1. Equalization Aid Karen Kucharz Robbe, Finance Consultant Finance Consultant School Financial Services Department of Public Instruction January 22,2015

2. U.S. Constitution on Education 10 th Amendment “…powers not granted to the federal government by the Constitution, nor prohibited to the States, are reserved to the States or the people…” 1791

3. Wisconsin Constitution on Education Article X, Section 2 “The legislature shall provide by law for the establishment of district schools, which shall be as nearly uniform as practicable; and such schools shall be free and without charge for tuition to all children between the ages of 4 and 20.” 1848

4. Wisconsin Constitution on Education Article X, Section 4 “Each town and city shall be required to raise by tax, annually, for the support of common schools therein……” 1848

5. Basic Framework State Responsibility District Schools As Nearly Uniform as Practicable Free Funded by Local Property Tax

6. Wisconsin Supreme Court Uniformity goes to the “character of education,” “character of education,” not to the total amount spent. However, funding “character” cannot result in too great of a disparity of cash.

7. Modern-Day Wisconsin In Wisconsin, the primary funding source for public schools is the property tax, but we know that property values across the state are not uniform. The challenge is defining “uniformity.”

8. $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 10 mil tax (Example: $1,000,000 x.010) $10,000$20,000$30,000$40,000$50,000 What is “uniformity”? $20,000$20,000$20,000$20,000$20,000 $30,000$40,000$50,000$60,000$70,000 (Does it mean that state aid is the same for all districts?)

9. $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 What is “uniformity”? $10,000 $20,000$30,000$40,000$50,000 $20,000 $10,000 $ 0 $-10,000$-20,000 $30,000$30,000$30,000$30,000$30,000 (Does it mean the “Robin Hood” principle with local property taxes?)

10. Buse vs. Smith (1976) NOT LEGAL State Cannot Recapture From Local Tax Base and Redistribute

11. $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 What is “uniformity”? $10,000$20,000$30,000$40,000$50,000 $40,000$30,000$20,000$10,000 $ 0 $50,000$50,000$50,000$50,000$50,000 (How about if state aid is related to local property value?)

12. Starting to Come Together More local property value means less aid from the state. Less local property value means more aid from the state. Inverse relationship.

13. $1,000,000$2,000,000$3,000,000$4,000,000$5,000,000 Number of Children to Educate 2010 $100,000$400,000$250,000$300,000$200,000 Notice the change after incorporating the number of children to educate.

14. State Equalization Aid Formula Takes into account property value AND number of children to educate.

15. 2014-15 General Aid* Equalization$4,396,882,65298.23% Special Adjustment $13,713,6130.31% Inter-District$20,507,6040.46% Intra-District$44,854,8651.00% Total General Aid $4,381,592,603100% General Aid is 27.9% of the State GPR Budget. Most districts receive only Equalization Aid. * Prior to Choice/Charter deductions.

16. Property Value per Member

17. Resources from Property Tax Base

18. Property Value per Member Equalization Aid Property Tax Base

19. A cost-sharing formula that incorporates: Spending Number of Students to Educate Property Value Equalization Aid Formula

20. General Fund Shared Cost Expenditures that are funded by State General Aid and Local Property Tax

21. Debt Service Funds Shared Cost Expenditures that are funded by Local Property Tax

22. Membership F.T.E. = full-time equivalent 2 halftime kindergarten students = 1 F.T.E. Average of 3rd Friday F.T.E. – September Residents 2nd Friday F.T.E. – January Residents + Summer School F.T.E. Residents Summer School = 48,600 minutes of instruction = 1 F.T.E.

23. Property Tax Base Property tax base is used to determine district ability to support expenditures. Uses Equalized Valuation or Fair Market Value NOT Assessed Value.

24. The Equalization Aid Computation …….is actually 3 individual computations…….. The results of all 3 are summed to get the district’s total Equalization Aid.

25. 3 District Factors Shared Cost (Spending) Membership (Students) Property Tax Base (Ability to Pay)

26. 3 State Factors Cost Ceilings Guaranteed Property Valuations Per Member Amount of Money to Distribute

27. Primary Aid Secondary Aid Tertiary Aid District #1 Property Value per Member 10%90% 75%25% 50%50% Equalization Aid – District #1

28. District #1 Per-Pupil Funding DISTRICT STATE $3,850 + $8,150 = $12,000 25% x $7,000 = $1,750 10% x $1,000 = $100 50% x $4,000 = $2,000 90% x $1,000 = $900 75% x $7,000 = $5,250 50% x $4,000 = $2,000 $3,850 $8,150

29. Primary Aid Secondary Aid Tertiary Aid Negative Tertiary Aid Equalization Aid – District #2 25% 75% 62.5%37.5% 125% District #2 Property Value per Member -25%

30. District #2 Per-Pupil Funding DISTRICT STATE $9,625 + $2,375 = $12,000 62.5% x $7,000= $4,375 25% x $1,000 = $250 125% x $4,000 = $5,000 75% x $1,000 = $750 37.5% x $7,000= $2,625 -25% x $4,000 = -$1,000 $9,625 $2,375

31. Comparison of Funding 2 Districts District Local Funding State Funding Total Shared Cost $200,000 value$3,850$8,150$12,000 $500,000 value$9,625$2,375$12,000 More local property value means less aid from the state.

32. Primary Aid Secondary Aid Tertiary Aid Negative Tertiary Aid Negative Secondary Aid No Equalization Aid Districts All Along Spectrum

33. Where Can I Find This Grid For My District? “2014-15 Equalization Aid Formula Position” http://sfs.dpi.wi.gov/sfs_buddev_eq

34. Watch Value Per Member Over Time

36. Where Can I Find Value Per Member Over Time For My District? For My District? http://sfs.dpi.wi.gov/sfs_buddev_valuation “School Aid Property Valuation” (Used in the Equalization Aid Formula)

37. Positive Primary Aid Positive Secondary Aid Positive Tertiary Aid District Value per Member Negative Tertiary Aid Negative Secondary Aid No Equalization Aid Equalization Aid Formula

38. Equalization Aid Takeaways 1.One (1) pot of money is split over 424 school districts based on district values, membership, and expenditures. Changes in individual district’s data affect each other’s aid. 2.Equalization Aid membership (residents) is an average of the September & January FTE counts, plus 100% of the Summer FTE. 3.Depending on district value-per member, some districts increase their aid by increasing expenses, while others decrease their aid by increasing expenses. It’s important to know where your district is in the formula. 4.Be aware of what is happening to your district over time.

39. Equalization Aid Knowing where your district is in the formula will help you better explain how changes in local finances might affect your state aid. What if we increase our shared cost ? How does that affect our aid? If we go to referendum, how will our aid change?

40. Thanks to WASB, WASDA and WASBO for the opportunity to speak to you today! *** DPI School Financial Services Homepage http://dpi.wi.gov/sfs/index.html

41. VISIT OUR WEBSITE…… or CALL US (all 608 Area Code): Robert Soldner, Director …………………….……………...266-6968 Debi Towns, Assistant Director …………………………….267-9209 Bruce Anderson, Consultant ………….….…….…………..267-9707 Carey Bradley, Consultant ………….……………………….267-3752 Dan Bush, Special Ed./Consultant ….………………….….267-9212 Victoria Chung, Accountant……………….…………….….266-9205 Gene Fornecker, Auditor ……………………….…………..267-7882 Brian Kahl, Auditor …………………….…………..…….……266-3862 Karen Kucharz Robbe, Consultant ………………………..266-3464 Vacant, Auditor Questions?