Proposed Executive Budget Main Issues for Chardon New calculation - PowerPoint PPT Presentation

Proposed Executive Budget

Main Issues for Chardon ● New calculation of state share and how it uses median income as a factor ● Phase out of the tangible personal property tax (TPP) reimbursement

Current Formula ● Uses a “Wealth Index” ● Has 2 possible components ○ Property Index also referred to as Valuation Index ○ Income Index ● If Property Index < Income Index, then only the Property Index is used to determine Wealth Index ● If Income Index < Property Index, then Wealth Index is composed of ⅔ Property Index and ⅓ Income Index

New (Proposed) Formula ● “Capacity Measure” replaces the “Wealth Index” ● Also has two possible components ○ Valuation index ○ Median income index ● Valuation index remains the same as under the current formula

New (Proposed) Formula ● Districts are broken down into three groups based on median income ○ Districts with median income below 88 percent of the statewide average median income ○ Districts with median income between 88 percent and 112 percent of the statewide average median income ○ Districts with median income above 112 percent of the statewide average median income

New (Proposed) Formula ● Median income < 88% Capacity index = valuation index - difference between 88 percent and their actual income index ● 88% < Median income < 112% Capacity index = valuation index ● Median income > 112% Capacity index = valuation index + (difference between their actual income index and 112 percent times 20% in 2016, 40% in 2017, *60% in 2018, *80% in 2019, and *100% in 2020) *This add-on is being phased in over 5 years.

New (Proposed) Formula ● Capacity measure is then converted to a state share percentage ○ Capacity measures of 0.2 or below receive a state share percentage of 90% ○ Capacity measure between 0.2 and 2.0 receive a state share percentage on a continuum of between 90% and 5% ○ Capacity measures of 2.0 or higher receive a state share percentage of 5%

New (Proposed) Formula ● The “Guarantee” ○ Will be based on the prior year funding amount ○ Will decrease by 1% of total State and local resources each year For Example: FY 2015 Revenue: $5,000,000 in state aid $30,000,000 total state and local FY 2016 Guarantee: $5,000,000 - ($30,000,000 * .01) = $4,700,000 FY 2017 Guarantee (assuming same total): $4,700,000 - ($30,000,000 * .01) = $4,400,000

New (Proposed) Formula What does this all mean for Chardon Local Schools? ● Our median income is $39,994 or 121% of the statewide average median income of $33,076. That puts us in the highest group for calculating the capacity measure, resulting in the following: FY 2016 FY 2017 Capacity Measure 1.62 1.64 State Share Percentage 22.2% 21.3%

New (Proposed) Formula Using the proposed formula, our estimated core aid is as follows: FY 2015 FY 2016 FY 2017 $5,535,843 $5,223,670 $5,116,821 Amounts are taken directly from the simulations released by the Office of Budget and Management. ● Loss of $312,173 in FY 2016 and then another $106,849 in FY 2017 ● Loss of $419,022 in annual revenue by FY 2017 Remember, the capacity measure calculation is being phased in over 5 years, so the number will continue to go down.

TPP Phase-Out ● The rate at which the reimbursements are phased out is determined by the calculated capacity measure. ● Higher capacity measures mean faster phasing out of TPP. ● The 610 districts in the state are broken down into quintiles. ● Districts in the top quintile (highest capacity) will be phased out by 2% of State and local resources per year. Each quintile’s percentage decreases by 0.25%, down to the bottom quintile (lowest capacity) of 1% of State and local resources per year.

TPP Phase-out ● Chardon Local School District is in the highest quintile. ● Our TPP reimbursement would be phased out on the fastest schedule. ● What that means in terms of dollars for us is shown below: Chardon Local School District TPP Reimbursement Revenue FY 2015 FY 2016 FY 2017 $977,841 $354,975 $0 Amounts are taken directly from the simulations released by the Office of Budget and Management.

Combined Loss for Chardon FY 2016 FY 2017 Cumulative Annual Loss Core Aid $312,173 $106,849 $419,022 TPP Reimbursement $622,866 $354,975 $977,841 Total: $935,039 $461,824 $1,396,863