Board of Education: Fiscal Issues

School Finance Information

April 14, 2008

General Introduction and “How the number of children in each district determines district revenues”

Every year, public schools in Iowa spend billions of dollars to educate the state’s children, sparking taxpayers to so often ask school board members, administrators and lawmakers, “Where does that money go?” That’s why part of the Farragut Community School District's mission is to help taxpayers understand how districts are spending that money, in an attempt to dispel the mystery surrounding school funding.

Here is an overall idea of the total funding public K-12 schools in Iowa receives to educate nearly 500,000 children in Iowa: Total state General Fund appropriations for school aid in FY 2007 amounts to $2 billion. About $1.1 billion comes from local property taxes that are earmarked to fund school programs, with another approximately $400 million funding facilities and other district expenses. Where it goes from there is a bit more complicated but just as important to understand.

Larry Sigel, school finance director for the Iowa Association of School Boards explained, “Knowing how this funding builds up from each individual district and child is important in understanding the roles and pressures facing local school districts, and taxpayers deserve to understand.”

While the area of school finance is a complex one, there are some basic principles that make it understandable to the average taxpayer, including:

The number of children in each district determines district revenues.
The General Assembly “equalizes” funding state-wide to make the “cost per student” roughly equal in every school, so that every student has access to the quality education.
The General Assembly controls the annual increase in the “cost per student,” called allowable growth, to determine how much each district receives from the state.
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.
Schools are budget limited - most other entities are property tax rate limited , and this difference is monumental

This article is the first of six that will address each of the principles affecting school funding, in effort to explain where those tax dollars are going and why.

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 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. That means our revenues are always a year behind the actual number of children we are serving in our classrooms. For the Farragut Community School District, our October 1 enrollment is 262.3 for the current year. Chart 1 below shows a history of the Farragut Community School District's enrollment.

“Because the formula is based on the number of children in the district, as we gain children, we gain revenues to serve those children. As we lose children, we also lose revenue from each of those students,” Sigel said.

Because the enrollment for our district has been declining over the past several years, this has created significant budget pressures for our district. As each child is “worth” slightly over $5,000 per year in General Fund revenue, losing 10 children from one year to the next reduces a district’s revenue by $50,000. However, this won’t reduce our costs because we still must have the same number of teachers whether there are 15 or 28 students in a class.

So, once district revenues are established, how is that money spent? It depends on state lawmakers, and will be discussed in the next article in this series.