The Aid Formula - Factors That Create Change WASBO Fall Conference Elkhart Lake September 28, 2006 Lori Ames Jerry Landmark DPI School Finance Team

The Aid Formula – Factors that Create Change How much aid is there? How much aid is there? What determines how much each district gets? What determines how much each district gets? How can you tell where you are in the aid formula? How can you tell where you are in the aid formula? How can you spend more and lose aid? How can you spend more and lose aid? Will your district’s placement in the aid formula change in coming years? Will your district’s placement in the aid formula change in coming years?

EST GENERAL AID Equalization Aid $4,535,649,28098% Special Adjustment Aid $ 13,638,817.3% Inter-District Aid $ 34,392,839.7% Intra-District Aid $ 50,572,122 1% Total General Aid $4,634,253,058100%

The state’s aid formula is a guaranteed tax base, sometimes called a “power equalization” formula. Once the amount the state contributes is set, the formula uses membership, shared cost and property value to determine aid. In theory, the higher the value of a district, the less aid it will receive…. And, the more it spends above the secondary cost ceiling, the smaller the aid/cost ratio EQUALIZATION AID

EQUALIZATION AID Positive Aid Negative Aid Positive Aid Negative Aid Positive Aid ZERO AID DISTRICT EQUALIZED VALUE PER PUPIL DISTRICT SHARED COST PER PUPIL As Property Value Increases As Shared Cost Increases

Equalization Aid Factors DISTRICT DISTRICT Membership Membership School Aid Value + School Aid Value + Computer Value Shared Cost Shared Cost STATE STATE Cost Ceilings- Cost Ceilings- Primary Primary Secondary Secondary State Guaranteed Value Per Member- State Guaranteed Value Per Member- Primary Primary Secondary Secondary Tertiary Tertiary

Primary Cost Ceiling - $1,000 Primary Cost Ceiling - $1,000 (Set by Law) Secondary Cost Ceiling - $8,366 Secondary Cost Ceiling - $8,366 (90% State Average Shared Cost Per Member) K-12 STATE AID FACTORS

Primary Guarantee - $1,930,000 Primary Guarantee - $1,930,000 (Set by Law) Secondary Guarantee - $1,260,004 Secondary Guarantee - $1,260,004 (“Floats” to Distribute the Appropriation) Tertiary Guarantee - $483,033 Tertiary Guarantee - $483,033 (Average Property Value Per Member) K-12 STATE AID FACTORS

DISTRICT AID FACTORS Use prior-year district data. ✔ Shared Cost ✔ Membership ✔ 2005 School Aid Values

DISTRICT SPECIFICS Membership - Sep FTE + Jan FTE (includes Youth Challenge and Second Chance Partnership students) divided by 2, plus 2005 summer school FTE, part-time, and foster group home. Membership - Sep FTE + Jan FTE (includes Youth Challenge and Second Chance Partnership students) divided by 2, plus 2005 summer school FTE, part-time, and foster group home. Equalized Value School Aid values certified in May, 06. (Value as of 1/1/2005 was first certified in the Tax-Apportionment values in 10/05. Adjustments from appeals were made, and the final 2005 values were certified in 5/06 as School Aid values.) Equalized Value School Aid values certified in May, 06. (Value as of 1/1/2005 was first certified in the Tax-Apportionment values in 10/05. Adjustments from appeals were made, and the final 2005 values were certified in 5/06 as School Aid values.) Shared Cost – Cost for which you don’t have another revenue source except property tax and state aid

EQUALIZATION AID TERTIARY: Over $8,366 per pupil. Positive Aid Negative Aid SECONDARY: Above $1,000 up to $8,366 per pupil. Positive Aid Negative Aid PRIMARY: Up to $1,000 per pupil. Positive Aid ZERO AID Up to $483,033 per pupil. Above $483,033 up to $1,260,004 per pupil. Above $1,260,004 up to $1,930,000 per pupil. Above $1,930,000 per pupil. DISTRICT EQUALIZED VALUE PER PUPIL DISTRICT SHARED COST PER PUPIL

✔ “Simplified” Percentage Method ✔ July 1 Estimate Method Algebraically, virtually the same. May be some difference due to rounding. DISTRICT WORKSHEETS

WORKSHEETS ON THE WEB School Financial Services Homepage On the Green Scan Bar: Worksheets/DPI Printed Worksheets/General Aid and Adjustment Worksheets

EQUALIZATION AID

TIER 1 CALCULATION Sample District – Positive Aid 265,209 1,930, % x $1,000 = $ District 86.26% x $1,000 = $862.59State Aid = 13.74% $ x membership = 1 st Tier Aid $ x 1,118 = $964, (Compare to G5)

TIER 2 CALCULATION Sample District – Positive Aid 265,209 1,260,00 6 = 21.05% 21.05% x $7,366 = $1, District 78.95% x $7,366 = $5,815.59State Aid $5, x membership = 2nd Tier Aid $5, x 1,118 = $6,501, (Compare to G10)

TIER 3 CALCULATION Sample District – Positive Aid 265, ,033 = 54.91% 54.91% x $392 = $ District 45.09% x $392 = $176.56State Aid $ x membership = 3rd Tier Aid $ x 1,118 = $197, (Compare to G15)

TOTAL EQUALIZATION Sample District – Positive Aid Tier 1 = $964,371 Tier 2 = $6,501,826 Tier 3 = $197,394 Total Equalization = $7,663,591

EQUALIZATION AID Sample District – Positive Aid The aid amount of $7,663,591 is now adjusted for : Milwaukee Charters ($64,318) Milwaukee Charters ($64,318) Equal Aid Adj 0 Equal Aid Adj 0 Final Total (rounded) $7,599,273 Final Total (rounded) $7,599,273 ….from the July 1 estimate….

COST SHARING PERCENTAGE Sample District – Positive Aid Total Equalization Aid Total Shared Cost = 77.62%$7,599,273$9,790,917

TIER 1 CALCULATION Sample District – Negative Aid 700,875 1,930, % x $1,000 = $ District 63.69% x $1,000 = $636.85State Aid = 36.31% $ x membership = 1 st Tier Aid $ x 3,719 = $2,368, (Compare to G5)

TIER 2 CALCULATION Sample District – Negative Aid 700,875 1,260,00 6 = 55.62% 55.62% x $7,366 = $4, District 44.38% x $7,366 = $3,268.68State Aid $3, x membership = 2nd Tier Aid $3, x 3,719 = $12,156, (Compare to G10)

TIER 3 CALCULATION Sample District – Negative Aid 700, ,033 = % % x $1,008 = $1, District % x $1,008 = $ State Aid $ x membership = 3rd Tier Aid $ x 3,719 = $-1,690, (Compare to G15)

TOTAL EQUALIZATION Sample District – Negative Aid Tier 1 = $2,368,454 Tier 2 = $12,156,222 Tier 3 = $-1,690,580 Total Equalization = $12,834,096

EQUALIZATION AID Sample District – Negative Aid The aid amount of $12,834,096 is now adjusted for : Milwaukee Charters ($ 107,713) Milwaukee Charters ($ 107,713) Equal Aid Adj 0 Equal Aid Adj 0 Final Total (rounded) $12,726,382 Final Total (rounded) $12,726,382 ….from the July 1 estimate….

COST SHARING PERCENTAGE Sample District – Negative Aid Total Equalization Aid Total Shared Cost = 36.51%$12,726,382$34,861,756

Hold-Harmless Provisions Assuming a district is in the aid formula: Assuming a district is in the aid formula: A district will always receive primary aid A district will always receive primary aid Negative tertiary aid will subtract from positive secondary aid Negative tertiary aid will subtract from positive secondary aid Negative secondary aid can not subtract from positive primary aid Negative secondary aid can not subtract from positive primary aid A district’s equalization aid eligibility will be at least 85% of the prior year – to meet the 85%, a district will receive special adjustment aid A district’s equalization aid eligibility will be at least 85% of the prior year – to meet the 85%, a district will receive special adjustment aid

Equalization Aid New Spreadsheet!!! It gives you equalization aid factors by district across a 7 year period to help you analyze why your aid has changed – and lets you see past trends to help you estimate how it may change in the future. It gives you equalization aid factors by district across a 7 year period to help you analyze why your aid has changed – and lets you see past trends to help you estimate how it may change in the future.

Timeline of DPI-Provided Aid Worksheets April (?) April (?) July 1 (required by law) July 1 (required by law) Late September (used as a data check for the October 15 Certification) Late September (used as a data check for the October 15 Certification) October 15 Certification (must be used in the Revenue Limit) October 15 Certification (must be used in the Revenue Limit) Final (typically completed in summer) Final (typically completed in summer)

AID USED IN REVENUE LIMIT Revenue Limit October 15 Aid Certification

OCTOBER-JUNE ADJUSTMENTS Per (4) (b), districts use the October 15 Certification in their Revenue Limit computation. Per (4) (b), districts use the October 15 Certification in their Revenue Limit computation. Final aid is computed sometime during the following spring/summer. Final aid is computed sometime during the following spring/summer. Differences between the 2 aid runs are made as an adjustment to the payment made in September of the following school year. Differences between the 2 aid runs are made as an adjustment to the payment made in September of the following school year.

MISCELLANEOUS What was two-thirds funding? What was two-thirds funding? It was a calculation done at the state level that added together several revenue sources, (levies, state and categorical aid and levy credit) to determine an amount that the state will pay, in total, to districts. It was a calculation done at the state level that added together several revenue sources, (levies, state and categorical aid and levy credit) to determine an amount that the state will pay, in total, to districts. What did two-thirds funding mean for individual districts? What did two-thirds funding mean for individual districts? It never meant that each district would receive 66.7% of their cost as aid. A district might or might not have had the state fund two-thirds of its costs. It depended where the district was in the equalized aid formula. It never meant that each district would receive 66.7% of their cost as aid. A district might or might not have had the state fund two-thirds of its costs. It depended where the district was in the equalized aid formula. The 66.7% requirement was removed from Wisconsin law in 2003.

QUESTIONS?

THANK YOU! Please call us with questions or comments! Brad Adams, Consultant, Brad Adams, Consultant, Lori Ames, Consultant, Lori Ames, Consultant, David Carlson, Director, David Carlson, Director, Gene Fornecker, Auditor, Gene Fornecker, Auditor, Kathy Guralski, Auditor, Kathy Guralski, Auditor, Karen Kucharz, Consultant, Karen Kucharz, Consultant, Jerry Landmark, Assistant Dir., Jerry Landmark, Assistant Dir., Natalie Rew, Auditor, Natalie Rew, Auditor,