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Finance Overview: AEA’s/LEA’s . Barb Harms Business Manager Grant Wood Area Education Agency Management Team Meeting – 11/3/06 . How AEA’s are Funded:. Per pupil funding based on LEA enrollments Formula is separate for 3 service areas (Media, Ed Services, Special Education)

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Finance overview aea s lea s

Finance Overview: AEA’s/LEA’s

Barb Harms

Business Manager

Grant Wood Area Education Agency

Management Team Meeting – 11/3/06

How aea s are funded
How AEA’s are Funded:

  • Per pupil funding based on LEA enrollments

  • Formula is separate for 3 service areas (Media, Ed Services, Special Education)

  • No direct taxing authority

Other aea revenues
Other AEA Revenues:

  • Federal funds – IDEA, Part C, etc.

  • Various other state, local grants

  • Sales of non-mandated services (such as printing, computer services, SEMS)

  • AEA’s also receive State funding for Juvenile Home/Shelter instructional programs

Show through concept
“Show-through” concept:

  • Each district includes the AEA per pupil funds in their budget to generate the dollars earmarked for AEA’s.

  • Districts generate property taxes for the AEA’s through their levy rate

  • The funnel is on paper only – dollars actually are paid directly from the State to each AEA

Finance formula
Finance Formula:

  • AEA cost per pupil X enrollment

  • Cost per pupil grows each year by the allowable growth amount (4% for FY 08)

  • Child-based: allowable spending is based on number of students counted

Finance formula cont d
Finance Formula (cont’d):

  • Special Education Services

    • Funding is a mix of State aid & prop taxes

    • Enrollment includes weighting for children with IEP’s

      AEA cost per pupil

      X Weighted Enrollment

      = Budget for Special Education services

Finance formula cont d1
Finance Formula (cont’d):

  • Media/Technology and Educational Services

    • Funded entirely from property taxes

    • Enrollment includes approved nonpublics

      AEA cost per pupil

      X Actual Enrollment (public & nonpublic)

      = Budgets for Media/Ed Services

Finance formula cont d2
Finance Formula (cont’d):

Special Education $16,754,381

Media Services $ 2,927,692

Educational Services $ 3,213,132

State Reduction $ (1,999,562)

“Controlled Funding” $20,895,643

Funding for lea s 5 basic principles
Funding for LEA’s: 5 basic principles

  • Funding based on number of students

  • State “equalizes” funding through a mix of state aid & property taxes

  • Legislature sets allowable growth – the annual increase in the “cost per student”

  • Local property taxes are a critical part of the formula

  • Funding sources have restrictions on their use

Funding for lea s
Funding for LEA’s:

  • # 1: Funding based on number of students

    Increases or decreases in enrollment affect district budgets.

    • The count on October 1 is used to establish the district’s budget for the following year

    • That means revenues are always a year behind the actual number of children we are serving in our classrooms

Funding for lea s1
Funding for LEA’s:

  • # 2: Equalization - the school aid formula relies on two sources of revenue

    • State General Fund appropriations

    • Locally raised property taxes

    • Results in a maximum expenditure per pupil and therefore a maximum amount a district can raise and spend

School foundation formula
School Foundation Formula

  • Three components

    • Uniform Levy - Property tax levy of $5.40 per thousand of taxable valuation.

    • State Foundation Percentage - Amount the state pays in excess of $5.40 - varies by district (87.5% of cost per pupil).

    • Additional Levy - Property tax levy which funds the difference between the Combined District Cost and the sum of the Uniform Levy and the State Foundation Percentage.

School finance spending authority
School Finance - Spending Authority

  • Spending authority is the sum of:

    • Combined District Cost (property tax and state aid)

    • Miscellaneous income

    • Unspent balance from previous years

  • Why important?

    • Districts cannot exceed spending authority

    • Not the same as cash

Funding for lea s2
Funding for LEA’s:

  • # 3: Allowable growth

    The Legislature sets the annual increase in the “cost per student”.

    • Growth rate is set over a year in advance to allow schools to meet budget deadlines

    • Rate for 2006-07 was 4% ($5,128 per student)

    • Rate for 2007-08 is 4% ($5,333 per student)

Funding for lea s3
Funding for LEA’s:

  • # 3: Allowable growth (cont’d)

    • When is 4% allowable growth not 4%?

      • If a district has an enrollment increase, their “new money” will be more than 4%

      • If a district has an enrollment decline, their “new money” will be less than 4%

      • The budget guarantee has been used to cushion districts that have enrollment declines – it is now being phased out

Funding for lea s4
Funding for LEA’s:

  • # 4: Local property taxes

    Why not remove property taxes from formula?

    • Lawmakers would have to replace $1.1 billion dollars statewide with sales tax or income tax

    • Property taxes add stability – if sales tax was used, funding would fluctuate based on spending

Funding for lea s5
Funding for LEA’s:

  • # 5: Restrictions on funding sources

    • Finance formula revenues go to the General Fund (salaries, supplies, etc.)

    • Other funding streams for facilities

    • Can’t be commingled or use excess in general fund for facilities

Lea funding facilities
LEA Funding - Facilities

Facility Related Levies

  • Board-Approved Physical Plant and Equipment Levy (PPEL).

  • Voter-Approved PPEL - simple majority vote required.

  • Bonded Debt - requires 60% majority vote, then Debt Service levy used to repay debt

  • Public Education and Recreation Levy (PERL). Public use playgrounds/recreation facilities.

  • Local option sales tax - maximum of $0.01 additional local option sales tax for school infrastructure - 97 of 99 counties have this

Funding for lea s6
Funding for LEA’s:

  • Program Levies

    • Instructional Support Levy (ISL)

      • Maximum of 10% of Regular Program Budget.

      • Can be either property taxes or income surtax, or combination.

      • Can be board-approved (maximum five years - subject to petition) or voter-approved (maximum 10 years).

Lea funding other levies
LEA Funding - Other Levies

  • Management Levy

    • Used to pay unemployment benefits, property insurance and early retirement benefits.

  • Cash Reserve Levy

    • Used to generate cash for the General Fund of the school district.

    • Generated by property tax via school board action annually.

    • Used to fund spending authority but does not directly generate spending authority.

Summarizing aea lea finance
Summarizing AEA/LEA Finance

  • What is common?

    • State funding based on number of students

    • Other revenues from grants, misc sources

    • Allowable growth

    • Weighted enrollment

Summarizing aea lea finance1
Summarizing AEA/LEA Finance

  • What is different?

    • Schools have taxing authority, AEA’s don’t

    • LEA finance formula is more complex

    • Schools have separate funding sources for facilities & other costs

    • AEA’s generate revenues from sales of non-mandated services

School finance web resources
School Finance - Web Resources

  • IASB:

  • IASBO:

  • Dept. of Education:

  • Legislature - bills, amendments, etc.

  • Dept. of Revenue and Finance:

School finance contacts
School Finance - Contacts

  • Iowa Association of School Boards (IASB)