The State School Fund:

The State School Fund: Why It Matters to You The Twist Ending Michael Elliott State School Fund Coordinator Oregon Department of Education 503-947-5627 Michael.S.Elliott@state.or.us Introduction 1

History State Revenue Local Revenue and Carve-outs Timeline Introduction School Funding pre Measure 5: 60% Local Revenue (property taxes) 30% State Revenue (income taxes) 10% Federal Revenue History of School Funding Measure 5 Passed in 1990 Capped property tax rate to $5 per $1,000 of market value for public education Required State to cover any local revenue losses to public education History of School Funding 2

Measures 47 and 50 Passed in 1996 and 1997 respectively Cut assessed property values Capped growth of assessed property values to 3% a year History of School Funding School Funding post Measures 5, 47, and 50: 30% Local Revenue (property taxes) 60% State Revenue (income taxes) 10% Federal Revenue History of School Funding K-12 Funding 1990-91 through 2014-15* 6 Total Funding 5 4 3 State Funding 2 Local Funding 1 0 * 2013-14 and 2014-15 are estimated History of School Funding 3

$10,000.00 Total K-12 Formula Funding per ADMr $9,000.00 $8,000.00 $7,000.00 $6,000.00 $5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $- History of School Funding $8,000.00 Total K-12 Formula Funding per ADMw $7,000.00 $6,000.00 $5,000.00 $4,000.00 $3,000.00 $2,000.00 $1,000.00 $- History of School Funding $4,500 Total K-12 Formula Funding Inflation-Adjusted Per ADMw $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $- History of School Funding 4

Purpose of State School Fund Remember State School Fund Formula is a tide Purpose of State School Fund Types of Equity: Equity of Inputs Equity of Opportunity Equity of Outcomes Purpose of State School Fund 5

Question: What type of equity is embodied in the current State School Fund formula? Purpose of State School Fund Answer: The State School Fund Formula embodies equity of Opportunity Purpose of State School Fund How State School Fund Formula creates equity of opportunity: Unequal students are treated unequally equalized across the districts Revenue distribution and accountability Preserve local control Purpose of State School Fund 6

Formula is NOT: A general cost reimbursement A revenue entitlement per student An assurance of funding stability or adequacy A measure of student outcomes An accountability system Purpose of State School Fund Components of the State School Fund State Revenue Local Revenue Carve-outs State School Fund Components 7

How Components work together: State School Fund Components State Revenue Current State and Local Revenue Local Revenue, 32.71% State Revenue Local Revenue State Revenue, 67.29% 2013-15 Biennium 8

State Revenue ($6.65 B) Lottery Funds, 4.92% Other Funds, 0.01% General Fund, 95.07% 2013-15 Biennium Includes $100 million from September 30, 2013 Special Session State Revenue: Majority of School Funding Set by the Legislature The biggest line item in the General Fund budget State Revenue Local Revenue 9

Local Revenue Common School Fund, 2.8% State Timber, 0.9% Federal Forest Fees, 0.4% Other, 0.6% Property Tax, 95.3% Estimated for 2013-15 biennium What defines local revenue? ORS 327.011 School District authority to collect School District entitled to revenue Local Revenue What is not local revenue? Revenue specifically excluded from local revenue Revenue without authority to collect Revenue with no entitlement Local Revenue 10

Property Taxes: Value of property Rate Property Taxes Question: Your district has a major employer that shuts down causing people to move away. This lowers your tax base. Does the State School Fund formula make up the difference? Property Taxes Answer: Yes. While statewide revenue will reduce a little, the individual district will recover most of the loss. Property Taxes 11

Question: If a district has the authority to collect $5,000,000 in property taxes but sets a rate that only collects $4,000,000 how much revenue will be calculated as part of the formula? Property Taxes Answer: The district will be credited as if they had set a rate that enabled the district to collect the full $5,000,000 for purposes of local revenue and the state school fund formula. ORS 327.011(1)(i) Property Taxes What s the difference? The first scenario is involuntary loss The second scenario is a choice to reduce revenue Property Taxes 12

Property Taxes Effects on property values: Macroeconomic situations Local decisions Property Taxes Types of property tax affecting decisions: Urban Renewal Agency creation Strategic Investment Programs Property Taxes 13

Urban Renewal: Creates public body to raise funds and improve urban blight Divides tax revenue between the district and the urban renewal agency Once urban renewal completed, any left over funds redistributed to district Property Taxes Strategic Investment Programs: Exempts large capital projects by private enterprise from property taxes Private company enters into community service fee agreement with local taxing districts Community Service Fee agreement provides some revenue to local districts School Districts excluded Property Taxes Question: Is revenue returned to a school district after an urban renewal agency closes down considered local revenue for funding purposes? Property Taxes 14

Answer: Yes. The urban renewal agency is required to send that money to the school district. Thus the school district is entitled to the funds and that matches with local revenue. Property Taxes Question: School district receives funds from the County. The County is disbursing funds it received from the community service fee agreement the county created when it entered into a Strategic Investment Program. Are those funds considered local revenue? Property Taxes Answer: The school district is excluded from any community service fee agreement. Thus the school district would not be entitled to those funds. Since the school district is not entitled to those funds, then they are not local revenue. Property Taxes 15

Consequences of Urban Renewal and SIP: Individual district made whole Less formula revenue during program Each individual district receives a little less Possible loss of control of funding for SIP Property Taxes Local Option Taxes Not part of local revenue Funding stays with district Passed by voters Expire in a set number of years Property Taxes Local Option Taxes and Compression Local option taxes target gap between assessed value and market value In recession gap narrows and so local option tax revenue reduced Property Taxes 16

Disbursements Where are we? Disbursements What are they? Funds going to specific programs Funds going to specific purposes Disbursements 17

What do they do? Assist districts with specific costs Fund programs that benefit the state Disbursements How do they affect the State School Fund formula? Reduce money going through the formula Funds given to districts outside of formula Disbursements Math Problem: You hear about a new bill in the legislature that wants to give grants to schools for STEM curriculum development. You also hear it will be approximately $5,000,000 statewide and will come from the state school fund. How much revenue will be reduced from your school district to pay for this new grant? Disbursements 18

Answer: For 2014-15 estimates that will cost your district $7.44 per weight Disbursements Solving the problem: Determine how much the new disbursement will cost Find out the total number of weights statewide Divide cost of disbursement by total statewide weights $,, $7.44, For 2014-15 every $1,000,000 of carve-out translates into loss of $1.49 per weight Disbursements Cost of the program: found in the bill or other information about the program Disbursements 19

Total Number of weights: First page of the estimate: http://www.ode.state.or.us/services/ssf/2014-15-ssfestimate-as-of-5-16-14-1112.pdf Disbursements Specific District : Same document, same website Scroll to your district Organized by county Disbursements Current Disbursements Carve-outs Sub Grants Disbursements 20

Programs: Tag support at ODE - $175,000 Speech Pathology Program - $75,000 Network of Quality Teaching and Learning - $22,500,000 Local Option Equalization Grant - $1,767,791 Skill Nursing Facility ~ $2,100,000 Long Term Care and Treatment ~ $10,500,000 Oregon School for the Deaf ~ $1,500,000 Oregon Virtual School District - $800,000 Carve-Outs Total estimated Carve-outs: $39,417,791 Total estimated 2014-15 weights: 672,000 Loss per weight: $58.66 Carve-Outs Sub Grants: Transportation Grant High Cost Disability Grant Facility Grant Small High School Grant Sub-Grants 21

Transportation Grant: Reimburses districts for eligible transportation expenses Reimburses at specific rates Rates determined by costs/admr Sub-Grants Reimbursement Rate: Three reimbursement rates 70% 80% 90% Based on district s rank of costs/admr Sub-Grants Transportation Grant Transportation Grant from 2005-06 to 2014-15* $200,000,000 $180,000,000 $160,000,000 $140,000,000 $120,000,000 $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $- 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 *2013-14 and 2014-15 Estimated 22

High Cost Disability: $18,000,000 per year Helps reimburse for special education costs Eligibility floor is $30,000 per year Per student basis Pays approximately 40% of eligible costs Sub-Grants Facility Grant: $20,000,000 per biennium Provides funds to furnish new classroom space Maximum amount per project is 8% of eligible costs Can t use funds for capital construction costs Paying approximately 5% of eligible costs Sub-Grants Small High School Grant 2,500,000 per year Expires June 30, 2015 District has to have less than 8,500 ADMw, School has less than 350 ADMr Sub-Grants 23

Reserve Funds: $20,000,000 a year Reserved to ensure adequate cash flow during reconciliation Part of formula and distributed to school districts Disbursements Break 24

Not those weights these weights: What are they? Provide additional resources for specific student and district characteristics Ensure equity by accounting for uncontrollable costs How they work 25

State School Fund Formula at equilibrium: Total Funding Total = Funding Per Weight - Mechanics Additional funding no additional weights: Higher Total Funding Same Total = Higher Funding Per Weight - Mechanics Additional weights, but no additional funding: Same Total Funding More Total = Lower Funding Per Weight - Mechanics 26

Importance: Math Problem: You hear of a new proposal that will add weights for TAG students. OSBA and your business manager are reporting that the estimates are this will add 2,000 weights to the system. If the Legislature does not add additional funds how much will the funding per weight be reduced? Answer: $20.33 based on current 2014-15 estimates 27

How: 1. District Funds Transportation Grant 1. Found on first page: http://www.ode.state.or.us/services/ssf/2014-15-ssfestimate-as-of-5-16-14-1112.pdf 2. District Funds ($4,799,140,916) 3. Transportation Grant ($194,977,971) 4. $4,604,162,945 2. Divide total funds by estimated weights 1. Estimated weights found on first page 2. $4,604,162,945/672,000 = $6,851.43 3. Add new weights to estimated weights 1. New weights from source of information 2. 672,000 + 2,000 = 674,000 28

4. Divide total funds by new estimated weights 1. $4,604,162,945/674,000 = $6,831.10 5. Old Funding per weight New funding per weight = Difference 1. Old funding per weight = $6,851.43 2. New funding per weight = $6,831.10 3. Difference = $20.33 and Individual Districts: are not distributed equally Consequences for changing weights Some districts will gain weight Some districts will lose weight 29

Weight: ADMr Average Daily Membership resident 1.0 weights The funding a student receives for being a student 1 + 1 + 1 = 1 Weight: IEP 1.0 Students eligible for special education services Additional weight capped at 11% district s ADMr Weight: IEP weights above 11% Cap Variable Based on severity of special education need and special education spending Quantitative analysis by ODE 166 districts have over 11% of their ADMr in special education 158 districts receive additional weights 30

Weight: ESL 0.5 Required to be receiving qualified ESL services No cap No spending requirement Weight: Pregnant and Parenting 1.0 weight Must be receiving services through qualified program Weight: Poverty 0.25 weights Based on Small Area Income Poverty Estimate created and published by U.S. Census Bureau Updated yearly at school district level 31

: Neglected, Delinquent and Foster students 0.25 weight Receive the information from Department of Human Services Weight: Remote Small Elementary School Correction Variable weight More than 8 miles from nearest elementary school in school district 28 per grade average Given 25 ADM as minimum Small High School Correction: Variable weight District ADMw maximum of 8,500 School ADMr maximum of 350 for 4 grades 32

Small School Corrections: On bell curve As schools approach maximums weight reduces Union High School Weight: High school district gets 0.2 additional weight Elementary school district loses 0.1 weight The Estimates 33

Find weight and funding information for district Estimates homepage: http://www.ode.state.or.us/search/results/?id=344 Estimates Funding on first page: Transportation Grant Local Revenue Extended ADMw General Purpose Grant Estimates State School Fund Grant Funding Ratio: Equalizes weights Ensures all state revenue distributed Estimates 34

Teacher Experience Another uncontrollable cost District average compared to state average $25 per year of average experience higher than the state Estimates Weight Estimate Non-Charter Charter Extended ADMw Estimates Extended ADMw: Greater of this year s ADMw or previous year s ADMw Calculated separate for charter and non-charter schools Stabilizes funding Estimates 35

Estimate Payment Timeline Timeline Month December of prior year First Monday in March March through July July 15 th July through January January/February/March/April May May of following year Action School District Business Managers submit estimates of the year s attendance and local revenue Official Estimate for upcoming year published Estimates are updated First State School Fund payment made Monthly payments made with update possible Update ADM and Local Revenue data Last payment made Reconciliation Timeline First March Estimate Local Revenue from districts State Revenue: Long Session: Governor s Recommended Budget Short Session: Previously passed budget Timeline 36

Notes to Timeline: All payments made on estimated data First update is because districts have better information Switch to 2 nd period ADM required by statute Timeline Reconciliation: All money distributed on estimates Have actual financial and ADM data Compare what was paid with what should have been paid Either state owed district or vice-versa Timeline Remember: State School Fund equalizes Total Revenue and weights affect level of equalization Conclusion 37

Questions? 38

State School Fund: Why it Matters Note Handout Funding Levels Pre Measure 5: 1. State: 2. Local: 3. Federal: Funding Levels Post Measure 5: 1. State: 2. Local: 3. Federal: Historically, the has been the portion of the State School Fund. This means that as total funding. However, we have seen local revenue start to those swings. Even though has over time, in terms of real dollars we have seen a in funding levels. The State School Fund Formula funding across districts by that a district faces. These costs are the basis for the in the formula. Distribution Definitions:

1. Carve outs: 2. Sub grants: Using current estimates the amount of weight for each of carve out is. The transportation reimbursement rate is by dividing the district s by the district s. 5 types of facilities that qualify for the facility grant: 1. 2. 3. 4. 5. The is a that is used to ensure during the. What are weights? 1. 2.

can affect the tide in. Adding revenue and weights the same the funding. weights revenue, will the funding. Determine the effect of increasing the weights 1. Subtract from on the first page 2. Divide by on front page 3. Add to estimated weights 4. Divide total funds by 5. Subtract funding per weight from funding per weight effect on the individual district: 1. 2. Statutes require that extra weights given for students eligible for services be capped at of a district s. Currently, are above the and receive additional weights.

Districts used to be able to apply to to get some additional. That application process is now a done at the department. The department the and of each district with the districts with combined will receive. Both are on a such that as the number of students gets then the additional weights. Source of Financial information for the March estimate: 1. Short Session (even years): 2. Long Session (odd years):

Timeline Table Date Action Occurring December prior to year starting First Monday in March March through July July July through January February/March/April May Payment May of the succeeding year