2. Basic School Finance 101 Everything You Wanted To Know But Were Afraid To Ask! Prepared by Galen Howsare, RSBA Associate Superintendent of Administrative Services West Des Moines Community School District howsareg@home.wdm.k12.ia.us 226-2716

3. Goals Help everyone to LEARN and UNDERSTAND some of the complexities of Iowa School Finance. ANSWER your questions.

4. What if you don’t understand?

5. Have a question? I would appreciate it if you would interrupt me, by raising your hand or calling my name, so that I can address your question at that time. Thanks in advance for your cooperation!!!!!!

6. Want to know more?

7. Helpful Resources Iowa Department of Education (www.state.ia.us/educate) School Laws of Iowa (www.edinfo.state.ia.us/web/law.asp) Iowa School Finance Manual (Iowa Association of School Boards) Certified Annual Report Spreadsheets (www.state.ia.us/educate/fis/sft/car/sp reads.html)

8. Helpful Resources (continued) Iowa Condition of Education Report www.state.ia.us/educate Uniform Administrative Procedures for Iowa School Officials (UAP) and Uniform Financial Accounting Manual (www.state.ia.us/educate/fis/sft/pubs.html)

9. Helpful Resources (continued) Iowa Association of School Boards (www.ia- sb.org/finance/finance.asp) District Documents Proposed Certified Budget 2001-02; Certified Budget Enrollment September 21, 2001; 10-year Facility Master Plan (on web); Board Policies (on web)

10. District’s Web Site http://www.wdm.k12.ia.us Check it out!!!

11. Where do we start? You have to know the rules first!

12. Good stuff to know!!!!!!!  Dillon’s Rule  District Boundaries versus City Boundaries  Different Funds  School Foundation Formula  Allowable Growth and Enrollment

13. Good stuff to know!!!!!!!  Spending Authority versus Money in the Bank  What is the source of spending authority and cash?  Where does the money go?  Long term debt  Cost efficiencies

14. Good stuff to know!!!!!!!  Dillon’s Rule

15. Dillon’s Rule severely limits the district’s legal authority In 1868 I issued a decision that schools only have authority for things which are expressly granted or necessarily implied in governing statutes. They don’t have HOME RULE authority.

16. Home Rule Cities/Counties have the broad authority to exercise any power or perform any function deemed appropriate except for statutory prohibition. “Do whatever you want except for what law says you can’t”

17. Home Rule Is Far Less Limiting Than Dillon’s Rule Cities & Counties Schools Home Rule Dillon’s Rule

18. Good stuff to know!!!!!!!  District Boundaries versus City Boundaries

19. School District Map 60th Street 142nd Street

20. School District versus City Boundaries for school districts are INDEPENDENT of city boundaries. Therefore, as city boundaries change, school district boundaries remain unchanged.

21. Good stuff to know!!!!!!!  Different Funds

22. District Funds  General  Activity  Management  Physical Plant and Equipment Levy (Regular and Voted PPEL)  Public Education & Recreation Levy (PERL)  Capital Projects includes Sales and Services Tax Fund  Debt Service  Enterprise- School Nutrition  Enterprise- Community Education  Trust

23. GENERAL FUND Description: Used to account for all financial resources except those required in another fund. Typical items include employee salaries, benefits, services, supplies, maintenance and equipment Revenue Sources: Foundation Formula determines property tax and state aid, cash reserve, federal dollars and funding from other sources (miscellaneous income) such as tuition, earned interest, and open enrollment Authority: State Foundation Formula & Board

24. ACTIVITY FUND Description: Student-related activities such as fundraising events, athletics, and other extra curricular Revenue Sources: Student fees, gate admissions, sales Authority: Board and student groups

25. MANAGEMENT FUND Description: Used to pay district unemployment charges, non- employee insurances, and early retirement benefits Revenue Sources: Property tax with rate dependent on dollars needed Authority: Board

26. PHYSICAL PLANT AND EQUIPMENT LEVY (PPEL) Description: (Iowa Code Chapter 298.3) Used for the purchase and improvement of sites, buses, and major building repair and re-modeling, single units of equipment over $1,500 Revenue Sources: Property tax (calculated on Taxable Valuation plus Tax Increment Finance Valuation) Authority: Regular (33-cents per $1,000) and Voted (max. $1.34). Currently, WDMCSD max. is $1.34.

27. Public Education and Recreation Levy (PERL) Description: (Iowa Code Chapters 276 and 300) This levy is used for the support of community education in WDMCSD. Revenue Sources: Property tax Authority: Voters, maximum allowed 13.5 cents per $1,000 of valuation, stays in place unless petitioned for election

28. CAPITAL PROJECTS FUND Description: Used to account for the resources that pay bills for school building additions and loans authorized by Chapter 297.36 or the local option sales and services tax Revenue Sources: Bond proceeds, Local Option Sales and Services Tax Authority: Voters, requires 60% for bonds

29. DEBT SERVICE FUND Description: Used for the accumulation of dollars for, and the payment of, general long-term debt, principal and interest Revenue Sources: Property tax (calculated on Taxable Valuation plus Tax Increment Finance Valuation) Authority: Board, rate set as needed to meet scheduled payments

30. ENTERPRISE: SCHOOL NUTRITION FUND Description: Used for school lunch and breakfast program Revenue Sources: Lunch and breakfast sales, ala carte sales, federal and state subsidies Authority: Board approves lunch prices

31. ENTERPRISE: COMMUNITY EDUCATION FUND Description: Used for educational programs available to the public such as KIDS WEST, construction technology class, and student stores Revenue Sources: Fees and sales Authority: Board, CE Advisory Board

32. TRUST FUND Description: Used for the assets held by the district from memorials not donated to the educational foundation*. Revenue Sources: Donations Authority: Board * West Des Moines Community Schools Foundation for Educational Excellence

33. Good stuff to know!!!!!!!  School Foundation Formula

34. State Foundation Formula Used to calculate a school district’s general fund budget, which primarily supports the education program of a school district. Each school district is responsible for calculating its budget (revenues and expenditures) under the state foundation formula. The formula also determines the maximum amount (spending authority limit) for the district’s expenditures.

35. State Foundation Formula In other words, the state foundation formula SETS AN EXPENDITURE CEILING for each school district’s total spending authority and TELLS the school district how to fund its spending authority.

36. The maximum limit on a credit card is much like spending authority. The maximum limit does not necessarily mean you have the money to spend to that limit. Spending authority is a calculation. It does not generate its own money.

37. School Foundation Principles Equity in expenditures Property tax relief Equalization of method of taxation Uniform state aid allocation formula Predictable Simple Pupil driven Provide for local discretion and incentives ESTABLISH MAXIMUM SPENDING CONTROL One formula for AEA & K-12

38. Equity in Expenditures

39. Wow! Wisconsin spent nearly $1,900 more per pupil than the Iowa average in 1999-2000!

40. Pupil Driven times DCPP = DCPP = District Cost Per Pupil = Property Tax/State Aid Revenue per pupil

41. Certified Enrollment This is the number of resident pupils on the third Friday in September. This count generates the budget and spending authority for the following school year.

42. Certified Enrollment History

43. Open Enrollment Current projections show the gap between ins and outs narrowing.

44. What is Allowable Growth? Allowable Growth is the percentage increase of the State Cost Per Pupil, which is set each year by the Iowa Legislature. This percentage, when multiplied by the current year’s State Cost Per Pupil, determines the amount of dollar growth in each district’s cost per pupil. For example, if the State Cost Per Pupil is $4,512, then a 4% allowable growth means that it will increase by $180 for the next year ($4,512 x 4% = $180). So, $4,692 ($4,512 + $180) becomes the State Cost Per Pupil for the next year.

45. How is Allowable Growth determined? We planned on this! Right now it looks this!!!

46. Why is Allowable Growth Important?

47. Why is this IMPORTANT? This is really serious! I hope parents and staff understand the significance that the allowable growth rate has in determining the district’s ability to maintain CURRENT programs and services for students.

48. District’s Cost Per Pupil The District’s Cost Per Pupil, DCPP, is the same as the state cost per pupil.

49. State Cost Per Pupil Analysis 53% of the districts have a DCPP HIGHER than the state cost per pupil! There is no way for WDMCSD to be higher than the state minimum.

50. Cost Per Pupil Comparisons

51. What if WDMCSD DCPP was the….? Same as Des Moines WDMCSD would receive an additional $68 per student (spending authority and money) or $593,818 for FY02 Same as State Maximum WDMCSD would receive an additional $175 (spending authority and money) per student or $1,528,205 for FY02.

52. Regular Program Calculation What will this number be?

53. Instructional Support Program Levy (ISP) Local district has the ability to generate up to 10% of the Regular Program in spending authority. Funding is a combination of property taxes and state aid which counts as miscellaneous income. Total state dollars have been capped since inception of the ISP. So as more districts approve an ISP, there are fewer state dollars for each district.

54. Instructional Support Program Levy (ISP) POSSIBLE SOLUTION: Legislation which would give the district full spending authority for state share with money coming from local taxpayers or FULL STATE FUNDING.

55. 2001-02 For those who want the more technical calculation..

56. 2001-02 This is for the accounting folks. Too technical? Just go to the next slide.

57. One possible scenario for 2002-03

58. How can the district increase spending authority? Higher allowable growth rate Increase certified enrollment Increase miscellaneous income School Budget Review Committee request for unique circumstances Decrease expenditures

59. How can the district increase its cash balance? Increase the cash reserve levy Increase miscellaneous income Decrease expenditures

60. Property Valuation History

61. Rollback-What is it? It is the percentage of residential property that is taxed.

62. Rollback-What’s the difference? General Fund-Increases state aid necessary PPEL and Debt Service- DECREASES dollars generated for the district

63. Rollback Impact on PPEL

64. Comparison of Valuations

65. Property Tax Valuation

66. TAXABLE VALUATION PER PUPIL

67. Property Tax versus State Aid

68. How does our tax rate compare?

69. Tax Rate and Levy for Each Fund 2000-01

70. Miscellaneous Income Examples Tuition Open enrollment Bus fees Textbook fees Earned interest Rentals Donations Categorical money All federal source dollars

71. Good stuff to know!!!!!!!  Where is the source of money?  Where does the money go?

72. What are the sources of funding for the General Fund?

73. 2000-2001

74. Miscellaneous Income All money that is NOT property tax or state aid.

75. Categorical Funding Examples Phase II/III Class Size Reduction Student Achievement and Teacher Quality Technology Vocational Aid Nonpublic Technology Title VI Title I Carl Perkins Eisenhower STAR Goals 2000 Drug Free E-rate

76. Phase II Teacher Payment History

77. Can we do more somehow? Currently, the district is taking advantage of EVERY AVAILABLE source of funding within the Iowa School Foundation Formula.

78. Where did the money in the General Fund go ? 2000-01

79. Where did the money in the General Fund go? 2000-01

80. Key Financial Measures Unspent Balance Fund Balance Financial Solvency Ratio

81. Unspent and Fund Balances

83. Financial Solvency Ratio General Fund Unreserved, undesignated fund balance divided by Total Revenues

84. Financial Solvency Ratio

85. Good stuff to know!!!!!!!  Long term debt

86. Bonded Indebtedness Schedule By keeping debt service level, current debt can be paid off sooner. Provides option for bringing on new debt ($28 m.) without increasing taxes.

87. Good stuff to know!!!!!!!  Cost efficiencies

88. Significant Ways District Maximizes Resources Maximum Instructional Support Program Levy Maximum PPEL and PERL levies K-6 class size policy of 26 and 28 Bus policy (43% ride bus) Minimum number of attendance centers for number of students

89. Financial Comparison In spite of the funding challenges, the district’s financial condition remains one of the top districts in the state. Gold Star!!!

90. Comprehensive Annual Financial Report (CAFR) - Certificates of Excellence in Financial Reporting Association of School Business Officials International every year since 1984-85 Government Finance Officers Association every year since 1986-87

91. QUESTIONS??? Thank you!