1. Revenue Limits Debra Towns Assistant Director School Financial Services Department of Public Instruction January 21,2016

2. Objectives Understand the data that are used in the revenue limit calculation Learn how the computation works Recognize the role of exemptions Discover a bit about your own district Discover a bit about your own district

3. Definition In 1993-94, the State enacted revenue limits to control the revenue a school district can collect from: General Aid (Equalization Aid, for most districts) Select Local Levies & Computer Aid General Fund (Fund 10) Non-Referendum Debt Service (Fund 38) Capital Projects (Fund 41) It is not an expenditure control or spending limit.

4. Revenues NOT Controlled There are many revenues not controlled under the limit. School Fees Categorical Aids (Library Aid, Transportation Aid, etc.) State and Federal Grants Gate Receipts Donations Donations Local Levies Local Levies Referendum Debt Service (Fund 39) Referendum Debt Service (Fund 39) Community Service Fund (Fund 80) Community Service Fund (Fund 80) Levy Chargeback (Fund 10) Levy Chargeback (Fund 10)

5. State Totals - School District Revenues NOT Subject to Revenue Limits CONTROLLED Although the mix of aid and taxes may be different across districts, the Revenue Limit can control 70-90% of the General Fund budget.

6. Prior-Year Controlled Revenue (base) Membership Changes (3-year averages) Increment (inflationary increase) Exemptions - additional revenue limit authority based on specific approvals that are happening at the district (referendum, BOE action) Data Used in the Revenue Limit Let’s review each.

7. + October 15 General Aid Cert 2014-15Data (Prior-Year) + Computer Aid Received + General Fund Levy + Non-Referendum Debt Levy + Capital Projects Levy - Non-Recurring Exemptions 2015-16 Revenue Limit Base Start With Prior Year Controlled Revenue - Revenue Limit Penalty - Unspent Amounts from PY Energy Efficiency Exemption Forms the Base (starting point) for 2015-16

8. Membership A 3-year average is used to minimize the financial impact of a sharp increase or decrease in membership. Base Average: 1,397 Sept 2012 Sept 2013 Sept 2014 Sept 2015 Summer FTE 42464336 40% Summer FTE 17181714 Sept FTE 1,3601,3851,3931,402 Total FTE 1,3771,4031,4101,416 Current Average: 1,410

9. Per Member Increase The legislature has the authority to set the per member increase. Originally, they based it on the annual percentage change in the consumer price index (CPI) for all urban consumers, US city average. Recent years have been flat dollar amounts, zero, & even reductions. The per member increase range was a low of -$562.00 in 2011-12 high of $274.68 in 2008-09 For 2015-16, the increment is $0.00. For 2016-17, the increment will remain at $0.00.

10. Visualizing the Big Picture ÷ Base Average Membership = Per-Member Base Total Revenue Limit Base + Per Member Increase = New Maximum Per-Member Per-Member Base X = New Maximum Per-Member New Revenue Limit Current Average Membership

11. Another Way to Visualize the Math Fairly Normal School District Revenue Limit Base (2014-15 data)$14,789,788 Base Average Membership1,397 Per-Member Base$10,586.82 Per Member Increase$0.00 New Maximum Per-Member$10,586.82 Current Average Membership1,410 New Revenue Limit$14,927,417 Membership Change: 1,410 – 1,397 = 13 FTE increase

12. In the current environment created by the legislature & administration there is no Per Member Increase. So how will all this affect my district in 2015-16 and 2016-17???? A Per Member Increase is likely to return some time but ------

13. The Impact of Membership Changes 1.) Increasing Membership 2.) Stable Membership 3.) Declining Membership 4.) Severely Declining Membership 4 Districts Your district will likely fall into one of these categories.

14. Barron (CESA 11) Base Revenue (Line 1) $15,039,452 Max Rev Lim (Line 7) $15,135,451 2014-15 Membership Average = 1410 2015-16 Membership Average = 1419 + 9 Change No Per Member Increase $0 X 1419 = $0.00 Change from Membership +9 X $10,666.28 = +$95,997 Total Increase $95,997 $95,999 Increase Difference is rounding.

15. Randolph (CESA 5) Base Revenue (Line 1) $5,359,640 Max Rev Lim (Line 7) $5,359,640 2014-15 Membership Average = 528 2015-16 Membership Average = 528 No change in Membership Average No Per Member Increase $0 X 528 = $0.00 Change from Membership 0 X $10,150.83 = 0 Total Increase $0.00 Zero $ Increase Difference is rounding.

16. Glendale – River Hills (CESA 1) Base Revenue (Line 1) $11,119,979 Max Rev Lim (Line 7) $11,119,979 2014-15 Membership Average = 920 2015-16 Membership Average = 917 -3 Change No Per Member Increase $0 X 917 = $0.00 Change from Membership -3 X $12,088 = -$36,264 Hold Harmless (Line 7B) +36,264 Total Decrease $0.00 Zero $ Increase Difference is rounding.

17. Tri-County Area(CESA 5) Base Revenue (Line 1) $6,319,602 Max Rev Lim (Line 7) $6,319,602 2014-15 Membership Average = 673 2015-16 Membership Average = 655 -18 Change No Per Member Increase $0 X 655 = 0.00 Change from Membership -18 X $9390.20 = -$169,022 Hold Harmless (Line 7B) +169,022 Total Decrease $0 Zero $ Increase Difference is rounding

18. Base Revenue Held Harmless  The Prior Year Base Revenue Hold Harmless adjustment was created by the Legislature in 2007.  It functions in every way like a non-recurring exemption but appears on the Revenue Limit worksheet on Line 7B (up in the initial establishment of the new year Revenue Limit base).

19. Base Revenue Held Harmless  It is intended to ‘Hold Harmless’ any district calculating a new base that is less than the previous year’s base.  Worksheet automatically inserts the loss difference so that the district begins the new year with the same base as prior year. 2016-2017 Revenue Limit Worksheet 1.2015-16 Base Revenue (Funds 10, 38, 41)(from left)0 2.Base Sept Membership Avg (13+.4ss, 14+.4ss, 15+.4ss/3)(from left)0 3.2015-16 Base Revenue Per Member (Ln 1 / Ln2)(with cents)#DIV/0! 4.2016-17 Per Member Change (A+B+C) #DIV/0! A.Allowed Per-Member Change0.00 B.Low Rev Incr ((9,100 - (3 + 4A))-4C) Not < 0#DIV/0! C.Low Rev Dist in CCDEB (Enter DPI Adjustment) 5.2016-17 Maximum Revenue / Member (Ln 3 + Ln 4)#DIV/0! 6.Current Membership Avg (14+.4ss, 15+.4ss, 16+.4ss/3)(from left)0 7.2016-17 Rev Limit, No Exemptions (Ln7A + Ln 7B)(rounded)#DIV/0! A.Max Rev/Memb x Cur Memb Avg (Ln 5 x Ln 6)#DIV/0! B.Hold Harmless Non-Recurring Exemption#DIV/0!

20. So, now we have established the foundation (Base) for the new year’s Revenue Limit. Let’s talk about exemptions to the Limit.

21. Revenue Limit Exemptions Exemptions to the revenue limit allow districts to increase the tax levy above & beyond the amount generated by membership changes and any inflationary increase. Recurring Exemptions (Are “permanently” in your base. Builds the base.) Ex. Transfer of Service, Recurring Referendum Non-Recurring Exemptions (Authority is available for a limited time – usually 1 year.) Ex. Declining Enrollment, Non-Recurring Referendum

22. Once a district levies for a Recurring Exemption, that amount stays permanently in the base going forward. Recurring Exemptions Base Prior Year Carryover Transfer of Service Recurring Referendum New Year Base Includes All $$$ Recurring Exemptions Levied in Prior Year 2015-16 Revenue Limit 2016-17 Revenue Limit Aid + Levy Base

23. Recurring Referenda o Requires approval of the voters Carryover o eligible prior year unused authority Other Recurring Exemptions (DPI approves amount) Other Recurring Exemptions (DPI approves amount) o Transfer of Service o Transfer of Territory o Loss of Federal Impact Aid Types of Recurring Exemptions

24. Generally, for operational purposes. No dollar limit on referendum; rather, needs of district balance with effect on taxes. Recurring Referendum can be: - Single Year – e.g., “$500,000 in 2015-16” (adds $500,000 to base) - Multiple Year – e.g., “$500,000 in each of the years 2014-15, 2015-16, 2016-17 for a total of $1,500,000” Recurring Referendum

25. If a district under-levies in a given year, can they ever get that revenue authority back?  It depends … Unused levy authority in one year will become “carry-over” authority into the following year, but only the amount that exceeds the non-recurring exemptions claimed by the district. Prior Year Carryover

26. Transfer of Service: an adjustment for additional costs/responsibility for programs or services transferred from another unit of government – usually for special education services from another district. Transfer of Territory: an adjustment to account for territory and pupils becoming part of, or detaching from a district. (rare occurrence) Federal Impact Aid Loss: to adjust for loss in Federal Aid from one year to the next for districts that receive Federal Impact Aid (25 districts with non-taxable, federal properties). Federal Impact Aid Loss: to adjust for loss in Federal Aid from one year to the next for districts that receive Federal Impact Aid (25 districts with non-taxable, federal properties). Other Recurring Exemptions

27. Just remember: Recurring exemptions stay in the Base. Base Prior Year Carryover Transfer of Service Recurring Referendum New Year Base Includes All $$$ Recurring Exemptions Levied in Prior Year 2015-16 Revenue Limit 2016-17 Revenue Limit Aid + Levy Base

28. The exemption is only valid for a limited period of time – usually one Revenue Limit cycle. Non-Recurring Exemptions Base Adjustment for new Choice Students Declining Enrollment Non-Recurring Referendum Base Will Include Only Levied Recurring Authority from the Prior Year 2015-16 Revenue Limit 2016-17 Revenue Limit Aid + Levy Base Energy Efficiency

29. Requires approval by Electors or Board o Non-Recurring Referendum o Energy Efficiency Project Debt Auto-determined in Revenue Limit Calculation o Declining Enrollment Other (DPI-determined amount) Other (DPI-determined amount) o Prior Year Uncounted Open Enrollment Pupils o Refunded/Rescinded Taxes Types of Non-Recurring Exemptions

30. Often for operating costs. No dollar limit on referendum. Non-Recurring Referendum can be: - Single Year – e.g., “$500,000 in 2013-14” (1x only – does NOT add to the base) - Multiple Year – e.g., “$500,000 for each year of 2013- 14 to 2017-18” (e.g., 5 years of additional revenue authority, but DOES NOT add to the district’s base) Non-Recurring Referendum

31. This exemption provides districts with additional revenue authority to make up for declining enrollment. Declining Enrollment Sept 2012 Sept 2013 Sept 2014 Sept 2015 Summer FTE 68677373 40% Summer FTE 27272929 Sept FTE 1,0621,0481,0231,046 Total FTE 1,0891,0751,0521,075 Current Average: 1,067 Base Average: 1,072

32. A district may add additional revenue limit authority to pay the costs of a project that results in the avoidance of, or reduction in energy costs or operational costs. Enter into a properly executed performance contract. Approved in a resolution of the District Board (not a vote of electors). Could be for one-time costs or to pay debt service if the district borrows for the project. Energy Efficiency

33. A district must expend the full amount of the exemption on valid project costs by the following June 30 th. Any unspent levy will be a negative adjustment on the following year’s revenue limit calculation. An exemption for debt service is reduced by annual utility savings. http://dpi.wi.gov/sfs/limits/exemptions/overview Energy Efficiency

34. Uncounted Prior-Year Open Enrollment Pupils: an adjustment for open enrollment pupils if, for some reason, they did not get counted in the previous year. an adjustment that allows a district to re-capture revenue that was paid back to a property owner when property valuation is adjusted (per notification from DOR). Refunded or Rescinded Taxes: an adjustment that allows a district to re-capture revenue that was paid back to a property owner when property valuation is adjusted (per notification from DOR). Other Non-Recurring Exemptions

35. Just remember: Non-recurring exemptions come out of the Base each year. Base Adjustment for new Choice Students Declining Enrollment Non-Recurring Referendum Base Will Include Only Levied Recurring Authority from the Prior Year 2015-16 Revenue Limit 2016-17 Revenue Limit Aid + Levy Base Energy Efficiency

36. 36 Almost finished!

37. Setting the Tax Levy On October 15 of each year, the DPI provides school districts with an estimate of their general school aid payment for the current fiscal year. The calculated Revenue Limit less the General Aid will equal the local property tax levy, including the Computer Aid payment.

38. Revenue Limit -General State Aid ________________ Tax Levy (including Computer Aid) The Equation

39. Setting the Tax Levy Districts that are more heavily aided will receive less of their dollars from taxes under the Revenue Limit. Property Taxes, including Computer Aid General State Aid

40. Setting the Tax Levy And, vice versa ….. Property Taxes, including Computer Aid General State Aid

41. 2015-16 Base Energy Efficiency Declining Enrollment Non-Recurring Referendum 2015-16 Maximum Revenue Limit with Exemptions Setting the Tax Levy Adjustment for new Choice Students ASDFHJKL October 15 General Aid Cert reduces what you can levy. Some districts also receive High Poverty Aid which needs to be included here. General State Aid Non-Ref Debt (38) Capital Projects (41) General Fund (10) Tax Levy Computer Aid reduces what you can levy. minus equals =

42. It is called Computer Aid – but it really functions as part of the Tax Levy ….. School Districts receive this ‘aid’ automatically included as part of their property tax payments from the municipalities. Computer & related business equipment was once subject to a chattel property tax. In 1999, these types of equipment became exempt from property tax and the Legislature now appropriates a dollar amount directly in the state budget to replace what would have been submitted by business owners. This is distributed by applying a tax rate established using Dept of Revenue values. This tax rate is then applied to the district’s exempt computer value.

43. It is called Computer Aid – but it really functions as part of the Tax Levy ….. The main thing to remember about Computer Aid is that it REDUCES the tax levy on your citizens. If you levy the Total Allowable Limited Revenue (Line 13), you will OVER LEVY.

44. Revenue Limit Takeaways 1.The Revenue Limit controls income from general state aid and local property tax revenues 2.Revenue Limits are calculated by multiplying the Membership X a Per Member dollar amount – and adding on any exemptions. 3.Most districts are not restrained by their initial calculation but are eligible for various exemptions to increase their Revenue Limit. Exemptions result in additional taxation. 4.It is very important to know the difference between recurring and non-recurring exemptions. This is especially true when planning a referendum. 5.Calculating the property tax levy is a direct result of completing the Revenue Limit calculation.

45. Where Can I Find This Data For My District? Both the 2015-16 pre-populated & the 2016-17 executable Revenue Limit Worksheets http://dpi.wi.gov/sfs/limits/worksheets/revenue

46. Where Can I Find This Data For My District? Longitudinal data looking at individual district Revenue Limit trends over recent years. http://dpi.wi.gov/sfs/statistical/longitudinal-data/revenue-limit

47. VISIT OUR WEBSITE…… or CALL US (all 608 Area Code): Bob Soldner, Director …………………….……………...266-6968 Debi Towns, Assistant Director …………………………….267-9209 Bruce Anderson, Consultant ………….….…….…………..267-9707 Carey Bradley, Consultant ………….……………………….267-3752 Karen Kucharz Robbe, Consultant ………………………..266-3464 Dan Bush, Special Ed./Consultant ….………………….….267-9212 Victoria Chung, Accountant……………….…………….….266-9205 Gene Fornecker, Auditor ……………………….…………..267-7882 Brian Kahl, Auditor …………………….…………..…….……266-3862 Derek Sliter, Auditor ……………………………..…….……267-9218 Questions?

48. Thanks to WASB, WASDA and WASBO for the opportunity to speak to you today! *** DPI School Financial Services Homepage http://dpi.wi.gov/sfs