Minimum Funding Level Options Understanding the Steps Taken When Tier Funding is Less Than $300 Million Prepared by the State Funding & Forecasting Department Equity ● Quality ● Collaboration ● Community 1
Evidence‐Based Funding Provisions 105 ILCS 5/18‐8.15 (a) sets general provisions and the founding principles of EBF. 105 ILCS 5/18‐8.15 (a) (2) (D) specifically addresses the distribution component: “[T]he model's distribution method allocates new State funding to those Organizational Units that are least well‐funded, considering both local capacity and State funding, in relation to their adequacy target .” 2
Introduction This presentation is meant to illustrate what happens to the calculation of TIER funding in the event that less than $300 million is appropriated. Tier funding is new money. This discussion does not impact Base Funding Minimum (BFM) which is the HOLD HARMLESS component of EBF. 3
Tier 1 Distribution Calculation “Refresher” Tier 1 districts receive 50% of new state funds available for distribution (tier funding). The Tier 1 Target Ratio is set at a % that allows for 50% of funding to be distributed to Tier 1 districts. The Target Ratio is re‐set annually and will vary depending on funding available. Tier 1 = districts with a Final % of Adequacy < (less than) the Tier 1 Target Ratio. Tier 1 Final Resources Final Adequacy Target Target Ratio Funding Gap 4
Tier 1 Distribution Calculation “Refresher” Tier 1 Remember this rate! It 30% Allocation will become very Rate important later in this discussion. The Tier 1 Allocation Rate is set at 30% per statute. It is a constant in the formula. Tier 1 Tier 1 Tier 1 Allocation Funding Funding Gap Rate 5
Number of Districts Qualifying for Tier 1 Will Vary Each Year The threshold for determining which districts and programs qualify for Tier 1 is a variable set each year. It is variable because of 2 reasons: 1. The fixed (constant) Tier 1 Allocation Rate of 30% 2. The appropriation of new state funding The more funding available, the higher the Tier 1 threshold. That means more districts qualify for Tier 1. 6
As More Tier Funding is Made Available, The Threshold to Qualify for Tier 1 Increases, Allowing More Districts Into Tier 1 380 374 Adding $50 million to Tier funding 375 increases the Tier 1 threshold from 370 67.22% to 67.77%, allowing 20 more districts to qualify for Tier 1. 365 360 354 355 350 345 340 Districts and Programs with $300M Tier Districts and Programs with $350M Tier 7
Minimum Funding Level in EBF The Evidence‐Based Funding statute established a Minimum Funding Level (MFL) for Tier funding distribution. MFL = $300 Million or more If less than $300 million is appropriated, new steps are taken to distribute the lower funding level. 8
When MFL is Less Than $300 Million 18‐8.15(g)(9) of the EBF statute lists steps to take when Tier funding is less than $300M. In general, it seems clear the steps were intended to accumulate any necessary shortfall by starting with Tier 4, then Tier 3, then Tier 2 and finally, if necessary, reducing Tier 1 funding…. However, the statute is unclear… It lacks direction about running initial tier funding and when and whether to stop when a reduction has been reached in an earlier Tier. 9
Statutory Language (9) The Minimum Funding Level is intended to establish a target for State funding that will keep pace with inflation and continue to advance equity through the Evidence‐Based Funding formula. The target for State funding of New Property Tax Relief Pool Funds is $50,000,000 for State fiscal year 2019 and subsequent State fiscal years. The Minimum Funding Level is equal to $350,000,000. In addition to any New State Funds, no more than $50,000,000 New Property Tax Relief Pool Funds may be counted towards the Minimum Funding Level. If the sum of New State Funds and applicable New Property Tax Relief Pool Funds are less than the Minimum Funding Level, than funding for tiers shall be reduced in the following manner: 10
Statutory Language – Part 2 (A) First, Tier 4 funding shall be reduced by an amount equal to the difference between the Minimum Funding Level and New State Funds until such time as Tier 4 funding is exhausted. (B) Next, Tier 3 funding shall be reduced by an amount equal to the difference between the Minimum Funding Level and New State Funds and the reduction in Tier 4 funding until such time as Tier 3 funding is exhausted. (C) Next, Tier 2 funding shall be reduced by an amount equal to the difference between the Minimum Funding level and new State Funds and the reduction Tier 4 and Tier 3. (D) Finally, Tier 1 funding shall be reduced by an amount equal to the difference between the Minimum Funding level and New State Funds and the reduction in Tier 2, 3, and 4 funding. In addition, the Allocation Rate for Tier 1 shall be reduced to a percentage equal to the Tier 1 allocation rate set by paragraph (4) of this subsection (g), multiplied by the result of New State Funds divided by the Minimum Funding Level. 11
Statutory Language During the EBF legislative process in 2018 ISBE was not asked to model the effects of the MFL language. 12
Option 1 for Implementing a Funding Shortfall $200 Million for Tier Funding ‐ Altering the Formula Step1: Lower Tier 1 Allocation Rate , Step 4: Increase Tier 1 Step 2: Step 3: Collect Qualifying Collect $300K Collect $2.7M $97M from Threshold from Tier 4 from Tier 3 Tier 2 419 Districts Assigned to Tier 1 13
Option 1 Results – Altering the Formula • More districts qualify as Tier 1, meaning many districts initially identified as Tier 1 give up a portion of their tier funding. • Benefits only those districts in the adequacy range of 64% ‐ 68.82%. • Districts with adequacy levels of 51% ‐ 63.9% receive less funding than districts in the 64% ‐ 68.8% range of adequacy. • ISBE’s modeling shows it drives distribution of new funds away from a greater amount of districts with 70% or more low‐income concentration. 14
Option 2 for Implementation With Only $200 Million for Tier Funding ‐ Maintaining the Integrity of the Formula Step 1: Collect $300K from Tier 4 Step 2: Step 3: Collect $2.7M Collect $97M 354 Districts from Tier 3 from Tier 2 Assigned to Tier 1 Second option does not alter which districts qualify as Tier 1 or the Tier 1 allocation rate. 15
Option 2 Results – Maintaining the Integrity of the Formula • Drives funds to the districts with the most need. (Districts with 51% ‐ 63.9% Adequacy) • Results in a higher per pupil increase to Tier 1 districts. • ISBE’s modeling shows it drives a distribution of new funds to a greater amount of districts with more than a 70% low‐income concentration. • Aligns with goal set in 105 ILCS 5/18‐8.15 (a) (2) (D) “[T]he model's distribution method allocates new State funding to those Organizational Units that are least well‐funded, considering both local capacity and State funding, in relation to their adequacy target .” 16
Comparing Options for Implementing a Funding Shortfall Option 1 Option 2 Percentage of Lower Tier 1 Allocation Rate, Reduce Funding in Tiers 4‐2, No Number of Change in Funding with Adequacy or Ability to Increase Tier 1 Target Ratio, Reduce Change in Data to Qualify as Tier Districts Option 2 vs Option 1 Fund Education Funding in Tiers 4‐2 1 50% ‐ 55% 3 $ 406,515 $ 525,454 $ 118,940 55% ‐ 60% 31 $ 32,605,108 $ 39,942,255 $ 7,337,148 60% ‐ 65% 170 $ 82,494,159 $ 89,328,868 $ 6,834,709 65% ‐ 70% 190 $ 76,208,380 $ 61,062,045 $ (15,146,335) 70% ‐ 75% 108 $ 3,347,197 $ 3,350,643 $ 3,446 75% ‐ 80% 56 $ 1,216,126 $ 1,217,378 $ 1,252 80% ‐ 85% 54 $ 480,861 $ 481,356 $ 495 85% ‐ 90% 38 $ 84,453 $ 84,540 $ 87 > 90% 201 $ ‐ $ ‐ $ ‐ Totals 851 $ 196,842,797 $ 195,992,539 $ (850,258) Tier 3 & 4 Note: 68 ROE Programs and 2 Lab Schools are not represented in this summary. They receive different funding amounts in each option so totals will differ in this comparison. 17
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