STATE EQUALIZATION GENERAL AID ERIN FATH ASSISTANT DIRECTOR DPI SCHOOL FINANCIAL SERVICES TEAM...

STATE EQUALIZATION &

GENERAL AIDERIN FATH – ASSISTANT DIRECTOR

DPI SCHOOL FINANCIAL SERVICES TEAM

AUGUST 14, 2013

WASBO New School Administrators and Business

Support Staff Conference

Equalization & General Aid2

So … you’ve just learned about Revenue Limits and that the amount of Equalization / General Aid your district receives will impact the levy your district can set.

During this presentation, you will:1. Learn how Equalization/General aids are calculated

(including the resources on the DPI web site).

2. Have the opportunity to ask questions to further your understanding of equalization/general aid (and revenue limits/levy).

3. See how your district’s aid amount figures into the revenue limit worksheet to produce your district’s levy each year.


Why do you need to know how to calculate Equalization/General Aid when

DPI calculates it for you?

Because you will be asked by your board members, your community and the media.

So you can better understand AND explain why your aid has changed.

Because you may want to do your own analysis and run “what if” scenarios …

4

Knowing where your district is in the formula will help you better explain how changes in local finances might affect your state aid.

What if we

over/under

spend our

budget? How

does that affect

our aid?

If we go to referendum, how will our aid change?

Equalization & General Aid

Handouts5

District Specific Data

1. July 1 Estimate of 2013-14 Equalization Aid (“General Aid Worksheet”)

2. Percentage Method Aid Computation: Bar Graph3. Positioning on the Equalization Aid Graph4. Longitudinal Analysis of Equalization/General

Aid


Under Article 10 of WI State Constitution the State Legislature is responsible for

establishing school districts, which are to be:

“as uniform as practicable……”

“free and without charge to tuition to all children”

How does the State of Wisconsin achieve this?


The State provides financial assistance to school districts in order to:

1. To reduce the reliance upon the local property tax as a source of revenue for educational programs.

2. To guarantee that a basic educational opportunity is available to all pupils regardless of the local fiscal capacity of the district in which the reside.

A student should not be unfairly disadvantaged as a result of where he or she lives


Three types of aid that the State provides to districts:1. Unrestricted “General Aid”:

a. Distributed primarily by formula on the basis of relative fiscal capacity of each school district – this is Equalization Aid.

b. Also includes “Special Adjustment Aid” and “Integration Aid”

c. High Poverty Aid is funded from a separate appropriation, but treated like General Aid for revenue limit & spending purposes.

2. Categorical aids – targeted purpose3. School levy tax credit –reduces property tax bills.

This presentation will discuss just General Aids, with a primary focus on Equalization & Special

Adjustment Aids.

Why Equalization Aid?

One of the primary funding mechanisms for public K-12 education in Wisconsin is the local property tax, but ….

Property values vary greatly from district to district

9

Property Value per Member10

< 200k

200k 300k 400k 500k 600k 700k 800k 900k 1 M 1.1 M1.2 M1.3 M1.4 M1.5 M1.6 M1.7 M1.8 M1.9 M +

0

10

20

30

40

50

60

70

80

90

100

District Equalized Value per MemberAdjusted for District Type (K-12, K-8 or UHS)

Num

ber

of D

istr

icts

51% of districts w/ Equal. Value / Member <$500k

2013 Certified Values, DOR

Why Equalization Aid?11

How, then, to establish funding for schools that provides “equal opportunity,” and is “uniform as practicable”?

The fundamental purpose of the Equalization Aid formula is to “level the playing field” by providing assistance (distributing aid) to poorer districts to make up for what they can’t get from their property tax base.


200,000 300,000 400,000 500,000 750,000 1,000,000 2,000,000 3,000,000

Property Value Per Member

Orange: Property Tax

Because property values vary so greatly across the state, the resources districts can raise from just their tax base also vary.


200,000 300,000 400,000 500,000 750,000 1,000,000 2,000,000 3,000,000

Property Value Per Member

Green: State Equalization AidOrange: Property Tax

Districts with less property value per member are aided at a higher proportion than districts with higher values per

member

Equalization Aid – General Concept14

State “shares” in district cost

Aid is based on a district’s ability to pay, as measured by its property wealth per member

The formula operates under the principle of equal tax rate for equal per pupil expenditures – levels the playing field by providing more aid to districts with fewer resources (property value)

Analogy: Needs-Based College Scholarship

State “shares” in district cost, just as the College shares in the student’s costs (tuition/books/housing)

Aid is based on ability to pay (measured by districts’ property value per member) just as the scholarship is based on need … ability to pay (measured by student’s financial resources)

State aid attempts to level the playing field for districts just as a needs based scholarship attempts to level the playing field for individual students

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Equalization Aid16

“State Factors” The total amount of money allocated for general

aid Cost ceilings State property value guarantee levels

What are the factors that affect aid? “District Factors” The number of pupils (membership) in your district Your district’s shared (aidable) costs Property values in your district

District Factors17

1. Pupils – Membership 2. Shared Costs3. Property Tax Base – Wealth

* * *All Prior-Year Data

(2012-13 data is used for 2013-14 aid.)

* * *Equalization Aid is a cost-reimbursement formula

District Factor #1 – Membership (prior year)

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Average of:3rd Friday in September (FTE)* and

2nd Friday in January (FTE)*plus (+) Summer School (FTE )

Includes Foster Care/Part-Time/YCA pupils (as applicable)

FTE = full-time equivalent:2 halftime (.50) K students = 1 FTE

Summer School = 48,600 minutes = 1 FTE

2013-14 aid based on membership derived from:Summer 2012* FTE, September 2012 & January 2013

*NOTE that summer starts the school year for membership data purposes

District Factor #2 – Shared Costs (prior year)

19

Total General Fund (Fund 10) Expenditures

plus (+)

Total Debt Service Funds (Funds 38 & 39) Expenditures

minus (-)

All categorical aid, grant revenue, local misc revenue

equals (=)Shared Cost (a.k.a. “Aidable Costs”) – these are the costs in which the state shares with the district via

equalization aid

District Factor #3 – Wealth (prior year)20

Property Tax base is used to determine wealth and ability to support district expenditures

This measure of district wealth uses equalized valuation (fair market value), NOT assessed value

Equalized property values are calculated by and provided to DPI by the Department of Revenue.

Timing: DOR assessments on Jan 1, 2012 became “final” in May 2013 – we use these “May values” for the 2013-14 aid calculation.

District Factor #3 – Value Per Member

21

Crucial Statistic:

District “wealth” Value per Member =

Total Equalized Value ÷ MembershipDistrict A: $400,000,000 ÷ 800 = $500,000

District B: $400,000,000 ÷ 1,000 = $400,000

District B would have a higher proportion of it’s shared costs aided, per member, than district A, because of its

lower value per member.

District Factors/Equalization Aid22

VERY IMPORTANT: The equalization aid formula is driven by the

relationship between an individual district’s factors and state averages (costs & property values).

Because changes in other districts’ factors will affect state averages, it is not simply the factors in your district that affect the amount of aid that your district will receive.

Let’s look at the State factors …

State Factors23

1. Total amount appropriated for aid

2. Costs Ceilings

3. Property Value Guarantees

State Factor #1 – Aid Appropriation24

The amount of dollars appropriated by the State Legislature & approved by the Governor for use as

general aids to schools.Aid Year General Aid

(Billions)% Change from

Prior Year2001-02 $4.052 2002-03 $4.201 3.7%2003-04 $4.273 1.7%2004-05 $4.318 1.0%2005-06 $4.614 6.9%2006-07 $4.723 2.4%2007-08 $4.723 0.0%2008-09 $4.800 1.6%2009-10 $4.653 -3.1%2010-11 $4.653 0.0%2011-12 $4.262 -8.4%2012-13 $4.294 0.7%2013-14 $4.341 1.1%2014-15 $4.416 1.7%

State Factor #1 – Aid Appropriation25

The change in the State’s appropriation for General Aid does NOT EQUAL the change in your district’s general aid payment. Rather, your district’s General Aid amount will depend on:

Your district’s prior-year Shared Costs per Member, and how those costs break out into the Secondary and Tertiary level costs

Your district’s Equalized Value per Member, and how it compares to the Primary, Secondary and Tertiary Guarantee Values

*Other Factors: Special Adjustment and Chapter 220 Integration Aid eligibility; reductions for the Independent Charter schools; prior year adjustments.

State Factor #2 – Costs Ceilings26

Equalization Aid is calculated at three levels – the line between those levels are called “cost

ceilings”:

*Not all districts have shared costs at the tertiary level.

PRIMARY COST CEILING: $1,000 per member, set in statute

PRIMARAY COSTS: the first $1,000 in per-member shared costs x total membership

SECONDARY COST CEILING: 90% of the statewide average shared costs per member (statute); July 1st aid est: $9,261

SECONDARY COSTS: shared costs per member between $1,000 and the secondary cost ceiling x total membership

There is no ceiling on the total amount of shared costs that are aidable.

TERTIARY COSTS *: shared costs per member above the secondary cost ceiling x total membership

State Factor #2 – Costs Ceilings27

Example District: Shared Costs per Member = $10,000

$1,000 (Primary Cost Ceiling)

$9,261 (Secondary Cost Ceiling)

State Factor #3 – Guarantee Levels28

Within each level, the proportion of shared costs that are aided by the state is based on a district’s property

value per member (“wealth”) compared to state determined levels*:

PRIMARY GUARANTEE$1,930,000, set in statute

SECONDARY GUARANTEEThis value “floats” such that the

general aid appropriation is fully expendedJuly 1st aid estimate for 2013-14: $ 1,049,683

TERTIARY GUARANTEE100% of the statewide average property value per pupil

(formula set in statute)July 1st aid estimate for 2013-14: $536,510

*These are the guarantee levels for K-12 districts; guarantees levels are adjusted for K-8 and UHS districts.

Remember the Scholarship Analogy?29

The scholarship example we used as an analogy still works, but we do it three times to determine each district’s aid:

1. PRIMARY AID – the state’s share of the first $1,000 of shared cost.

2. SECONDARY AID – the state’s share of the district’s shared cost over $1,000 up to the secondary ceiling (est. $9,261).

3. TERTIARY AID – the state’s share of cost over the secondary ceiling.

Putting it all Together30

LEVELDist Val / Member

Guar Val / Member Dist Share

State Share

Cost Ceiling

Aid / Member

PRIMARY $500,000 $1,930,000 25.91% 74.09% $1,000 $741

SECONDARY $500,000 $1,049,683 47.63% 52.37% $8,261 $4,326

TERTIARY $500,000 $536,510 93.19% 6.81% $739 $50

TOTAL AID PER MEMBER 51.17% $10,000 $5,117

Example District:Shared Costs per Member = $10,000Value per Member = $500,000Cost Ceilings and Guarantee Values = July 1st aid estimate

values





Local (prop tax)

State (Equal Aid)

TOTAL


What happens when a district’s value/member exceeds the guaranteed

value per member?NEGATIVE AID

July 1st Aid Estimate: 184 districts are negatively aided at the tertiary level because their property value/member is greater than the tertiary guarantee. Of these districts:

43 Districts received just Primary Aid; and 20 districts receive no Equalization Aid (i.e., do

not qualify for even Primary Aid). [All but 2 of those districts qualify for Special Adjustment Aid – more in later slide].

Negative Aid33

NEGATIVE TERTIARY AID• Occurs when:

District has costs at the Tertiary LevelDistrict has Equalized Value/Member > TGVNegative aid reduces the district’s aid at the

secondary levelBut the district’s Equalization Aid can not

go below the amount of Primary Aid generated by the formula – this is the “Primary Guarantee”

Negative Tertiary Aid34

District’s value per member is greater than the Tertiary Guarantee

District has costs at the tertiary levelNegative Tertiary Aid reduces the amount of aid at the

Secondary Level

District Value per Member: 750,000

LEVEL Guar Val/Mem Dist Share State Share Cost Ceiling Total Aid

PRIMARY $1,930,000 38.86% 61.14% $1,000 $611

SECONDARY $1,049,683 71.45% 28.55% $8,261 $2,359

TERTIARY $536,510 139.79% -39.79% $739 -$294

TOTAL EQUALIZATION AID: 26.76% $10,000 $2,676

Negative Tertiary Aid35




Local (prop tax)

State (Equal Aid)

TOTAL

Negative Aid – Primary Aid Only (1)36

District’s value per member is greater than the Tertiary Guarantee

District has costs at the tertiary levelA district is always eligible for at least the Primary Aid

generated by the formulaDistrict Value per Member: 1,035,000


PRIMARY $1,930,000 53.63% 46.37% $1,000 $464SECONDARY $1,049,683 98.60% 1.40% $8,261 $116TERTIARY $536,510 192.91% -92.91% $739 -$687

Sum of aid at each level -$107

TOTAL EQUALIZATION AID: 4.56% $10,000 $456

Negative Aid – Primary Aid (1)37




Local (prop tax)

State (Equal Aid)

TOTAL


District’s value per member is greater than the Secondary Guarantee

District has costs at the tertiary levelA district is always eligible for at least the Primary Aid

generated by the formulaDistrict Value per Member: 1,500,000


PRIMARY $1,930,000 77.72% 22.28% $1,000 $223

SECONDARY $1,049,683 142.90% -42.90% $8,261 -$3,544

TERTIARY $536,510 279.58% -179.58% $739 -$1,327

Sum of aid at each level -$4,648






Local (prop tax)

State (Equal Aid)

TOTAL


District’s value per member is greater than the Secondary Guarantee

District has NO costs at the tertiary level:Shared Cost/Member = $9,000

A district is always eligible for at least the Primary Aid generated by the formulaDistrict Value per Member: 1,500,000


PRIMARY $1,930,000 77.72% 22.28% $1,000 $223

SECONDARY $1,049,683 142.90% -42.90% $8,000 -$3,432

TERTIARY $536,510 279.58% -179.58% $0 -$0







Local (prop tax)

State (Equal Aid)

TOTAL

No Equalization Aid42

District’s value per member is greater than the Primary Guarantee

District has costs at the tertiary levelA district would be eligible for Special Adjustment Aid, if

they received any General Aid in the prior yearDistrict Value per Member: 2,000,000


PRIMARY $1,930,000 103.63% -3.63% $1,000 -$36

SECONDARY $1,049,683 190.53% -90.53% $8,261 -$7,479

TERTIARY $536,510 372.78% -272.78% $739 -$2,016


TOTAL EQUALIZATION AID: 0.00% $10,000 0

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Know Your District’s Position in the Aid Formula

If a districts is positively aided at the Tertiary Level, an increase in shared costs will increase aid at the tertiary level – more shared costs to be aided*

If a district is negatively aided a the Tertiary Level, an increase in shared costs will decrease aid at the tertiary level – more shared costs to be negatively aided*

*Relative to the aid it otherwise would have received (i.e., all other things being equal).

Conceptualizing the Equalization Aid Formula

44

This chart is available on the DPI website at: http://sfs.dpi.wi.gov/sfs_aid_grid

Equalized Value Per Pupil (July 1st, 2013 Estimate)

Cost Ceilings (July 1st, 2013 est)

Up to $536,510 per pupil

Above $555,348 up to $1,049,683

Above $1,049,683 up to $1,930,000

Above $1,930,000 per pupil

Primary Level: Up to $1,000 per Pupil Positive Aid Positive Aid Positive Aid Zero Aid*

Secondary Level: Above $1,000 up to

$9,261 per PupilPositive Aid Positive Aid Negative Aid Negative Aid

Tertiary Level: Over $9,261 per Pupil Positive Aid Negative Aid Negative Aid Negative Aid

*May be eligible for special adjustment aid if any general aid was received in prior year.

Equalization Aid45

Regardless of what is happening at the state level with funding, your district’s general aid is a function of:

Your district’s “factors”The relationship between your

district’s factors and the statewide averages, which are affected by ….

Every other districts’ factors

Equalization Aid is part of “General Aid”

Type of Aid# of

Districts Receiving

*

13-14 Aid [July 1st Est.](Prior to Choice/Charter deductions)

% of General Aid

Appropriation

Equalization 404 $4,246,601,708 97.8%

Special Adjustment 77 $26,038,485 0.6%

Inter-District 23 $23,209,898 0.5%

Intra-District 4 $45,742,020 1.1%

Total General Aid 422 $4,341,592,111 100.0%

NO GENERAL AID 2

*Aid types are not mutually exclusive, so numbers will not add to the 424 total districts in Wisconsin. *In the July 1st Aid estimate: 345 districts received Equalization Aid but no Special Adjustment Aid; 18 districts received Special Adjustment Aid only; and 59 districts received both. All districts that receive Inter- and Intra-District aid also received Equalization Aid.

46

All four General Aid types are used for the Revenue Limit computation

(though most districts receive only Equalization Aid)

Special Adjustment Aid47

To ensure that districts don’t see a dramatic drop in aid amounts from year to year, the aid formula includes “Special Adjustment Aid.”

Sometimes called “hold harmless aid”

Equal to 85% of the gross general aid (equalization + special adjustment + Inter/Intra District aids) for which the district was eligible in the previous year*

Acts as a parachute for districts with declining aid (often result of rapidly declining enrollment).

Very property wealthy districts may be “out of the aid formula” but continue to receive Special Adjustment Aid for years.

*Less any prior year Revenue Limit Penalty (because that amount was deducted from the district’s prior year general aid payment)

From Gross Aid Eligibility to Actual Aid Payment

48

Reductions/adjustments to general aid eligibility:1. Independent (“2r”) Charter Schools: cost is spread over all

districts via an equal % reduction to gross general aid (equalization/special adjust/inter/intra aids)

July 1st aid estimate for 2013-14 aid: -1.479% May change in the October 15th aid certification (small

change)

2. Prior Year (“October to June”) adjustment: the difference in general aid amounts calculated between the October 15th aid certification and the final aid run of the prior year (+ or – value)

3. Parental Choice Program: reduction in aid to partially offset the cost of the program – but affects Milwaukee only

Equalization Aid Takeaways

1. One pot of money is split over 424 school districts based on district membership, shared costs and values; changes in individual district data affect every other district’s aid.

2. Aid Membership = average of September + January FTE, plus 100% of Summer FTE. This is different from Revenue Limit Membership.

3. Depending on district value per member, some districts increase their aid by increasing expenses, while others decrease their aid by increasing expenses (negative vs. positive tertiary aid).

4. Special Adjustment Aid ensures that districts receive at least 85% of the [gross] general aid awarded the prior year.

5. Reductions for the Independent Charter schools & prior year aid adjustments impact the actual aid payment.

6. Be aware of what is happening to your district over time …

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GENERAL AID AND THE LEVY50

You know your district’s general aid estimate for the 2013-14 year – now

what?

The amount of General Aid (and High Poverty Aid, if applicable) has a direct

impact on the allowable controlled levy.

SETTING THE LEVY51

A district’s maximum controlled levy is, in effect, determined by State Law:

• Revenue Limit Calculation (including exemptions, e.g., referenda, declining enrollment, energy efficiency)

• Equalization / General Aid Formula & High Poverty Aid

11. 2012-13 Revenue Limit With All Exemptions (Ln 9 + Ln 10) 10,000,00012. Total Aid to be Used in Computation (12A + 12B) 5,050,000

A.July 1 2012-13 General Aid ESTIMATE 5,000,000 B.State Aid to High Poverty Districts (not all districts) Source 628 50,000

REMEMBER TO USE OCT 15 CERT WHEN SETTING THE LEVY. 13. Allowable Limited Revenue: (Line 11 - Line 12) 4,950,000

(10, 38, 41 Levies + Src 691. Src 691 is DOR Computer Aid.)

SETTING THE LEVY52

A district’s actual levy involves decisions by the Board:• Fully utilize the allowable revenue authority?• Levy outside the revenue limit? (e.g., Fund 80)

14. Total Limited Revenue To Be Used (A+B+C) Not >line 13 4,950,000

Entries Required Below: Amounts Needed by Purpose and Fund:

A.Gen Operations: Fnd 10 including Src 211 & Src 691 4,900,000 (Proposed Fund 10)B.Non-Referendum Debt (inside limit) Fnd 38 Src 210 50,000 (to Budget Rpt)C.Capital Exp, Annual Meeting Approved: Fnd 41 Src 210 0 (to Budget Rpt)

15. Total Revenue from Other Levies (A+B+C+D): 100,000A.Referendum Approved Debt (Non Fund 38 Debt-Src 210) Entry RequiredB.Community Services (Fnd 80 Src 210) 100,000 (to Budget Rpt)C.Prior Year Levy Chargeback (Src 212) (to Budget Rpt)D.Other Levy Revenue - Milwaukee & Kenosha Only (to Budget Rpt)

16. Total Levy + Src 691, "Proposed Levy" (Ln 14 + Ln 15) 5,050,00017. Est Src 691 (Comp Aid) Based on Ln 16 & Values Entered (to Budget Rpt) 7,50018. Fnd 10 Src 211 (Ln 14A-Ln 17), 2012-13 Budget 4,892,500 Line 18 (not 14A) is the Fund 10 Levy certified by the Board. 19. Total Fall, 2012 All Fund Tax Levy (14B + 14C + 15 + 18) 5,042,500 Line 19 is the total levy to be apportioned in the PI-401. Levy Rate =

Equalization Aid – Explaining Changes Over Time

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How can I explain changes in my district’s aid?

10-Year Longitudinal Analysis of General and Equalization Aid Formula Components

http://sfs.dpi.wi.gov/sfs_buddev_eq

“Longitudinal Data – Equalization Aid”See “Explaining General Aid (including Equalization Aid)

Changes”



10 Year Longitudinal Analysis54

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

♦ District ■ State Ave District Value per Member Compared to the State Average


2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

♦ District ■ State Ave

District Shared Cost Per Member Compared to Secondary Ceiling


2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-1414,000

14,100

14,200

14,300

14,400

14,500

14,600

14,700

14,800

14,900

Aid Membership


2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14$65,000,000

$70,000,000

$75,000,000

$80,000,000

$85,000,000

$90,000,000

General Aid(includes Equalization Aid)

Understanding & Explaining Equalization Aid

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More analytical tools

http://www.dpi.wi.gov/sfs/buddev_eq.html

“Understanding and Explaining Equalization Aid”

October 15, 2012 Equalization Aid Computation – Percentage Method - Algebraic Format

October 15, 2012 Equalization Aid Computation – Percentage Method - Bar Graphs

October 15, 2012 Aid Formula Position K-8 October 15, 2012 Aid Formula Position UHS October 15, 2012 Aid Formula Position K-12

http://www.dpi.wi.gov/sfs/buddev_eq.html

Understanding & Explaining Equalization Aid

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More analytical toolsIn addition to the “production” worksheets on our website, DPI has available blank executable worksheets:

General Aid Worksheet Equalization Aid – Algebraic Method Special Adjustment Aid Shared Costs, Membership Revenue Limits

http://sfs.dpi.wi.gov/sfs_workexe

From the School Financial Services Homepage left-hand side, grey scan bar Worksheets DPI Executable Worksheets



Or call (all 608 area codes):

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• Bob Soldner, Director ………………………..

266-6968 • Erin Fath, Assistant Dir ……………………..

267-9209• Brad Adams, Consultant ……………………

267-3752 • Bruce Anderson, Consultant ..…………….

267-9707• Dan Bush, Consultant (Spec Ed) .………..

267-9212• Gene Fornecker, Auditor …………………..

267-7882• Brian Kahl, Auditor ……………………………

266-3862• Michele Tessner, Auditor …………..……….

267-9218

Questions?Visit our web site:

http://sfs.dpi.wi.gov/



STATE EQUALIZATION GENERAL AID ERIN FATH ASSISTANT DIRECTOR DPI SCHOOL FINANCIAL SERVICES TEAM...

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Transcript of STATE EQUALIZATION GENERAL AID ERIN FATH ASSISTANT DIRECTOR DPI SCHOOL FINANCIAL SERVICES TEAM...