1. Next page INTERGOVERNMENTAL FISCAL RELATIONS Correspondence Tax Systems Grants State and School Aid Mandates

2. Jump to first page Basic Principle of Fiscal Federalism Geographic Matching -- decision unit coincides with beneficiaries from service provision (who also bear the burden of service provision)

3. Jump to first page Tax Systems Federal = Income & Payroll Taxes State = Sales Taxes Local = Property Taxes & User Fees Correspondence principle

4. Jump to first page Objectives of this bloc of instruction Understand justifications for intergovernmental aid Recognize types of intergovernmental aid Appreciate some of the drawbacks associated with intergovernmental aid

5. Next page Justifications

6. Jump to first page Violations of correspondence principle Economies of Scale and Scope? Local knowledge (better or worse) Fiscal Disparity (ability to pay) Overlapping jurisdictions Tax limits (statutory and competitive)

7. Next page Types of grants

8. Jump to first page Grants Revenue Sharing Block Grants Categorical Grants Formula (need contingent -- directly addressed to fiscal disparities) Project (deserving -- need plus political considerations)

9. Jump to first page State School Aid Flat Grants, General, and Categorical Foundation Grants SC = F(ADA) - c(PTB) ≥ 0 LC = r(PTB) TC = F(ADA) + (r-c)(PTB), or SC + LC Where: SC = State Aid > 0, LC = Local Contribution F = Foundation Amount Per Pupil ADA = Pupils in Average Daily Attendance c = Computational Tax Rate, r = Actual Tax Rate PTB = Property Tax Base

10. Jump to first page State School Aid Flat Grants, General, and Categorical Foundation Grants SC = $1000(100) - 1.5%($5M), $25K = $100K - $75K LC = $150K = 3%($5M) TC = $175K = $100K + $75K, or $25K+$150K Where: SC =, LC = Local Contribution F = $1000 ADA = 100 c = 1.5%, r = 1% PTB = $5M

11. Jump to first page State School Aid Flat Grants, General, and Categorical Foundation Grants SC = $1000(100) - 1.5%($5M), $25K = $100K - $75K LC = $50K = 1%($5M) TC = $75K = $100K - $25K, or $25K+$50K Where: SC =, LC = Local Contribution F = $1000 ADA = 100 c = 1.5%, r = 1% PTB = $5M

12. Jump to first page State School Aid Guaranteed Tax Base Grants (Percentage or Power Equalizing) SC = r(STB*ADA) - r(PTB) LC = r(PTB) TC = r(STB) STB = ADA(stb) Where: SC = State Aid > 0, LC = Local Contribution R = Locally set property tx rate stb = Standard Tax Base Per Per Pupil ADA = Pupils in Average Daily Attendance PTB = District Property Tax Base STB = Statewide Property Tax Base

13. Jump to first page State School Aid Guaranteed Tax Base Grants (Percentage or Power Equalizing) SC = 1%($100K*100) - 1%($5M) ≥ 0, $50K = $100K - $50K LC = $50K TC = $100K = 1%($100K*100), or $50K + $50K Where: r = 3% stb = $100K ADA = 100 PTB = $5M

14. Jump to first page State School Aid Guaranteed Tax Base Grants (Percentage or Power Equalizing) SC = 3%($100K*100) - 3%($5M) ≥ 0, $150K = $300K - $150K LC = $150K TC = $300K = 3%(100K*100), or $150K + $150K Where: r = 3% stb = $100K ADA = 100 PTB = $5M

15. Jump to first page State School Aid Guaranteed Tax Base Grants (Percentage or Power Equalizing) SC = 3%($100K*100) - 3%($15M) ≥ 0, -$150K = $300K - $450K LC = $450K TC = $300K = 3%(100K*100), or -$150K + $550K Where: r = 3% stb = $100K ADA = 100 PTB = $15M

16. Jump to first page State School Aid Guaranteed Per-pupil Revenue Grants (Support Per Student Equalizing) SC = A i (ADA) - t(PTB), LC = t(PTB) TC = A i (sumADA i ) - (t-r)(PTB) Where: SC = State Aid > 0, LC = Local Contribution A i = Grant amount for student type I t = maximum allowable district tax rate ADA = Pupils in Average Daily Attendance PTB = Local Property Tax Base

17. Jump to first page State School Aid Guaranteed Per-pupil Revenue Grants (Support Per Student Equalizing) SC = $1500(100) - 1.5%($5m), $150K - $75K = $75K LC = $75K TC = $150K, or $75K + $75K Where: A i = $1500 t = 1.5% ADA = 100 PTB = $5m

18. Jump to first page State School Aid Guaranteed Per-pupil Revenue Grants (Support Per Student Equalizing) SC = $1500(100) - 1.5%($15m), $150K - $225K = -$75K LC = $225K TC = $150K, or -$75K + $225K Where: A i = $1500 t = 1.5% ADA = 100 PTB = $15m

19. Next page Drawbacks He who pays the piper calls the tune

20. Jump to first page Mandates Internalizing Externalities Nationwide/Statewide uniformity in service delivery Tax shifting Un-funded Mandates Reform Act of 1995