Funding Minnesota Schools Presentation to Robbinsdale LAC September 29, 2009.

Funding Minnesota Schools

Presentation to Robbinsdale

LAC

September 29, 2009

Financing Minnesota’s Public Schools

Minnesota’s public schools are financed through a mix of state aid and local property taxes. Most of the financing is based on the number of pupils served by each school district. This packet sets the context for school funding.

•The first several pages highlight Minnesota’s general fund budget and the portion used for K-12 programs.•The next group of pages provide a cursory review of school districts’ role in the property tax system and contrasts school district funds from state and the local property tax levy.•The next several pages display enrollment trends and some general school district characteristics.•The last few pages show graphs of school revenue and expenditures by category.

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Summary of State Resources

The state raises revenue through a variety of taxes including:• Individual income tax; • Sales tax; • Corporate income tax; • Statewide business property tax; and • Other smaller taxes.

3House Research Department

09/29/09

Summary of State Spending

The state spends its revenue on programs including:• K-12 education;• Health care and human services spending;• Higher education;• Local government aids; and• Other smaller programs.


Unallotment• The Governor has used extraordinary powers granted to

him under the unallotment statute (Minn. Stat. section 16A.152, subd. 4) to reduce spending in a number of areas and to implement delays in school aid payments that mimic the property tax recognition and aid payment shifts.

• The Governor has lowered the portion of each district’s state aid that is paid in the current year from 90% to 73% of the district’s aid entitlement beginning in FY 2010. – In the next year, the Governor intends to withhold state aid in May

and June to cause aid savings similar to the savings that would result if the property tax recognition shift had been enacted in law.

09/29/09 5House Research Department

Unallotment• These aid payment shifts save the state about $1.7 billion

in the 2010-11 biennium and while they affect school districts’ cash flow and borrowing needs, do not affect school district revenue.

• The Department of Finance has not yet reissued fund statements, so the following graphs show state aid prior to the unallotment activities.


Where the Money Comes FromFY 10-11 General Fund $31.463

Billion

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Individual Income47%

Liquor/Cigarette2%

Corporate/Bank4%

Sales27%

Motor Vehicle0%

Statewide Property Tax5%

Non-Tax Revenue2%

Fund Balance In2%

All Other10%

MA surcharges1%

Gambling Tax0%

Chart Title


Where the Money GoesFY 10-11 Spending $33.789

Billion

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K-12 Education40%

Higher Ed9%

State Govt3%

Intergovt Aids10%

Criminal Justice5%

Health&Human Services

27%

Environment & Eco Dev2%

Debt Service3%

All Other1%

Chart Title


Where the Money Comes FromFY 10 General Fund $15.353

Billion

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Individual Income46%

Liquor/Cigarette2%

Corporate3%

Sales27%

Motor Vehicle0%

Statewide Property Tax5%

Non-Tax Revenue2%

Fund Balance In4%

All Other10%

MA surcharges1%

Gambling Tax0%

Chart Title


Where the Money GoesFY 10 Spending $16.309 Billion

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K-12 Education40%

Higher Ed9%

State Govt3%

Intergovt Aids10%

Criminal Justice5%

Health&Human Services

27%

Environment & Eco Dev2%

Debt Service3%

All Other1%

Chart Title


09/29/09

Property Tax Overview

Property taxes have been a major part of school district funding for most of the last 100 years. Changes made by the 2001 Legislature have substantially reduced the share of property taxes that go to school districts but school districts are still the second largest user of property taxes.


Taxable Market Value by Property Type

Taxes Payable in 2009 $581 Billion

09/29/09

Residential Homestead

58%

Other Residential11%

Commercial/Indust15%

Agricultural11%

Seasonal Rec5%

Chart Title


Taxes Paid by Property TypeTaxes Payable in 2009 $7.713

Billion

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Residential Homestead

47%

Other Residential11%

Commercial/Indust34%

Agricultural5%

Seasonal Rec3%

Chart Title


Property Taxes Payable in 2009By Type of Government $7.713

Billion

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County31%

Special4%

City22%

TIF4%State

10%Townships

2%

School Districts27%

Chart Title


09/29/09

Student Enrollment and Counting Students

• Public school enrollment in Minnesota peaked in1972 at the height of the baby boom.

• Public school enrollment fell sharply from 1973 to 1985 then increased at a moderate rate from 1985 to 2001.

• Statewide enrollment peaked in 2002 and has been slowing declining since that time.

• Enrollment changes are very different across the state.

• Most school districts have faced declining enrollment during the last 5 years.

• Minnesota has a few very large school districts and many very small school districts. 15House Research Department

Minnesota School Enrollment1960 to 2015

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1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

2020

2023

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

School District Charter Nonpublic

Pu

pil

s


School Enrollment by RegionFY 2009

09/29/09

#1 Northwest4%

#3 Northeast6%

#4 WestCentral4%

#5 Northcentral3%

#6 Southwest

6%

#7 EastCentral11%

#9 Southcentral4%

#10 Southeast9%

#11 Metro Area54%

Chart Title


-8%

-6%

-4%

-2%

0%

2%

4%

6% Chart TitlePercent

School District 5 Year Enrollment Change by Region FY 2005 to

2009

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Northwest Northeast WestCentral Southwest

EastCentral

SouthCentral Southeast

7 County

Metro

NorthCentral


Percent of Students Enrolled by School Size Quintile FY 2009

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Series10%

10%

20%

30%

40%

50%

60%

70%

80%

Series1

68 Largest Districts

68 Second Largest Districts

68 Middle Districts68 next

Smallest Districts68 Smallest

Districts


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State Aid For Schools

The percentage of state aid for school districts, as measured by aid plus levy (which excludes federal funds and other local funds such as fees for food service, etc.) had been fairly constant during the 1970s, 1980s and early 1990s.

The state aid began increasing in the late 1990s, and the 2001 overhaul of the state’s property tax system increased the state share of K-12 funding to nearly 90% of the total. Since that time, the state share has been steadily decreasing so that the state share for FY 2008 is now about 82% of total revenue.


Percent of K-12 Aid & Levy From State Aid

For Fiscal Years 1984 to 2009

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0%

20%

40%

60%

80%

100% Chart TitlePercent


Total Revenue for EducationTotal Revenue $10.389 Billion FY

2009

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General Education56.0%

Op. Referendum6.9%Special Programs

8.0%

Early Childhood1.2%

Facilities 9.4%

Federal5.9%

Fees8.3%

Other4.2%

Chart Title


09/29/09

General Education Revenue

$6.539 Billion in FY 09General Education Revenue consists of several components including:•Basic Aid--$4,868 million•Extended Time--$62 million•Compensatory Revenue--$348 million•Limited English Proficiency (LEP) Funding--$41 million•Training and Experience Revenue--$1 million•Operating Sparsity Revenue--$23 million•Transportation Sparsity Revenue--$61 million•Operating Capital Revenue--$195 million•Equity Revenue--$94 million•Gifted and Talented Revenue--$11 million•Qcomp Revenue $66 million•Transition Revenue--$30 million•Pensions Adjustment Reduction– ($31 million)•Referendum Revenue--$722 million


General Education Revenue byComponent $6.539 Billion FY

2009

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Transition .5%

Basic 74.3%

Extended time .9%

Compensatory 5.3%

Op. Sparsity .4%

Transpo Sparsity .9%LEP .6%

Equity 1.4%

Op. Capital 3.0%T & E Revenue .1%

Referendum 11.0%

Gifted and Talented .2%

Qcomp 1.0%

Chart Title


School District RevenuePer Student 1984 to 2009

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84 86 88 90 92 94 96 98 0 2 4 6 80

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Total revenue /pupil CPI inflation adj /pupil

$ pe

r St

uden

t


Revenue per Student LessBuilding Debt and Special Ed

Expenses

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84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 80

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Total Revenue per adm

Total Revenue Less Building Debt per adm

Total Rev less Debt and Spec Ed per adm

$ pe

r S

tude

nt


Inflation Adjusted Revenue per Student

Less Building Debt and Spec Ed Expenses

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84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 080

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Inflation Adjusted Total Revenue per Student

Inflation Adjusted Total less Building Debt

Inflation Adjusted Total less Debt and Spec. Ed

$ pe

r S

tude

nt


Special Education

• Minnesota’s school districts receive special education funding through a formula that partially reimburses the district’s costs.

• Federal funds are significant, but meet only a small portion of school’s special education costs.

• The “cross-subsidy” describes the gap between state funding and a district’s special education spending.


Special Education Revenue and Expenses 1999-2013

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99 0 1 2 3 4 5 6 7 8 9 10 11 12 13 -

500

1,000

1,500

2,000

Federal Aid State Aid Allocated Gen Ed Expenditures

$ T

hous

ands


Minnesota ARRA Stimulus Allocations

• Stabilization Fund--$816 million ($500 million is for K-12 education and is a one-time offset against the state’s general education payments for FY 2010, $168 million is for higher education, $100 million is for human services programs and $38 million is for corrections programs)

• Special Education Grants--$205 million of which $190 million is for Part B grants

• Title 1 grants--$122 million of which $95 million is for direct grants to school districts


09/29/09

Additional ResourcesAdditional information on Minnesota’s school finance system is available online. The following sources may be of help:

• Detailed description of Minnesota’s school finance systemhttp://www.house.leg.state.mn.us/hrd/topics.asp?topic=7#Finance_105

• Federal stimulus documents on MDE’s website

http://education.state.mn.us/MDE/About_MDE/News_Center/Fed_Stimulus_Update/index.html

• Fiscal worksheets prepared by the House fiscal analysis department http://www.house.leg.state.mn.us/fiscal/commpage.htm#K12


http://www.house.leg.state.mn.us/hrd/topics.asp?topic=7#Finance_105

http://www.house.leg.state.mn.us/hrd/topics.asp?topic=7#Finance_105

http://www.house.leg.state.mn.us/fiscal/commpage.htm

Funding Minnesota Schools Presentation to Robbinsdale LAC September 29, 2009.

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