MINNESOTA EDUCATION FINANCE – 101
Key Items to Review 1. Education Budget: Big Picture 2. Defining Revenue, Forecast, and Targets 3. Counting Students 4. Formula Funding 5. General Education Revenue 6. Categorical Revenue 7. School Property Taxes 8. Early Learning Programs
Budget Breakdown – Big Picture (FY18) • Total Education Funding: $11.25 billion (FY18, estimated) • 78% State Aid ($8.8 billion) • 15% Local Levy ($1.7 billion) • 7% Federal Funds ($750 million) • Share of Spending; State Budget (excluding federal funds) • State pays about 84% per pupil. • Total estimated revenue = $10.5 billion (FY18) • Total combined aid = $8.8 billion (FY18) • Education is the largest portion of the state’s general fund budget at 41% (HHS is 30%).
Education Revenue • Education Revenue = State Aid and Local Levies • State Aid = Money appropriated by the state. • Local Levy = Tax revenue for the school district. • FY18 Revenue per Pupil (estimated) = $12,227 • FY18 State Aid per Pupil (estimated) = $10,268 • Revenue and Aid Varies by District or Charter • Minneapolis Revenue = $15,123/pupil • Elk River Revenue = $10,797/pupil
Base/Forecast vs. Target • Most education aid is an entitlement: automatically adjusts to reflect changes in student enrollment. • February Forecast adjusts spending projections based on changes in student enrollment to set base funding levels. • Targets (aid and levy) are relative to forecasted base. • Example: • FY18/19 base increase = $860 million (over FY16/17) • FY18/19 “target” over base increase = $483 million • FY18/19 total increase = $1.34 billion
Counting Students – ADM or APU State funding formula does not just count the number of students in the schools (Adjusted Average Daily Membership), but counts students using weights to calculate Adjusted Pupil Units used in formula funding or other funding streams. Details: • VPK/SR+ = 0.412 to 0.60 pupils • Half-Day Kindergarten = 0.55 pupils • K – 6 = 1.0 pupils • 7 – 12 = 1.2 pupils • Extended Time Programs = 0.2 pupils (Except Charters)
Formula Funding The “formula” is based on “Basic Formula Aid” as the foundation with other spending items “linked” to basic formula dollar amount. An increase in basic formula increases the “linked” items. Formula funding includes: • Basic Formula Aid ($6,188/pupil FY18); • Compensatory Revenue; • Declining Pupil Aid; • Sparsity (elementary, secondary, transportation); • PSEO Aid Payments; • Nonpublic Pupil (aid, transportation); • ECFE.
More Money on the Formula For FY18/19, the Legislature funded a 2% & 2% formula increase: • Basic formula aid increased by 2% in FY18; and 2% in FY19. • Triggers increases in the linked items. Formula increases are “expensive” over the biennium with the first year’s increase paid for twice, followed by another 2% in the second year. A 2% & 2% is a net 4% increase, but the state pays for 6%. Example: (Rule of Thumb) $1 on the formula cost $1 million. A $100 basic formula increase costs $100 million in FY18, and $200 million in FY19. Schools see a net $200 million increase, but the state paid $300 million for the two-year budget.
Payments to Schools: Aid & Levy Shift • The 90/10 Payment Shift: 90% of funding paid from July through June in current fiscal year; 10% paid August through October of following fiscal year. • Purpose of 90/10 Shift: Pays anticipated entitlement based on projected enrollments. 10% hold-back serves as ”clean-up” to balance the books when actual enrollments are reported. Avoids state claw back of overpayment. • Charters have a modified schedule to speed up cash flow. • Tax Recognition: taxes collected in the spring are assigned to the fiscal year beginning July 1 to join the fall tax payments for the same fiscal year. (Taxes payable 2017; revenue FY18)
Major Revenue Streams • General Education Revenue: available to all district and charter schools, with some exceptions, to pay for general operations and core education programs. • Categorical Revenue: program specific revenue either available through state mandate or voluntary participation.
General Education Revenue Key Components: • Basic Formula Aid = $6,188 (FY18); $6,312 (FY19) per APU • Compensatory (funding based on students in poverty) • Referendum Revenue (locally determined) • Sparsity Revenue (limited to certain districts)
Compensatory Revenue • After Basic Formula Aid, Compensatory Revenue is the largest component of general education (and the formula) funding. • Compensatory revenue calculations with the “concentration factor” for high poverty schools remains in place. • Changes: • Formula funding increases dedicated to extended time programming. [$35.5 million for FY18/19] • Compensatory Pilots made permanent: Anoka-Hennepin, Brooklyn Center, Osseo, Robbinsdale, Rochester, South Washington, and Albert Lea. [$13.9 million for FY18/19]
Categorical Revenue Examples: • Special Education • Achievement and Integration (rules determine funding) • Q Comp (voluntary; spending capped) • Long-Term Facilities Maintenance Revenue
Special Education • Funded with federal and state dollars. • Funding not based on enrollment, but identified services. • IEP and 504 Plans • Slow move toward census-based formula funding • Cross-subsidy: Schools are funded for only a portion of their total costs. Schools “subsidize” special education by ”crossing” over general education funding. • A student’s home or “Resident” district is responsible for 90% of unreimbursed costs when the student open enrolls.
Charter School Funding • General Education Revenue per pupil, minus 4.66% of basic formula, unless the charter provides transportation services. • Modified Extended Time Revenue • No levy or bonding authority, but receives the referendum equalization aid for each enrolling student. • Special Education funding similar to school districts, except charters may bill back 90% of eligible unreimbursed costs to resident district (with exception for charters with 90% or more special education students). • Building Lease Aid; LTFMR (may be used for any school related purpose). • Other aids, grants, revenues similar to school district, unless the funding requires a levy.
Community Education • Funded separately from general education often using a mixture of state aid, local levies, and/or participants fees. • Examples include: • Adult Basic Education • School-age care • Youth development programs (before and after school) • School Readiness • Early Childhood Family Education (ECFE)
School Property Taxes School levies are paid by local property taxpayers, and are voter approved in most cases. Most levies are equalized (subsidized) with state aid including referendum and debt service. Levies calculated either on RMV or ANTC. Examples: • Referendum Revenue (voter approved) • Local Optional Revenue (board opt-out) • Debt Service Levy (approved by school bonds) • AIM (70% aid/30% levy) ; Q Comp ($169 aid/$91 levy)
Local Tax Base • Referendum Market Value (RMV) • Residential homes, including “house/garage and one-acre” • Operating Referendums • Local Optional Revenue ($424/pupil) • Equity Revenue • Adjusted Net Tax Capacity (ANTC) • Residential; seasonal/recreational; agricultural; commercial • Debt Service Levies • Q Comp; AIM; Safe Schools, etc.
Referendum Equalization Aid • Three Tiers of Equalization • Tier 1; first $300/pupil = $880,000 RMV per pupil • Tier 2; next $460/pupil = $510,000 RMV per pupil • Tier 3; > $760/pupil = $290,000 RMV per pupil • Example: $440,000 RMV/Pupil with $1,000/pupil levy • Tier 1 = $150/pupil Levy; $150/pupil Aid (50% levy) • Tier 2 = $395/pupil Levy; $65/pupil Aid (86% levy) • Tier 3 = $240/pupil Levy; $0/pupil Aid (100% levy) • Total Levy = $785; Total Aid = $215 • LOR ($424/pupil) Equalized at Tier 2
Debt Service Equalization Aid • Tier 1 = combined debt below 15.74% district’s ANTC • No equalization • Tier 2 = portion between 15.74% and 26.24% districts ANTC • Greater of $4,430 or 55.33% ANTC/Pupil • Tier 3 = remaining portion • Greater of $8,000 or 100% ANTC/Pupil
Early Learning Programs The education budget funds a variety of early learning programs that are operated by public schools; child care centers; family child care providers; or Head Start. Examples (FY18): • School Readiness Aid ($33.7 million) • Voluntary PreK ($23.5 million) • School Readiness Plus ($50 million for FY18/19; shared with VPK) • Early Learning Scholarships ($70.2 million) • Early Childhood and Family Education ($30.5 million)
Funding Early Learning • VPK/SR+ funded similar to formula funding; SR+ uses sliding fee scale • School Readiness based on census of 4-year-olds residing in school district and FRL%; prorated from state cap; sliding fee scale authorized (excludes Charters). • Early Learning Scholarships: up to $7,500/participant provided directly via Pathway 1 or to selected programs via Pathway 2 (PW2 capped at FY17 levels) • ECFE funded through state aid, local levy ($22.135M), and fees. • Head Start: Federal funds ($105M); State Funds ($25M)
Questions and Comments… Thank You! Jody Withers: jwithers@edalliesmn.org
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