School Finance in Iowa
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Key Concepts of Iowa School
Finance
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Dillon’s Rule vs. Home Rule
“Bright line” between General Fund
and Building Expenditures
Pupil Based Formula
Source of Revenues
Property Poor (kid rich)
Spending Authority vs. Cash
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School Finance - Background
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Dillon’s rule:
– School districts only have those powers
expressly authorized by the Code of Iowa.
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Home rule:
– Cities and counties can do anything not
expressly prohibited.
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School Aid - Basics
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The “Bright” Line in School Finance
– Educational program expenditures are
funded and equalized by the state
foundation formula.
– Facility expenditures are not under the
finance formula and may not be used for
educational program expenditures (and
vice versa).
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School Aid – Basic Principles
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The school aid formula is a child-based
formula.
The total amount of foundation formula
revenue is the number of children
times a cost per child.
Some children cost more to educate
than others – weightings in the formula
for special education, non-English
speaking
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Operation of Foundation
Formula: Three Components
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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.
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Operation of Foundation Formula
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Valuation and Property Tax Rates and
Ranges: What’s the Relationship?
Per Pupil Net Value
General Fund Rate
(FY 2009)
(w/o ISL)
High
$927,204 $7.11/$1,000 Low
Average $267,844 $11.49/$1,000 Average
Low
$122,993 $15.73/$1,000 High*
*Range in levy rate from high to low has narrowed with state
property tax equity payments, which will eventually lower the
top half to the average.
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School Finance - Spending Authority
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Spending authority is the sum of:
– Combined District Cost (property tax and
state aid)
– Miscellaneous income – anything not
above
– Unspent balance from previous years
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Why important?
– It’s a ceiling: Districts cannot exceed
spending authority
– It’s not a measure of cash
– Why allow districts to carry forward unused
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spending authority?
To Increase Spending Authority:
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Claim full At-Risk amount (5% enrollment)
Approve ISL (for those who don’t have it)
Efficiency incentives
Sharing incentives
Lobby legislature to increase the ceiling
(allowable growth)
Decrease or shift expenditures:
– Early retirement
– State Penny/PPEL expenditures
– Sharing (reduce costs)
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Comparing Spending Authority and Cash
Concepts
Term
Explanation
Analogy
Type
Spending
Authority
Total amount a school district
can legally spend during a year.
Income +
credit cards
Recurring
Unspent Balance
Remaining amount of spending
authority at end of the year
(Spending Authority minus
Actual Expenditures).
Credit cards
One time
Analogy
Type
Term
Explanation
Cash On Hand
Total cash on hand.
Savings
account
One time
State Aid
Amount received by a district
from state General Fund.
Paycheck
Recurring
Property Taxes
Amount received by a district
from local property taxes.
Paycheck
Recurring
Miscellaneous
Income
Any income which is not
property tax or state aid (must
be actually received).
Birthday
money from
Grandma
One time/
recurring
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Levies Available to School Districts
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Instructional Support Levy (ISL is
the only General Fund levy)
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Voter PPEL
Board PPEL
PERL
Debt Service
State Penny for School
Infrastructure
Management Levy
Cash Reserve
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Four Questions
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Why do we have enough money to
pave the parking lot but can’t pay
teachers?
Why can’t we just levy whatever we
need to support the school?
Why don’t schools become more
efficient?
Why don’t property taxes ever
decrease?
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School Aid - Contacts
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Iowa Association of School Boards
(IASB)
– Larry Sigel, School Finance Director 515288-1991 ext. 235 lsigel@ia-sb.org
– Website: www.ia-sb.org
– Margaret Buckton, Assoc. Executive Dir.,
Public Policy ext. 228
mbuckton@ia-sb.org
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