1 Finance Overview: AEAs/LEAs Barb Harms Business Manager Grant Wood Area Education Agency Management Team Meeting – 11/3/06

2 How AEAs are Funded: n Per pupil funding based on LEA enrollments n Formula is separate for 3 service areas (Media, Ed Services, Special Education) n No direct taxing authority

3 Other AEA Revenues: n Federal funds – IDEA, Part C, etc. n Various other state, local grants n Sales of non-mandated services (such as printing, computer services, SEMS) n AEAs also receive State funding for Juvenile Home/Shelter instructional programs

4 Show-through concept: n Each district includes the AEA per pupil funds in their budget to generate the dollars earmarked for AEAs. n Districts generate property taxes for the AEAs through their levy rate n The funnel is on paper only – dollars actually are paid directly from the State to each AEA

5 Finance Formula: n AEA cost per pupil X enrollment n Cost per pupil grows each year by the allowable growth amount (4% for FY 08) n Child-based: allowable spending is based on number of students counted

6 Finance Formula (contd): n Special Education Services –Funding is a mix of State aid & prop taxes –Enrollment includes weighting for children with IEPs AEA cost per pupil X Weighted Enrollment = Budget for Special Education services

7 Finance Formula (contd): n Media/Technology and Educational Services –Funded entirely from property taxes –Enrollment includes approved nonpublics AEA cost per pupil X Actual Enrollment (public & nonpublic) = Budgets for Media/Ed Services

8 Special Education$16,754,381 Media Services$ 2,927,692 Educational Services$ 3,213,132 State Reduction$ (1,999,562) Controlled Funding$20,895,643 Finance Formula (contd):

Budgeted Revenues

10 Funding for LEAs: 5 basic principles 1. Funding based on number of students 2. State equalizes funding through a mix of state aid & property taxes 3. Legislature sets allowable growth – the annual increase in the cost per student 4. Local property taxes are a critical part of the formula 5. Funding sources have restrictions on their use

11 Funding for LEAs: n # 1: Funding based on number of students Increases or decreases in enrollment affect district budgets. –The count on October 1 is used to establish the districts budget for the following year –That means revenues are always a year behind the actual number of children we are serving in our classrooms

12 Funding for LEAs: n # 2: Equalization - the school aid formula relies on two sources of revenue –State General Fund appropriations –Locally raised property taxes –Results in a maximum expenditure per pupil and therefore a maximum amount a district can raise and spend

13 School Foundation Formula n Three components –Uniform Levy - Property tax levy of $5.40 per thousand of taxable valuation. –State Foundation Percentage - Amount the state pays in excess of $ varies by district (87.5% of cost per pupil). –Additional Levy - Property tax levy which funds the difference between the Combined District Cost and the sum of the Uniform Levy and the State Foundation Percentage.

14 School Foundation Formula

15 School Finance - Spending Authority n Spending authority is the sum of: –Combined District Cost (property tax and state aid) –Miscellaneous income –Unspent balance from previous years n Why important? –Districts cannot exceed spending authority –Not the same as cash

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17 Funding for LEAs: n # 3: Allowable growth The Legislature sets the annual increase in the cost per student. –Growth rate is set over a year in advance to allow schools to meet budget deadlines –Rate for was 4% ($5,128 per student) –Rate for is 4% ($5,333 per student)

18 Funding for LEAs: n # 3: Allowable growth (contd) n –When is 4% allowable growth not 4%? If a district has an enrollment increase, their new money will be more than 4% If a district has an enrollment decline, their new money will be less than 4% The budget guarantee has been used to cushion districts that have enrollment declines – it is now being phased out

19 Funding for LEAs: n # 4: Local property taxes Why not remove property taxes from formula? –Lawmakers would have to replace $1.1 billion dollars statewide with sales tax or income tax –Property taxes add stability – if sales tax was used, funding would fluctuate based on spending

20 Funding for LEAs: n # 5: Restrictions on funding sources –Finance formula revenues go to the General Fund (salaries, supplies, etc.) –Other funding streams for facilities –Cant be commingled or use excess in general fund for facilities

21 LEA Funding - Facilities Facility Related Levies Board-Approved Physical Plant and Equipment Levy (PPEL). Voter-Approved PPEL - simple majority vote required. Bonded Debt - requires 60% majority vote, then Debt Service levy used to repay debt Public Education and Recreation Levy (PERL). Public use playgrounds/recreation facilities. Local option sales tax - maximum of $0.01 additional local option sales tax for school infrastructure - 97 of 99 counties have this

22 Funding for LEAs: n Program Levies –Instructional Support Levy (ISL) Maximum of 10% of Regular Program Budget. Can be either property taxes or income surtax, or combination. Can be board-approved (maximum five years - subject to petition) or voter-approved (maximum 10 years).

23 LEA Funding - Other Levies n Management Levy –Used to pay unemployment benefits, property insurance and early retirement benefits. n Cash Reserve Levy –Used to generate cash for the General Fund of the school district. –Generated by property tax via school board action annually. –Used to fund spending authority but does not directly generate spending authority.

24 Summarizing AEA/LEA Finance n What is common? –State funding based on number of students –Other revenues from grants, misc sources –Allowable growth –Weighted enrollment

25 Summarizing AEA/LEA Finance n What is different? –Schools have taxing authority, AEAs dont –LEA finance formula is more complex –Schools have separate funding sources for facilities & other costs –AEAs generate revenues from sales of non-mandated services

26 School Finance - Web Resources n IASB: n IASBO: n Dept. of Education: n Legislature - bills, amendments, etc. n Dept. of Revenue and Finance:

27 School Finance - Contacts n Iowa Association of School Boards (IASB) –Larry Sigel, School Finance Director ext. 235