1. Iowa Department of Education1 Special Education Finance Overview SEAP Friday, April 5, 2013

2. Iowa Department of Education2 Iowa Funding of Special Education Foundation Formula Weighting Grants-in-Aid (IDEA) Medicaid Services Other State/Federal categorical aid & allocations

3. Iowa Department of Education3 Foundation Formula Iowa is one of 36 states with a foundation formula Pupil driven system (Pupils x Cost Per Pupil = Regular Program Budget) Sets spending limit/ceiling = budget authority Praised for its equity

4. Iowa Department of Education4 Goals and Principles Equity in Expenditure Horizontal Vertical Property Tax Relief Equalize Taxation Uniform State Aid Allocation Formula Predictable Simple Pupil Driven Provide for Local Discretion/Incentives Establish Maximum Spending Control One Funding Formula AEA + K-12 Provides Adequate Funding

5. Iowa Department of Education5 Horizontal Equity All students treated equally. All students are FIRST regular education students. All students have equal funding behind them. Referred to as “1.0” funding Comes from October 1 certified enrollment count

6. Vertical Equity Iowa is one of 20 states that weights per pupil Creates weight (Pupil FTEs) based on need Purpose is to equalize educational opportunity Provides additional funding for certain populations of students Iowa Department of Education6

7. 7 Weighted Enrollment Funding Pupil Driven System Weights “Adds” Pupils (FTEs) Weights x District Cost Per Pupil = Additional Categorical Funding

8. Iowa Department of Education8 Weighted Enrollment Funding Pupil Driven System Weights –Provide funding to cover additional instructional cost Special Education English language Learners Shared Teachers/Students/Regional Academies At-Risk Students Called Categorical Funding

9. Vertical Equity in Special Education 3 Levels of Special Education Weighting Level 1 = 0.72 Level 2 = 1.21 Level 3 = 2.74 Iowa Department of Education9

10. 10 Annual Growth to Cost Per Pupil Allowable Growth Allowable Growth Rate x State Cost Per Pupil = Growth Per Pupil 2012-2013 2.0% x $5,883 = $118 Per Pupil $5,883 + $118 = $6,001

11. Iowa Department of Education11 AEA Program Funding AEA Funding –Pupil Driven –Flows Through Local District Budgets –Special Education Support Services –Media Services –Educational Services

12. Iowa Department of Education12 Revenue - Foundation Formula Required Local Levy - Uniform Levy Minimum Local Tax Effort State Aid Equalizing Foundation Level Total funding is the same in all district—just source changes (property tax or state aid) Additional Levy

13. Iowa Department of Education13 State Aid Increase Funding for Districts “Fair” Method to Distribute State Aid Provide Property Tax Relief Equalizes Effort

14. Iowa Department of Education14 Foundation Formula State Aid Uniform Levy $5.40 Per $1000 Valuation Additional Levy Foundation Level 87.5% of State Cost ($6,001) = $5,251 Per Pupil

15. Iowa Department of Education15 Foundation Formula Property Rich District Property Poor District Uniform Levy $5.40 Additional Levy State Aid Uniform Levy $5.40 Additional Levy State Aid Foundation Level

16. Iowa Department of Education16 87.50% Foundation 79% LevelFoundation Level State Aid AEA Special Education Support Special Education Instruction Additional Levy Uniform Levy Additional Levy State Aid Additional Levy Regular Program Foundation Formula

17. Iowa Department of Education17 SE is Unique Among Categorical Funding Student Count for SE weighting is late October rather than October 1 like all others Results in possible 1.0 and wtg in different districts Requires a Local Match Portion of the 1.0 becomes categorical Balance of 1.0 remains general purpose Different portions for each wtg level Makes it difficult to budget

18. Iowa Department of Education18 SE is Unique Among Categorical Funding SE weighting is not the final amount like all others—more like an estimated advanced Focus is SE is NOT on balance Focus is on meeting every IEP need May cost less than wtg—may cost more than wtg If less “Use it or Lose it” is WRONG in SE Excess over 10% of receipts goes to other districts that need it—does NOT revert to the state

19. Iowa Department of Education19 SE is Unique Among Categorical Funding If more Called “deficit” District may levy additional property tax Unlimited funding—whatever it takes to meet IEP needs

20. Iowa Department of Education20 SE is Unique Among Categorical Funding—Creates Issues If less: Districts have “Use it or Lose it” concept Try to spend needlessly to prevent sharing with other districts If more : Unlimited funding can cause district to lose incentive to be good financial stewards Unlimited funding causes districts to be victims of those who perceive them as “deep pockets”—whatever the market will bear attitude

21. Iowa Department of Education21 SE is Unique Among Categorical Funding -- AEAs If less: Revert to the state treasury special education support services balances greater than 10% of expenditures If more : Iowa Code allows special education support services to scoop funding from education services and media services to ensure that all special education support services needs are met

22. Iowa Department of Education22 School Budget Review Committee’s Role in SPED “Manage” Foundation Formula Adjust Special Education Weights Approve Positive & Negative Balances Direct Payment of Supplemental Aid Grant Authority to Charge Administrative Costs to Special Education Weighted Funding

23. Iowa Department of Education23 SBRC Action Special Education Deficits approved –More on this later Weightings did not change Special Ed Admin Costs – generally ok –More on this later

24. Iowa Department of Education24 Special Education Reviews & Audit of Provider Special Ed deficits increased from $19 million in FY11 to $55 million in FY12. SBRC wanted to know more on the ground about this trend Visited four locations: Cedar Rapids, Dubuque, Waterloo, Atlantic Reviewed expenditure detail

25. Iowa Department of Education25 SE Review (cont.) Findings –1) Loss of ARRA funds negatively impacted balances –2) Little or no allowable growth magnified deficits –3) DE’s rubric for qualifying students pushes more students toward a level II service vs. level I –4) High growth in paras

26. Iowa Department of Education26 SE Review (cont.) Will always find some expenditures coded incorrectly Concerns with third party billings Concerns with Special Education Admin Iowa law does not allow any expenditures for SPED other than instructional program expenditures pursuant to IEP

27. Iowa Department of Education27 Audit Key finding – Third party provider was including nonpermissive items in billing Responsibility for both implementing special education programming (at any site) and to ensure legal spending lies with the district District must ensure there is enough detail to know whether billable expenditures are legal

28. Iowa Department of Education28 What’s Next – SPED Issues General Deficit –Property Taxes vs. state aid SPED Counts –SPED Counts vs. Actual Enrollment –AEAs vs. direct to DE –Certified Enrollment vs. SPED Count –IMS vs. RTI General Purpose Percentage –General purpose costs are never accounted for on a student basis or student classification basis.

29. Iowa Department of Education29 What’s Next – SPED Issues Transportation –Only allowable if in IEP Carryover Provision –Limit of 10% Supplanting –SPED Students always general ed first, then weighted next if IEP Claims and timing of revenues

30. Iowa Department of Education30 What’s Next – SPED Issues Rules –In need of updated guidance on SPED finance Mixed classrooms –Need for additional guidance Audits –Need for additional training of local auditors Look Back Rule –Already fixed – look back to October