issues that have been raised about the key components (Rooms) of the system. Our goal was to empower you with an understanding of the finance house, how it was built, perceived flaws and what if any, modifications you would make if you were to able to make changes. In addition, we have identified resources (Building Materials) that will help you to apply these concepts to your own district (House).

Your Home Inspection should ask:  Is the foundation sound?  Is the house too big or too small?  Should some rooms be demolished?  Any new rooms needed?  Is the house functional? Appealing? Attractive?

Resources Fundamentals of Wisconsin’s School Funding System Resources WASB; The Budget Cycle Association for Equity in Funding Website; DPI Finance Team's Learning Center DPI Finance Team's Basic Facts Legislative Fiscal Bureau DPI School Data Warehouse

A Tour of Wisconsin’s House of School Finance  Bambi Statz, PhD, Emeritus Professor, UW- Whitewater and Association for Equity in Funding Executive Director  David Carlson, WASB Organization Services Program Consultant