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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)
    • Larry Sigel, School Finance Director

515-288-1991 ext. 235

[email protected]