I was asked to write an article on this topic for the paper. Here is a re-run of that:
Iowa school finance is complicated, but understanding certain concepts can help one’s overall understanding. I appreciate being asked to write on the topic. One of those important concepts is that Iowa’s school funding formula is a pupil-driven formula. Essentially, this means that student enrollment, in combination with increases in aid determined by the Iowa Legislature, drives school funding. Districts with increasing enrollment are under less financial pressure than districts with declining enrollment. A pupil-driven formula was selected in 1971 because it is a relatively equitable way to fund school districts.
Today, virtually all school districts are under budget pressure. Even rapidly growing districts may have to make budget reductions because count day each October 1 determines the certified enrollment for funding the next school year. Students moving in after October 1 will be educated without additional on time funding. Declining enrollment districts do not receive the full per pupil increase in new money; they qualify for a budget guarantee of a 1% increase from the previous year.
Indianola’s district cost per pupil, the amount of state aid received for each resident student, is $6,591.00 this year. A 1.11% increase in state supplemental aid would be an additional $72.50 per student for the next school year. This increase is typically called new money. Indianola had a certified enrollment decline of 42 students this past October count day, so our district will be on the budget guarantee, receiving $228,807.00 new money. If our enrollment had increased, we would have received a 1.11% increase for next year instead of 1%. For example, in 2015-16 our certified enrollment was 3,471. If we had grown by 100 students, our new money would have been $72.50 X 3,571, or $258,597.00. Because we declined, it is $228,807.00, which is $6,591 (district cost per pupil) X 3471 X .01 (1% budget guarantee).
In either case, whether our new money is 1% or 1.1%, that level of funding will not cover increases in operational costs. A budgeting projection number often used is a 3% cost increase for the General Fund. The General Fund pays salaries and benefits, curriculum and materials costs, and operational costs such as electricity, water, and fuel. A 3% increase in last year’s General Fund expenditures would have been $1,072,416.00.
Another increase to consider is insurance cost. The district has received increase estimates as high as 12%, which would carry a cost of $213,856.00. Remember that the district’s new money is $228,807.00. The insurance increase will consume most of the new money, not taking into account any salary increases for the district’s more than 500 certified and non-certified employees or any other increased costs.
What makes this particularly difficult is the compounding effect of modest state aid year after year. The last six years state supplemental aid has averaged 1.9%. Many schools have no choice but to reduce staff, reduce programs, increase class sizes, and in some instances, close attendance centers. Schools have a spending authority limit that is also pupil-driven, so they cannot simply ask local taxpayers to help. If school districts have negative spending authority in two consecutive years, Iowa law states that the school district could be dissolved. Though rare, this has happened in Iowa. While Indianola has not been a persistently declining enrollment district, our district has to look for efficiencies, too. We cannot consistently have expenditures exceed revenue.
Currently the district is looking for savings through attrition and realignment. When we have resignations or retirements, sometimes there are opportunities to hire fewer staff back or hire less experienced staff that command lower salaries. The district is working hard to avoid cutting existing staff or cutting programs.
While the public may not understand all of the details of per pupil funding and spending authority, people know from their own experience that it is difficult to do more with less. The district believes in being good stewards of tax dollars, but modest budget growth year after year makes it difficult to maintain or increase services. Indianola CSD is not a status quo district. We want to continue to improve how we serve our students and families. Limited resources make that difficult.