The following became a guest column in the Oct. 2 Tomahawk Leader.
Primer in school funding …
and the predicament
when state budget is unknown
By Al Prosser
Tomahawk School District Administrator
Is our current school funding formula in need of a change? That question gets asked just about every time the state elects a new governor, or when it is faced with developing a new state budget. The answer to the question most often depends upon just who is doing the asking. In the end, it is the State Supreme Court that hears the challenges to our school funding formula. For the most part, the court has held the current system does meet legal challenges.
The current system dates back to 1993. At that time, the Legislature and the governor placed schools under revenue caps. The caps limit the amount of revenue a school district can raise. In 1993, the state determined how much each school district spent on a per-student basis. This became the base revenue limit. The base revenue limit is adjusted annually for inflation. One per-student base revenue limit during the 2006-2007 school year was $8,512.53. Because we do not have a new state budget, we do not have the inflationary increase for 2007-2008. Absent a state budget, we continue under the old budget and would use the old amount of $256.93 per student. Our annual inflationary adjustment has been about 3 percent per year.
School budgets begin on July 1 and end June 30 of each year. Our 2007-2008 budget opened on July 1, 2007. It will close on June 30, 2008. We have been expending money and paying bills since the first of July. Monthly expenditures total between $1.25 and $2 million dollars. Our projected budget for 2007-2008 is over $18 million.
Why do I say our “projected” school budget? The revenue limits are based upon a three-year rolling average of student enrollment. The enrollment count does not take place until the third Friday in September. We just took the count Friday, Sept. 21. The new enrollment count will be placed in the revenue limit calculation worksheet, and the revenue limit for the district will be determined by the Department of Public Instruction. Information and copies of these worksheets can be found on the DPI’s web site, www.dpi.state.wi.us.
The revenue limit is supported by two sources of revenue. The first is state equalization aid. The second is the local property tax. State equalization aid is based upon the total property value in the district on a per-student basis. Districts with high property values per student receive little equalization aid. Districts with low property values per student member receive more equalization aid. Equalization aid is to balance spending across the state. It is felt that districts with high property values can afford to cover more of the total school costs at the local level, and thus need less help from the state.
At the state level, government is funding two-thirds of the cost of school expenses, but at the local level it is a different situation. Currently the Tomahawk School District receives about 30 percent of its revenue from the state. As property values change, the level of state equalization aid also changes. When the state fails to fund part of its share, local property taxes make up the difference. In its simplest form, the revenue cap minus state equalization aid equals the local property tax levy.
The Department of Public Instruction is responsible for certifying the district’s state equalization aid by Oct. 15 of each year. Once the district has received the revenue limit and the certified equalization aid from the department, simple subtraction determines how much money must be raised from the local property tax. The school district then determines how much of the levy must come from each municipality in the district based upon their proportionate share of the total property value of the district. The district is obligated by statute to certify the tax levy amount to the municipality by Nov. 6.
While we begin operating under the new budget on July 1, we do not finalize that budget until early November. A third of the school year has been completed before all parts of the budget are put into place. Until finalized, we operate based upon the best available information and history of the district’s finances.
The exact impact of no state budget has yet to be determined. DPI said it would need any new budget information by last Friday to complete their work. While state budgets have been late in previous years, it has never been this late. A new budget would bring an increase in the amount of equalization aid. Absent a new state budget we rely on last year’s numbers. As was pointed out earlier, when the state fails to meet its share, the difference is passed on to the property taxpayer. Absent a new state budget, increases in property taxes of 20 to 30 percent are anticipated.
The district budget for 2007-2008 increases 2 percent over the 2006-2007 budget. That increase results from revenue limits. Should we spend above the revenue limit, the state will simply deduct the overage from our final state aid payment. Since revenue limits are tied to student enrollment, our declining enrollment will limit budget increases even more in coming years. To understand the entire picture, we need to discuss the expenditure side of the budget. We will look at that next.