Enhance Your Knowledge of School Finance
Article 1: General Introduction and “How student enrollment in each district determines district revenues”
Every year public schools in Iowa spend billions of dollars to educate children, sparking taxpayers to often ask school board members, administrators and lawmakers: “Where does that money go?” That’s why part of the Maquoketa Community School District’s mission is to help taxpayers understand how districts are spending that money, in an attempt to dispel the mysteries surrounding school funding.
Knowing how the state school funding formula works is important in helping understand the pressures facing local school districts. While the area of school finance is complex, some basic principles make it understandable to the average citizen, including:
- The number of children enrolled in each district determines a district’s budget/revenues.
- The General Assembly through the finance formula “equalizes” funding statewide so the “cost per student” is roughly the same in every district and every student has access to a quality education.
- The Governor recommends the annual change in per pupil state supplemental aid. The General Assembly is responsible for passing legislation to establish the annual increase in the “cost per student/state supplemental aid”.
- Property taxes matter. They determine how much money each district receives in state aid.
- Funds are restricted. We can only use funds on what the legislature tells us we can. This is called Dillon’s Rule.
- Schools are budget limited. Most other public entities are property tax rate limited. This difference is monumental.
In an effort to explain where those tax dollars are going and why, this article is the first of six that will address each of the principles affecting school funding.
First, Iowa’s school funding formula is a child-based formula, meaning that the allowable spending for a school district is based upon the number of children enrolled in that district on October 1 of each year. The number of students counted on that day is used to establish the district’s budget for the following year. This means our revenues are always a year behind the actual number of children we are serving in our classrooms. For the Maquoketa Community School District, our October 1 enrollment is 1363 for the current year.
Because the formula is based on the number of children enrolled in the district, as we gain children, we gain revenues to serve those children and, if enrollment declines, we also lose revenue.
Two of the last three years the enrollment for our district has increased. However, declining enrollment has been the case over the past several years. This has created significant budget pressures for our district. The current district cost per child for Maquoketa Community Schools is $6,664 this year. Any time that we lose children this reduces our district’s revenue by $6,664 multiplied by the number of students lost for next year. (i.e. if we lose 10 students multiply $6,664 times 10 which equals $66,640) If our district’s enrollment actually drops below the prior year our budget could be subject to the minimum growth guarantee (1%). However, our fixed costs, such as for transportation, salary and benefits, technology and facilities, and maintenance continue to rise, despite our best efforts to economize.
Once district revenues are established, how is that money spent? It depends on state lawmakers –and this will be discussed in the next article of this series.