School Finance
Revenues for the Novice
General State Aid, Grants, Federal Revenue Sources
Principles of School Finance Committee
Stephen Miller CPA
Senior Financial Advisor
PMA Financial Network, Inc.
Naperville, IL
(630) 657-6413
smiller@pmanetwork.com
James Fritts, Ph.D.
Northeastern Illinois University
Chicago, IL
(847) 691-1192
jfritts253@gmail.com
Presentation Topics
• State revenues and their outlook
– General State Aid-Jim
– Categorical Grants-Steve
• Federal grants and their outlook-Steve
• Questions and discussion
• This handout is designed for self-study after the
Conference, using also the ISBE.net web resources
that are listed. Questions are inevitable and
expected.
Judging a State’s School Funding System and Spending
• States’ funding systems, including the local component, can
be compared and evaluated on the extent to which they
achieve
– Equity
– Adequacy
• By these criteria, Illinois has ranked in the lowest tier among
the states in recent years, especially in funding equity.
• The ranking improved somewhat in 2009, but it reflects the
drop on other states’ scores as the recession took hold.
A Definition of “Equity”
• Equity in school funding is achieved when there is a fair and
just means of distributing resources among all districts in a
state, taking into account the differing abilities of districts to
raise money through property taxes.
• If districts’ spending correlates highly with their property
wealth, as in Illinois, equity is not present in that state’s
funding system.
• Absent equity, the quality of a student’s education depends
on the “accident” of where the student resides.
Equity is not a Recent Problem
• “Differences in educational expenditures per
pupil across school districts in a state remain a
concern in most states.”
Elwood Cubberly in School Funds and their
Apportionment, Teachers College Press, 1905
Historical Background
• Original schools were dependent on property tax.
• As school populations increased and shifted towards
urban areas, states created minimum foundation and
equalizing state aid formulas as new district lines
were drawn, thereby creating inequities of taxable
resources.
• State systems supplemented the property tax, but
unequal and often highly varying amounts of
property wealth per pupil (pwp) resulted.
• Legal challenges to fiscal disparities began in the
1960’s in Illinois and continue to this day.
Measuring Adequacy
• Adequacy requires provision of sufficient fiscal resources to enable
all schools to deploy educational strategies that can educate nearly
all their students to the state’s proficiency standards.
• Illinois has used data on the expenditures of a sample of lowspending districts with high achievement on State tests as a
reference point to establish a foundation level in the General State
Aid formula.
• Current foundation funding levels of less than $6,000 are far below
the $8,360 figure recommended by an Educational Funding
Advisory Board in December 2010.
• Adequacy can also be measured by comparing a state to the
spending levels of other states.
How Illinois Ranks Among the States
• Each year, the publication Education Week grades the states on the extent
to which they achieve funding equity and adequacy.
• The rankings are based on revenue and expenditure data compiled by the
National Center for Education Statistics (NCES).
• Illinois ranked in the bottom 5 or 10 in funding equity and low average in
adequacy in recent years. Slight improvement was shown for 2009.
– High correlation (.19) of districts’ property wealth and spending level
– Wide variations in property wealth and spending level that are not
compensated by the state funding formula
– An average FY 2009 (SY 2008-09) state spending level of $11,229, compared
with the all-state average of $11, 665
– The small percentage (33%) of students residing in districts which spend at or
above the U.S. average. The all-state average is 40.5%.
• Percentage of school costs funded by State has declined over the years.
Objective of General State Aid
• General State Aid (GSA) provides unrestricted grants-in-aid to
school districts in an equitable manner.
• It is distributed in inverse proportion to local fiscal capacity, as
measured by property tax wealth per pupil (pwp).
• The formula for computing GSA is referred to the “foundation
formula.” The concept of a foundation formula dates to work
done by Strayer and Haig at Columbia University in the 1920’s.
• The “foundation level” is the guaranteed minimum amount of
money per student to be available to support the education of
each student in the state. It includes both a local property tax
component and the state component.
Understanding the Components of GSA
• General State Aid is the sum of several components in
addition to the “foundation/equalizing” formula, although it is
shown as a single appropriation in the ISBE budget.
• Some provisions, including the “poverty supplement,” apply
to all districts. Some apply only to districts subject to the tax
cap, and one applies to tax-capped districts that have passed
a referendum to increase the limiting rate.
• Therefore, business managers and superintendents must
understand the factors that apply to their own district and
how they will be affected by trends in the tax base and rates,
attendance and poverty, proposed formula changes and state
and ISBE budget developments.
Illinois Foundation System
• The foundation formula assures $6,119 per student in shared
state aid and local property tax revenue.
• The State’s share is inversely proportional to a district’s
available per pupil local resources, consisting of the tax base
(GSAEAV) and Personal Property Replacement Tax Revenue.
• GSA requires $4.448 billion in FY12 state budget--about 2/3 of
the total ISBE grants from state funds.
• Two formula variations (alternate method and flat grant)
apply to districts at high end of wealth scale. These districts
are “off the foundation formula” but other GSA components
may apply.
GSA Distribution
General State Aid
2008-2009
$5,500
$5,000
Foundation Level = $5,959
l
$4,500
General State Aid per Pupil
$4,000
$3,500
Foundation
$3,000
$2,500
$2,000
$1,500
$1,000
.
Alternate Method
Flat Grant
$500
$0
.93 x FLEVEL
1.75 x FLEVEL
Available Local Resources as Percentage of Foundation Level
The graph illustrates the 2008-09
formula at a foundation level of
$5,959 per pupil. The concept is also
valid for the 2011-12 target figure of
$6,119, but funded at only $5,953. A
district slides down the GSA per
pupil slope as its local wealth per
pupil increases. But it levels off
before it hits $-0-.
Illustration of GSA Formula
• The graph shows how GSA increases or decreases with a
districts' ability to raise funds through property taxes.
• GSA per pupil can range from $5,000 or more down to $218 for
the richest districts.
• University lab schools, alternative/safe schools and the Illinois
Math and Science Academy receive the full foundation amount
for each student, since they have no property taxing authority or
tax base.
• Even though the GSA grant line falls below $0, no district is
excluded from GSA--yet.
• Cutting out wealthier districts from GSA has been considered in
recent years.
The 3 GSA Formulas
ISBE Statistics for FY 2012; numbers rounded
•
•
•
•
The Foundation Formula generates GSA to 700 districts and programs with the lowest
property wealth per pupil.
– They are 75% of all districts with 71% of the students and receive 93% of the total GSA
allocation.
An “Alternate Method” formula generates about $300 to $425 per student to approximately
170 districts (18%), mostly in the Chicago area.
– They have 24% of the students and receive 6% of the allocation.
A “Flat Grant” of $218 per student goes to the approximately 70 wealthiest districts (7%),
almost all in the Chicago suburbs.
– They enroll 5% of the students and receive 1% of the allocation.
Distribution of GSA by type of entity:
– 387 unit districts (41%) receive 70% of the GSA allocation.
– 101 (11%) high school districts receive 8% of the funds.
– 377 (40%) elementary districts receive 21% of the funds.
– 75 (8%) ROE programs and lab schools receive 1% of the funds.
Calculating GSA
• It will be helpful to follow the next few slides
while looking at the Waukegan District 60 GSA
calculation in your handouts.
• Line numbers on the slides refer to the line
numbers on the GSA entitlement report.
• Later we will tell you how to get this report for
any district in the state and to estimate GSA
for future years.
Computing General State Aid
• Under the Foundation Formula:
GSA = (FLEVEL of $6,119 - Available Local Resources (ALR)
X Average Daily Attendance (ADA).
Example: ($6,119-$4,000 ALR/Pupil)=$2,119 GSA per pupil.
($2,119 x 1000 Pupils in ADA)= GSA of $2,119,100.
per pupil)
• Under the Alternate Method:
GSA =7% to 5% of FLEVEL ($428 to $306) x ADA
Example: $350 per pupil x 1000 pupils= GSA of $350,000.
• Under the Flat Grant:
GSA = $218 x ADA. For 1,000 pupils that is $218,000.
• Formula modifications may apply and will be illustrated later
in the presentation.
Determining the Applicable Formula
• Finding the local ratio:
– Multiply GSA EAV (Line G1) by the “calculation tax rate” for
the type of district (Line G4) to get property tax
component of ALR.
• Elementary = .023; High School =.010; Unit =.030
• Add the Corporate Personal Property Replacement Tax
(CPPRT) Revenue received during the previous year (Line G3).
• Divide total ALR (Line G7) by the best 3-months’ Average Daily
Attendance (Line G2) to find Available Local Resources (ALR)
per pupil (Line G8).
• Divide ALR per pupil by the Foundation Level ($6,119) to find
the local ratio (Line G9).
Determining the Claim Amount
• It all depends on the local ratio.
• If the local ratio is less than .93, the Foundation Formula applies.
• If the local ratio is between .93 and 1.75, the “Alternate Method”
applies. Per pupil state aid ranges from $306 to $428. The foundation
level and equalization have minimal effect.
• If the local ratio is greater than 1.75, the “Flat Grant” of $218 per pupil
applies, and the foundation level and equalization formula have no
effect.
• The Waukegan GSA is calculated on the Foundation Formula in Part II.
• The District’s Foundation Formula State Claim Amount is
$45,706.638.66--before calculating the Poverty Grant (Part II, line 3).
• That is equivalent to $3,226.99 per pupil (Line 4), or about 53% of the
foundation amount of $6,119.
A District’s Total GSA has Several Components
• Foundation state aid computed on one of the three formula,
depending on local wealth.
• Poverty grants computed on the percentage of pupils
classified as “poverty” by the Illinois Department of Health
and Human Services.
• For some tax-capped districts, an adjustment for the effect of
the PTELL on the equalized assessed valuation used for
general state aid purposes.
• Adjustments for a few tax-capped districts where voters have
approved an increase in the limiting tax rate.
• Adjustments due to claim audits and other factors, including
EAV changes, TIFs, property tax appeals.
Supplemental GSA Poverty Grant
• Districts receive additional funding for pupils
categorized as “poverty pupils.”
• These grants are paid as part of the GSA formula, but
all districts are eligible regardless of which GSA
formula applies to the district.
– A district can be “property-rich” but have a large number
of low income families residing within its boundaries.
– Think, for example, of a district with a large railroad yard
and truck terminal and a large number of low income
housing units. The tax base is high, but so is the poverty
level of the residents.
Poverty Grant Formula
• Low Income Concentration Level (LICL) (Line G6)
– 3 Year Average of Illinois DHS count (Line G5) divided by ADA.
– The count includes recipients of such state benefits as health
insurance.
– It is not the same as Federal Title I or Free/Reduced lunch counts.
• 0% to 15% LICL districts receive a flat grant of $355 x Low Income Count.
• > 15% LICL districts receive a variable per pupil grant that increases with
the low income level up to $2,994.
• In Waukegan, the 85.87% poverty concentration results in a $27,533,768
grant (Part II line 3) or $2,285 for each of its 12,050 poverty pupils.
• After various audit adjustments and corrections (Part IV) the total
Waukegan GSA claim is $73,278,800.48.
The Costs of Higher Poverty
• The Poverty Grant is a built-in budget bomb for the next few
years.
– The poverty counts are a 3-year rolling average and
poverty rates are still increasing.
– From 2003-2012 poverty grants increased from $388
million to $1.567 billion, requiring 35% of the total GSA
appropriation
– The grants are not itemized in the ISBE budget.
• Higher counts do not per se increase the total GSA
appropriation by the General Assembly. Rather, they draw a
larger share of the total GSA appropriation away from
foundation aid.
“Double Whammy”Adjustments are of Two
Types and Apply to Tax-Capped Districts
• It reduces the EAV used for GSA calculation and thereby increase GSA. The
“Whammies” it seeks to correct are an increase in EAV that cannot be fully
accessed due to the tax cap, but would nevertheless work to reduce GSA.
• It provides for an alternate lower calculation of GSAEAV and is found on
the entitlement worksheet prepared by ISBE. (Lines AA-FF).
• It benefits 364 of 460 tax-capped districts.
• The costs of the Double Whammy have increased from $46 million to $629
million over 12 years, drawing on the total GSA appropriation that also
“supplies” foundation/equalization aid and poverty grants.
• As with the poverty grant, they are not itemized in the state budget. and
the diversion of funds from the foundation component of GSA to the
PTELL adjustments does not per se increase the total GSA appropriation.
GSA and Adequacy
• The current formula level of $6,119 is only 54.6% of the
$11,197 average expenditure of Illinois school districts in 2009
and even less than the average 2012 expenditures, which are
not yet available.
• There has been no increase in the foundation level for 3 years
due to State’s fiscal crisis.
• The low overall state share contributes to Illinois poor
rankings among states in school funding.
• Significant increases will require billions of new state revenue
and new revenue sources.
Managing and Projecting GSA
• ISBE’s website provides information on the GSA variables,
including GSAEAV, CPPRTR, Poverty Counts and more.
–
–
–
–
–
On-Line data entry & forms downloading
General State Aid Claim Forms (54-33A)
General State Aid Worksheet (54-33)
General State Aid Excel Calculator and simulator
Student Attendance Frequently Asked Questions (FAQ)
• Attendance management and record-keeping compliance are
the points of control in managing GSA.
• Use the Excel calculator to simulate changes in foundation
levels, GSAEAV, attendance etc. for budgeting GSA.
Projected General State Aid Worksheet
for the 2010-2011 Claim Payable in 2011-2012
District
Foundation Level =
$6,119.00
Yel low cell s for tax capped di stricts onl y
DATA SECTION
1A. 2009 Adjusted Real EAV
2008-2009 ADA
1B. GSA EAV used f or FY 2011
2009-2010 ADA
1C. Current Y ear PTABs
$0
2010-2011 ADA
$0
Three-Y ear Av erage ADA
0.00
2.
0.00
1D. Alternativ e Exemption (7% Cap)
1. GSA EAV used f or FY 2012
2008 DHS Low Income Count
ADA Used f or GSA
2009 DHS Low Income Count
2010 DHS Low Income Count
5. AVG DHS Low Income Count
0.00
6. District Low Income Concentrati on
3. 2009 CPPRT (Rec'd in 2010)
4. Calculation Rate
0.0300
(Unit=.0300, Elementary=.0230, High School=.0105)
7. Available Local Resources
$0.00
T ax Capped Distri cts Only
8. Available Local Resources per ADA
2009 Original EAV
9. Percentage of Foundation Level
2009 Limiting Rate
2008 Original EAV
1997-98 Hold Harmless Base
2008 OTR
EAV Used in GSA Calculations
Real EAV
2009 Extension Limitation Ratio
Not Appl icable
SECTION A - FOUNDATION FORMULA
10. Foundation Level X ADA
11. Available Local Resources
12. FOUNDAT ION FORMULA AMOUNT
$0.00
$0.00
$0.00
SECTION B - ALTERNATE FORMULA
13.
15.
17.
18.
Li ne 9 mi nus .93
Li ne 14 ti mes .02
Am ount per ADA
ALT ERNAT E FORM ULA AM OUNT
0.0000
0.0000
$0.00
$0.00
14. Li ne 13 divi ded by .82
16. .07 m inus Line 15
0.0000
0.0000
SECTION C - FLAT GRANT FORMULA
19. FLAT GRANT FORM ULA AMOUNT
($218 x ADA)
$0.00
SECTION D - POVERTY GRANT
If Line 6 < .15 then
Else
Poverty Grant = $355 x Li ne5
Poverty Grant = (294.25 + (2700 x (Li ne 6 x Line 6))) x Line 5
Poverty Hold Harmless has expired, per statute
20. Am ount per Low Incom e Count
PLEASE SEE NOTE BELOW
Hol d Harmless Base
21. FY 12 GROSS POVERTY ENTITLEMENT
22. GROSS FORMULA ENTITLEMENT
$0.00
23. GROSS GENERAL STATE AID
(Gross GSA Entitlem ent + Poverty)
NOTE: GSA HOLD HARMLESS WAS PAID AT LESS THAN 50% IN FY 2010
THERE WAS NO FUNDING FOR GSA HOLD HARMLESS IN FY 2011
Hol d Harmless-100%
GSA HH - 50%
GSA HH - 25%
$0.00
#VALUE!
#VALUE!
Researching a District’s GSA
• Go to www.isbe.net.
• Click on “General State Aid Program” on the site
map.
• Click on “GSA Inquiry” in the box.
• Click on “FY12 reports.” Use the pull down menu to
find your district and click on it.
• Click on “Calculation of entitlement.”
• Print the report; it looks like the Waukegan report in
your packet.
Effect of $1 million EAV Change on Foundation Formula GSA
(if other factors remain the same)
•
•
•
•
Unit Districts lose or gain $30,000 in GSA.
Elementary Districts lose or gain $23,000 in GSA.
High School Districts lose or gain $10,500 in GSA.
If a district’s EAV is changing, it may gain or lose in local property taxes
more than it gained or lost in GSA, if the district’s tax rate is higher than
the calculation rate in the GSA formula.
• Important facts to remember when projecting future GSA amounts.
– EAV is not used for GSA until 2 years after the tax extension:
the 2009 EAV used in 2010 tax extension was used for FY12 GSA.
– CPPRT revenue is used for GSA calculation 2 years after the year it is
received-e.g. revenue received in 2010 was used for FY 2012 GSA.
CPPRT revenue changes are an upward or downward force on GSA
calculations (if the district is a foundation or alternate method
district.)
Some Common Audit Problems of ADA
• Including non-claimable orphanage students (separate
funding source)
• Including non-claimable tuition paying students
• Including non-resident students
• Claiming ADA on Parent-Teacher Conference day
• Incorrect calculation of days in session
• Discrepancies with classroom counts/office records
• Math errors in summarizing attendance data and entering it in
IWAS system
• Train your attendance record personnel in recording
procedures and related regulations.
Outlook for FY13 GSA
(Presenter’s Prediction as of 5/8/12)
• Foundation level: flatline or reduction.
– Governor’s FY13 budget would support $5,823 actual
funding level, compared to $5,953 this year.
– Necessary funding to maintain or increase current levels
will draw on categorical grants.
• All districts will continue to receive GSA.
• Possible reduction in PTELL “double whammy”
adjustment.
• No change in poverty formula; but higher poverty
counts will require more money.
Other State Revenues –
Categoricals and Grants
• Originated as incentives that were later
mandated
• Funding varies year to year
– Depends on numbers of children and on health of
the State economy
– Appropriations dependent on Legislature
– Grants are often are prorated
Mandated Categoricals
•
•
•
•
Special Education
Orphanage
Transportation
PA 96-1441 – made certain initiatives not
mandatory if there is not funding to support
them
FY2012 State Education Budget
General State Aid
Mandated Categoricals
Special Education
Transportation
Orphanage
Lunch/Breakfast
Grants
Bilingual
Early Childhood
All Others
Total
$
4,448,104,500
$
$
$
$
1,099,719,400
642,608,900
13,000,000
26,300,000
$
$
$
$
63,381,200
325,123,500
109,895,200
6,728,132,700
FY2012 MCATs Budget
Special Education
Personnel
Funding for Children…
Orphanage
Private Tuition
Summer School
Transportation
Special Education
Regular/Vocational
Total
$
$
$
$
$
465,700,000
343,375,700
101,700,000
177,743,700
11,200,000
$
$
$
436,800,000
205,808,900
1,742,328,300
Special Education
• Personnel reimbursement
– Pays for a portion of teachers ($9,000 per FTE) and staff ($3,500)
– Amounts were increased in FY08 for the first time
• A portion of costs for home and hospital tutoring
• A portion of private school tuition and room and board for
outside placements
• Funding for Children Requiring Special Education Services
– Formerly known as Extraordinary
– Per student reimbursement
• Orphanage funding
Transportation Reimbursement
• Regular Transportation
– Reimbursement for students transported over 1.5 miles or less than
1.5 miles with hazard approval
– Minimal Amount of Expenditures Reimbursed
• Special Education Transportation
– Reimbursed at a higher rate
•
•
•
•
Vocational Transportation
Field Trips
Annual claim submitted in August for prior year
Available to districts that run their own transportation and
those that use an outside contractor
Outlook for FY13 Categoricals & Grants
• Continued delays in payments
• Further Regular Transportation cuts, maintenance of
Special Education Transportation funding. Potential
modification of reimbursement formulas.
• No restoration of programs eliminated in FY2011:
ADA Safety Block Grant, Reading Improvement Block
Grant
• Further debate over ROE funding
Federal Revenues
• Perceived National Need
– To promote cause of education
– To broaden scope of education
– To educate individuals for whom the federal government accepts
responsibility
– To improve quality of education
– To compensate for deficiencies in tax base
• Application Based, Need Based and Reimbursement Based
– Title Grants
– IDEA Special Education - not all districts receive this directly, it may go
to your Special Education Co-Op
– Free & Reduced Lunch
– Medicaid
FY2012 Federal Revenue
(flow-through from ISBE)
Federal Grants
Title I NCLB
Title I ARRA
Title II - Teacher Quality
Title III LIPLEPs
Title IV-Drug Free
Title IV- 21st Century
School Lunch/Breakfast
IDEA, Part B
IDEA ARRA
IDEA, Preschool
Vocational Education (CTE)
Others
Total Federal
$
$
$
$
$
$
$
$
$
$
$
$
$
750,000,000
381,125,200
157,000,000
40,000,000
15,000,000
60,500,000
725,000,000
650,000,000
354,535,900
25,000,000
60,000,000
184,974,200
3,403,135,300
Outlook for FY13 Federal Programs
• Loss of remaining ARRA funds
• Stable funding for traditional programs (Title,
IDEA)
• Any new funds will come with additional
strings (Race-to-the-Top; reform)