School Funding, State Aid and Property Taxes

Iowa law guarantees that every child in the state receives an “equal” amount of money to fund his/her education. A district’s budget is basically derived from the number of children enrolled in the district multiplied by the district’s cost per child. However, economic factors change from year-to-year, and it is up to state lawmakers to decide just how much to increase the cost per child to reflect that change. This increase is called “allowable growth.”

Patti Schroeder, education finance co-director for the Iowa Association of School Boards, explains the principle this way: “Under the basic finance formula, each district’s spending is based upon a district cost per pupil. The total amount the district is allowed to spend is that per pupil amount times the number of students enrolled. A district can spend less than the maximum, but cannot spend more.”

An allowable growth rate is recommended by the Governor and established by the Legislature.  The rate is multiplied by the state cost per pupil to calculate an allowable growth amount per pupil. All districts receive the same amount per pupil. Allowable growth per pupil is intended to further provide equity in school districts throughout the state because, as we discussed last week, the legislature set a principle that each child is worth the same amount, no matter where he/she lives.   

Local property taxes account for one-third of the total funds going into districts’ programs and represent about 40% of the overall state property tax funds levied. As discussed in prior articles, the state school funding formula largely determines school property tax rates and, therefore, the amount each district receives in state aid.

People often ask, "Why don't we just remove property taxes from the formula entirely?" There are several reasons why this isn’t a wise move.

§  It would take away roughly $1.5 billion dollars statewide, leaving lawmakers to decide whether to raise the state sales tax or income taxes to make up that difference.

§  Property taxes also add stability to the funding of school districts. For example, if we operated solely under the sales tax, the amount available for school funding would surely fluctuate depending on consumer spending.

§  Just as many people found out during the 1990s, too much reliance on a single funding source invites large swings in funding, which isn’t good for an entity unable to adjust to midyear revenue changes. Diversification is a prudent investing strategy that applies to schools as well.

Considering the aforementioned reasons and the present revenue and political climate, removing property taxes from the school finance formula seems unlikely.

Due to changes in our school district's budgeting practices, whole grade sharing, and operating as lean as possible, we have been able to maximize our local and state funding sources.  This has allowed our local school property taxes in both the Alta and Aurelia school districts to come down over the past 4 years.  If the current trend from the capitol to under fund schools continues, taxes will go back up.

No public official, whether our local school board members and administrators or the city and county officials, takes the impact of raising property taxes lightly. In most cases, public officials exhaust all other options before asking property taxpayers for more funds. However, when the General Assembly cuts short our state aid and we experience additional, unforeseen expenses such as increased fuel and energy prices, we really have no alternative except to raise local property taxes or reduce expenditures. Seventy-five to 85 percent of school district budgets are comprised of salary and benefit costs, which doesn’t leave much discretionary spending to cut. No one likes property taxes, but they are an essential part of efficient funding of our schools.

Once all school districts establish their budgets based on the combination of state aid and local property taxes they receive, there are still many restrictions on where and how that funding can be spent.  This is known as "Dillion's Rule" and will be a topic of discussion in a future article.

Iowa School Funding

A great deal of attention across the state of Iowa has been placed on the school start date debate but, there’s a deeper issue that should be receiving more attention.  School funding. The school start date has become a distraction away from the school funding issue, and the funding should really be at the top of the priority list.

On the Republican side with Gov. Branstad, the Iowa House approved a 1.25 percent increase in state supplemental aid for the 2015-16 school year. The Democratic Iowa Senate approved a spending packing including a 4 percent increase in state aid for the next two years.

Individual school districts, and the Iowa Association of School Boards have been promoting a 6 percent increase.  A 1.25 percent would do a disservice to our students.

What would be the result of a 1.25% in funding?

In Alta, our class sizes, perhaps, would be larger as we would be restricted from adding the staff we may need. In both Alta and Aurelia, as we look at compensation for staff, we know that our insurance is increasing, and just moving across the lane in their salary schedule, already puts us in a negative with 1.25 percent. 

We know that cost of materials, utilities, fuel, and supplies increases at an average annual rate around 4%.  In both school districts, over the next two years, we will be planning for the added cost of a much needed update in Math and Language Arts textbooks. Four percent barely gets us to where we need to be, that’s why schools are  promoting a 6 percent growth.

Both Alta and Aurelia could survive for a short time on 1.25% growth in state supplemental aid, but if that rate continues, both of our districts would have greatly reduce spending. 75% of any districts expenses is in salary and benefits, so any reduction in spending would result in staff reductions, which would adversely affect both school districts' programs.

If this is a topic of concern for you, please contact your local State Representatives and State Senators to voice your opinion. My experience with them has always been very positive and they are interested in listening to their constituents.

School Start Date and the Early Start Waiver

Iowa Code states that a school year shall begin no sooner than a day during the calendar week in which the first day of September falls.  In past years, schools have been allowed to apply for a waiver allowing school to start earlier.  By my numbers, all but two school districts in Iowa applied for the Early Start Waiver last year.  Alta and Aurelia have both applied for the Early Start Waiver for a number of years. Past reasons for starting school earlier than the legislated date are:

• To end the first semster prior to Christmas break and start the second semester upon returning from Christmas break.

• To better align the high school calendar with the college calendar because college classes open for high school students to take begin in August and the semester ends prior to Christmas.

• Practices for Fall sports begin in early to mid August.

• A school year extending into June creates difficulties for staff members pursuing continuing education courses.

• To reduce the overlap of youth baseball and softball with the school year.

• Extracurricular competition or scheduling

• Post-Secondary Enrollment Option courses or local community college schedules

• Completion of first semester before winter break

• Professional development for teachers

• To account for snow days

The tourism industry supports a later start date to extend the summer period for family vacations. It also extends the time that high school students would be available to work at tourist attractions.

In the past, the waivers have required a public hearing, local school board approval and the rationale for starting early. If those criteria were met, the waiver was granted.  Starting this Spring, the automatic approval is coming to an end, effective with the 2015-16 calendar submission. 

The process that the Department of Education will follow states that school districts bear the burdent of proving that a start date on or before the date specified in Iowa Code wold have a "significant negative educational impact."  Keep in mind, that the bar set by the general assembly for granting this waiver is high. 

Negative educational impact is defined as and adverse effect on student academic achievement and/or student learning environment. The district is required to provide objective evidence of the negative impact, the percentage of students negatively impacted, the magnitude of the negative impact as supported by valid and reliable measures, and supported by scientifically based research.

Based on recent communications sent to school from the Department of Education, the following WILL NOT constitute a significant negative educational impact:

• Extracurricular competition or scheduling
• Post-Secondary Enrollment Option courses or local community college schedules
• Completion of first semester before winter break
• Professional development for teachers
• To account for snow days

**This is not an all inclusive list.

For the 2015-16 school year, the earliest a school can start without a waiver is August 31st. Proving a negative educational impact may be difficult as most of our local reasons for starting early are clearly stated as not allowable for future waivers.  Start date preference surveys are going out to get impact from staff and parents on the subject.  Deadline for submitting and Early Start Waiver application is March 15th.

School Start Date

On Friday, December 12th Iowa Department of Education Director Brad Buck sent a letter to Iowa schools informing them that waivers to the school start date requirement would no longer automatically be granted. Effective immediately, individual waiver requests will only be granted if there is evidence of “a significant negative educational impact” by following the required start date. Director Buck additionally stated that clarification to the criteria to be used for granting a waiver will come from the Department of Education in January.

I support the concept of local decision-making and local control regarding the school start date. Local school boards, staff members and patrons are in the best position to determine the optimal start date for their communities. These decisions are made for educational reasons, while considering their communities’ and school district's needs and circumstances.

I believe that this is an important issue of local control. We should not be distracted from the more important issues facing our schools. 

I personally have always held to the belief that how we lay out the school calendar is one of the least impactful things we do in education.  Pedagogy, appropriate and timely resources, a guaranteed and viable curriculum all rank far above when we start and end our school year.

As a reminder, the current law states that schools can start their year no earlier than the Monday during the week that Sept 1st falls.  Schools have been allowed to apply for waivers which are to be board approved at a public hearing, which means that the public has an opportunity to weigh in on the subject prior to the board taking action.  

Also, keep in mind that (assuming my numbers are correct) currently there are only two school districts in the state that do not apply for the early start waiver. I think this speaks volumes.

If this is an important issue to you, either way. Please contact your state representaive, and/or state senator eith your opinions and input.  Since this has come down from the Governor's office, a note or email to Governor Brandstads office and Iowa Department of Education Director Brad Buck is recommended as well.

School Funding and the Foundation Formula

Taxpayers often ask, and rightfully so, how Iowa spends the nearly $4 billion earmarked for the state’s public education system. Earlier, we ran the first in a series of articles dedicated to helping taxpayers understand how those dollars are being spent to educate nearly 474,000 students throughout the state. Today we’ll discuss how those dollars are divided.

When it comes to school funding, the state legislature tries to ensure all children receive a quality education based on roughly the same amount of per pupil funding throughout the state. That’s where the school finance formula comes in. This formula relies on a combination of state aid and property taxes to fund education. The amount of state aid each district receives depends on how much it brings in through local property taxes. If the state relied solely on property taxes to fund schools, some districts would be able to raise a lot of money with a very small property tax rate, while others would raise a smaller amount of money on a much larger property tax rate.

This was almost exactly the situation Iowa found itself in over 35 years ago. Before the early 70s districts relied primarily on property taxes for school funding.  However due to the wide range of property tax rates funding districts and concern over the disparity in funding per child, lawmakers instituted a formula to address both of these issues, setting a maximum and “equal” cost per student. All districts are required to levy a uniform levy of $5.40 and then the state funds an additional amount up to a certain level (called the foundation level). Beyond that foundation level, local property taxes are levied to fund the remainder of the difference.

The Iowa Association of School Board’s education finance co-director, Patti Schroeder, explained that school funding is basically made up of three layers. “The first layer is local property taxes determined by the Uniform Levy,” Schroeder said. “The middle layer is state aid and the top layer is additional local property taxes. The mix of all three of these is set by a formula over which the local district has little control.”

Our two districts have a property valuation per pupil that is above the state average. This means our Uniform Levy of $5.40 generates more dollars and we get less state aid as a result. However, our Additional Property Tax Levy rate is lower than the average, so our additional levy rate can be lower and generate the same dollars as other districts because of our higher property valuation."

While the state partially equalizes tax rates through the school finance formula, significant deviations still affect how much each district receives from the state. The lowest combined tax rate for a school district is $7.48 for the current fiscal year and the highest is $21.66, making that a difference of $14.18 per thousand.

The Alta Community School District combined tax rate is currently $11.98.  The Aurelia Community School District combined tax rate is currently $9.95.  Both well below the state average.

Regardless of the financial situation of the local school district, a large portion of the district's tax rate is set by formula and there is little the local school board members or administrators can do about it. However, Iowa law does make allowances for growth and inflation from year-to-year.

We’ll discuss the concept of “allowable growth” in a future article in our series explaining school finance.

Current Enrollments Impact School Funding

Every year public schools in Iowa spend billions of dollars to educate children, sparking taxpayers to often ask school board members, administrators and lawmakers: “Where does that money go?” That’s why part of the Alta Community School District and Aurelia Community School District’s mission is to help taxpayers understand how districts are spending that money, in an attempt to dispel the mysteries surrounding school funding. Knowing how the state school funding formula works is important in helping understand the pressures facing local school districts. Because the formula is based on the number of children enrolled in the district, as we gain children, we gain revenues to serve those children and, if enrollment declines, we also lose revenue.

While the area of school finance is complex, some basic principles make it understandable to the average citizen, including:

1. The number of children enrolled in each district determines a district’s budget/revenues.
2. The General Assembly through the finance formula “equalizes” funding statewide so the “cost per student” is roughly the same in every district and every student has access to a quality education.
3. The Governor recommends the annual change in per pupil allowable growth.  The General Assembly is responsible for passing legislation to establish the annual increase in the “cost per student/allowable growth”.
4. Property taxes matter. They determine how much money each district receives in state aid.
5. Funds are restricted. We can only use funds on what the legislature tells us we can.
6. Schools are budget limited. Most other public entities are property tax rate limited. This difference is monumental.

Iowa’s school funding formula is a child-based formula, meaning that the allowable spending for a school district is based upon the number of children enrolled in that district on October 1 of each year. The number of students counted on that day is used to establish the district’s budget for the following year. This means our revenues are always a year behind the actual number of children we are serving in our classrooms. For the Alta Community School District, our October 1 enrollment is 510 for the current year, which is nearly identical to last year's actual enrollment.  But, the total number of students provided instruction by the district increased by 27 students this year. For the Aurelia Community School District, our October 1 enrollment is 244.7 for the current year, which is up 2.3 students from last year  But, the total number of students provided instruction by the district decreased by 15 students.

Why the different enrollment figures (actual enrollment compared to number of student provided instruction)?  The actual enrollment is all of a district's resident students that attend school, plus all the open enroll out/tuition out students.  The total number of students provided instruction are the actual number of students in the building (resident students, plus the all of open enroll in/tuition in students).  So, as open enrollment in and out of a district changes and the number of resident students attending changes, so changes  the total number of students provided education for a district.

Because the enrollment for our districts have been relatively stable over the past four years, we’ve been fortunate that our budgets have been stable as well. However, if enrollment declines in the future, along with increasing costs, we will be faced with the prospect of reduced resources to serve the needs of our district. This could result in personnel reductions and have an impact on programs.

It's More Than Reading And Writing

Most parents know that reading and writing is so important for children. How words help us to understand our world and make the most of opportunities is much more than reading and writing. This is called literacy.

The word literacy often makes people think of school and many parents expect that literacy will be taught to their children once they start school. Children do not wait until they start school to develop literacy skills. From birth, babies and children are learning all the time.

Literacy is a part of everyone’s daily life. The experiences that are given to children influence their knowledge and understanding of their world.

Children need opportunities to practice the skills they know and are able to do in order to become confident learners. In everyday activities and in your relationship with your children, you have a wonderful opportunity to help them develop literacy skills.

Literacy was once seen as reading and writing. Now literacy is seen as much more; it is language we use in:

• speaking and listening
• reading and watching
• drawing and writing.

Literacy development begins in the family and continues in families and communities as well as in schools.

Years of research show clearly that children are more likely to succeed in learning when their families actively support them. When you and other family members read with your children, help them with homework, talk with their teachers, and participate in school or other learning activities, you give your children a tremendous advantage.

Other than helping your children to grow up healthy and happy, the most important thing that you can do for them is to help them develop their literacy skills. It is no exaggeration to say that how well children learn to read and write affects directly not only how successful they are in school but how well they do throughout their lives. When children learn to read and write, they have the keys that open the door to all the knowledge of the world. 

The foundation for developing literacy skills is in place long before children enter school and begin formal reading instruction. You and your family help to create this foundation by talking, listening, and reading to your children every day and by showing them that you value, use, and enjoy reading in your lives.

You could say that your child starts on the road to becoming literate on the day they’re born and first hears the sounds of your voice. Every time you speak to your child, sing to your child, and respond to the sounds that they makes, you strengthen your child's understanding of language. With you to guide them, they are well on their way to literacy.

To understand the connection between a child's early experiences with spoken language and literacy, you might think of language as a four-legged stool. The four legs are talking, listening, reading, and writing. All four legs are important; each leg helps to support and balance the others.  

Talk with and listen to your child. Read together with them. Help your child learn about books and print. Take advantage of the public libraries. Encourage your child’s early writing efforts. These are all ways to support the development of literacy skills in your children.

As a parent, you are your child's first and most important teacher. You don't need to be the best reader to help—your time and interest and the pleasure that you share with your child as part of reading together are what counts. For more ways to help develop reading, writing, and over all literacy skills with your child, contact their classroom teachers. They are more than willing to support and encourage your efforts at home as we work together to open the world of knowledge for your child’s future.