SCHOOL FINANCE ESSENTIALS
WASDA NEW ADMINISTRATORS WORKSHOP
* Bruce Anderson
School Finance ConsultantCarey Bradley
School Finance Consultant
Department of Public Instruction
November 10, 2015
Department of Public Instruction 1
Property Value, Tax Levy, and Taxpayers –
The Confusing Questions
Equalization Aid
Summer School Fees
Department of Public Instruction 2
Agenda and Handouts
Handouts District-Specific Simplified Percentage Method District-Specific Formula Positioning (color grid) District-Specific Analysis of Equalization Aid Formula
Components
2 Focus Articles (10-31-06 – green and 06-18-06 – blue)
(used with permission from the Wisconsin Taxpayer’s Alliance)
School Property Tax Overview (goldenrod)
Extra Resource Referenced:
DOR 2015 Guide for Property Owners
Sample Wisconsin School District 2015-16 Preliminary Budget Projections – spreadsheet
Department of Public Instruction 3
Property Value, Tax Levy, and
Taxpayers
Department of Public Instruction
4
Explaining the Tax LevyQuestions You’ll Likely Be Getting Soon
1. How can the school levy on one residential taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%?
2. How can a residential tax bill show an increase in the school district tax levy of 5.8% when the % year over year increase on the PI-401 was only 2.98%?
Department of Public Instruction
5
1. How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%?
A. They live in different municipalities in the school district. (the obvious answer, but may not be the only thing going on……)
Reasons (so far) That Answer Question #1
Department of Public Instruction
6
Explaining the Tax LevyWhat Really Matters
How your share of the total valuation is changing relative to other taxpayers.
1.) your property vs other properties within the same municipality
2.) your municipality vs other municipalities within the school district
The total tax levy is divided among individuals according to each individual’s share of total
municipal property value.
Department of Public Instruction
7
Equalized & Assessed ValuationWhy Both?
1.) Assessment practices differ across the state. Property can be assessed at different percentages of market (equalized) value.
2.) Not all property is re-assessed every year.
Only requirements are: 1.) the assessment is within 10% of market value; and 2.) there is equity between taxpayers within the municipality.
Each year, the Department of Revenue turns local assessed valuations into equalized valuations.
All school finance computations use equalized valuations.
Department of Public Instruction
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Apportioning Taxes
Assessed Value
% of Total
$40,000Levy
Tax Using Assessed
Value
Muni #1 $2,100,000 29.6% $40,000 $11,831
Muni #2 $4,500,000 63.4% $40,000 $25,352
Muni #3 $500,000 7.0% $40,000 $ 2,817
School District $7,100,000 100.0%
$40,000
Assessment Ratio
(assessed ÷ equalized)
105%
90%
91%
EqualizedValue
% of Total
$40,000Levy
Tax Using Equalized
Value
Equalized MillRate
Muni #1 $2,000,000 26.5% $40,000 $10,596 5.298
Muni #2 $5,000,000 66.2% $40,000 $26,490 5.298
Muni #3 $550,000 7.3% $40,000 $2,914 5.298
School District $7,550,000 100.0%
$40,000
Department of Public Instruction 9
Muni A Muni B Muni C
Most School Districts Have Many Underlying Municipalities
…differing sizes, differing types of taxpayers (residential, forest, commercial, manufacturing, etc), differing concentrations of
taxpayers, and differing local assessment practices…
Department of Public Instruction 10
Change in Assessed Valuation2 Residential Taxpayers
Total Municipal Assessed Property Value = $200,000
$100,00050%
$2,000 $2,000
$100,00050%
Each shares in the total property value at 50%, so each pays 50% of the total levy.
Total Municipal Levy = $4,000
Department of Public Instruction 11
Change In Assessed Valuation2 Residential Taxpayers
Total Municipal Assessed Property Value = $300,000
Total Municipal Levy = $4,000
$2,320 $1,680
$174,00058%
$126,00042%
Assessed rate = $4,000/$300,000 = 13.34 mils ($13.34 per $1,000 of assessed property
value).
$126,000 x .01334$174,000 x .01334
Department of Public Instruction
12
Explaining the Tax LevyMisconceptions
1. Higher assessments don’t necessarily mean higher taxes. Depends on how your assessment is changing in relation to the rest of the municipality.
Department of Public Instruction
13
How Assessed Valuation Works2 Residential Taxpayers
Total Municipal Assessed Property Value = $300,000
Total Municipal Levy = $4,000
$2,900 $1,680
$174,00058%
$126,00042%
$126,000 x .01334$174,000 x .01334
Assessed rate = $4,000/$300,000 = 13.34 mils ($13.34 per $1,000 of assessed property value).
Department of Public Instruction 14
How Assessed Valuation Works2 Residential Taxpayers
Total Municipal Assessed Property Value = $500,000
Total Municipal Levy = $6,000
$3,600 $2,400
$300,00060%
$200,00040%
$200,000 x .01200$300,000 x .01200
Assessed rate = $6,000/$500,000 = 12.00 mils($12.00 per $1,000 of assessed property value).
Department of Public Instruction
15
Explaining the Tax LevyMisconceptions
1. Higher assessments don’t necessarily mean high taxes. Depends on how your assessment is changing in relation to the rest if the municipality.
2. Lower tax rates don’t necessarily mean lower taxes. Depends on how the total levy and your assessment is changing.
Department of Public Instruction
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1. How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%?
A. They live in different municipalities in the school district.
B. Individual property owner’s value increases as a percent of the municipality.
C. Municipal levy increases and/or individual property owner’s value increases as a percent of the municipality.
Reasons (so far) That Answer Question #1
Department of Public Instruction 17
Levy Apportionment and Tax Rates
The school district apportions the levy to the underlying municipalities
based on equalized values.
Then, each underlying municipality apportions its portion of the school
district levy to the underlying properties based on assessed values.
Department of Public Instruction
18
Apportioning the Levy
Muni A Muni B
Muni C
School District Divides the Levy Over Municipalities Based on Equalized Value (PI-401)
Equalized Muni Value(equalized rate)
Equalized Muni Value(equalized rate)
Equalized Muni Value(equalized rate)
Apportions the dollar amount needed to be raised from this
municipality over the assessed value (assessed rate).
Apportions the dollar amount needed to be raised from this
municipality over the assessed value (assessed rate).
Apportions the dollar amount needed to be raised from this
municipality over the assessed value (assessed rate).
$ $ $
Department of Public Instruction 19
Municipal Re-Valuation
EqualizedValue
% of Total
$40,000Levy
Tax Using Equalized
Value
Muni #1 $2,000,000 25.0% $40,000 $10,000
Muni #2 $5,000,000 62.5% $40,000 $25,000
Muni #3 $1,000,000 12.5% $40,000 $5,000
School District $8,000,000 100.0%
$40,000
EqualizedValue
% of Total
$40,000Levy
Tax Using Equalized
Value
Muni #1 $2,000,000 26.5% $40,000 $10,596
Muni #2 $5,000,000 66.2% $40,000 $26,490
Muni #3 $550,000 7.3% $40,000 $2,914
School District $7,550,000 100.0%
$40,000
Department of Public Instruction
20
1. How can the school levy on one taxpayer’s bill go up by 15%, and the guy’s across the road from him go up by 25%?
A. They live in different municipalities in the school district.
B. Individual property owner’s value increases as a percent of the municipality.
C. Municipal levy increases and/or individual property owner’s value increases as a percent of the municipality.
D. Municipality goes through a re-valuation.
Reasons That Answer Question #1
Department of Public Instruction
21
Muni AMuni B
Muni C
Most School Districts Have Many Underlying Municipalities
…differing sizes, differing types of taxpayers (residential, forest, commercial, manufacturing, etc), differing concentrations of
taxpayers, and differing local assessment practices…
Department of Public Instruction
22
Tax Base Composition Shifting(what happens within just 1 municipality)
One Final Thing to Consider
Brown Deer School District
Department of Public Instruction
23
Item 2014-15 2015-16 % Change
Residential 63.66324% 64.55778% 1.41%
Commercial 30.79951% 29.52597% -4.13%
Manufacturing 2.41129% 2.65067% 9.93%
Agricultural .00019% .00019% 1.17%
Personal 3.12577% 3.26538% 4.47%
100.000% 100.000% 0.00%
Department of Public Instruction
24
Brown Deer School DistrictTax Base Composition
Commercial
Residential
Brown Deer School DistrictTax Base Composition in 2014-15
Department of Public Instruction 25
Commercial
Residential
Shifting Value, Shifting Tax Burden
Even Without Considering Any Tax Levy Increases or Residential Property Value Changes!
Tax Base Composition in 2015-16
Department of Public Instruction
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Reasons That Answer Question #2
1. Tax base composition shifting.
2. The percentage the credits (School Levy, Lottery and Gaming, First Dollar) were of the total changed from 2014-15 to 2015-16.
Department of Public Instruction
27
Conclusion
Tracking the details that cause property tax changes, given the many underlying municipalities
in a school district, is virtually impossible.
But, now you have a list of items
Equalization Aid
Department of Public Instruction
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Under Article 10 of WI State Constitution, the State Legislature is responsible for establishing school
districts which are to be:
“as uniform as practicable … ”
“free and without charge for tuition to all children”
“each town and city shall be required to raise by tax, annually, for the support of common schools therein……”
How does the Legislature achieve this?
Department of Public Instruction
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Why Equalization Aid?
Equalization Aid
The State provides financial assistance in the form of Equalization/General Aid to school districts in order to:
Reduce the reliance upon the local property tax as the sole source of revenue for educational programs.
Guarantee that a basic educational opportunity is available to all pupils regardless of the local fiscal capacity of the district in which they reside.
A student should not be unfairly disadvantaged
as a consequence of where he or she lives.
Department of Public Instruction
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Legislature and Funding Formula
Department of Public Instruction 31
Equalization Aid
Property Tax Base
Equalization Aid
Why do you need to know how to calculate aid when DPI calculates it for you?
Because you will be asked by your board members, constituents, and the media.
So you can figure out why your aid has changed AND explain why.
Because you may want to do estimates and run “what if” scenarios …
Department of Public Instruction
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State “shares” in district cost.
Aid is based on a district’s ability to pay, as measured by its property wealth per member.
Department of Public Instruction
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Basic premise: The more property wealth per member a district has, the lower the percent (proportion) of shared costs that will be aided by the state through the equalization aid formula.
Equalization Aid
District Factors
- shared cost
- equalized property value
- membership
State Factors
- cost ceilings
- guaranteed valuations per member
- total amount of funding available for distribution
Department of Public Instruction
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What determines where a district is in the formula?
Equalization Aid
State Factors Assumptions
(Shared) Cost CeilingPrimary $ 1,000Secondary $ 9,000
State says we will treat the first $1000 of cost a certain way, the next $8000 another way and anything above this an even different way.
Guarantees (value per member)Primary $ 2,000,000Secondary $ 800,000Tertiary $ 400,000
Department of Public Instruction
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SAMPLE INFORMATION
Equalization Aid
District #1 District #2
Shared Cost $12,000$12,000
Equalized Property $200,000$600,000
Department of Public Instruction
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Sample District Values Per Member
Equalization Aid
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
DIS
TR
ICT
SH
AR
ED
CO
ST
PE
R M
EM
BE
R
DISTRICT VALUE PER MEMBER
Positive Primary Aid
Positive Secondary
Aid
Positive
Tertiary Aid
Negative Tertiary Aid
No Aid
37
Equalization Aid Formula Position for District #1
District Value per Member
Sample District #1 ResultsPer-Member Funding
Department of Public Instruction 38
Sample District #1 ResultsPer-Member Funding
Department of Public Instruction
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$900 + $6,000 + $1,500 = $8,400 x 500 = $4,200,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
DIS
TR
ICT
SH
AR
ED
CO
ST
PE
R M
EM
BE
R
DISTRICT VALUE PER MEMBER
Positive Primary Aid
Positive Secondary
Aid
Positive
Tertiary Aid
Negative Tertiary Aid
o Aid
40
District Value per Member
Equalization Aid Formula Position for District #2
Sample District #2 ResultsPer-Member Funding
Department of Public Instruction 41
Sample District #2 ResultsPer-Member Funding
Department of Public Instruction
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$700 + $2,000 - $1,500 = $1,200 X 500 = $600,000
District #1 District #2
Shared Cost $ 12,000 $ 12,000
Equalized Property $200,000 $600,000
Equalization Aid
Primary $ 900 $ 900
Secondary $ 6,000 $ 2,000
Tertiary $ 1,500 $ - 1,500
Total $ 8,400 $ 1,200
70% 10%
Department of Public Instruction
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Sample District Values Per Member
Equalization Aid
Percent of total shared cost – not each additional dollar of cost
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
DIS
TR
ICT
SH
AR
ED
CO
ST
PE
R M
EM
BE
R
DISTRICT VALUE PER MEMBER
Positive Primary Aid
Positive Secondary
Aid
Positive
Tertiary Aid
Negative Tertiary Aid
Negative Secondary Aid
No Aid
Sample Districts
44
Equalization Aid - Longitudinal Data
Department of Public Instruction
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Property value is fairly consistent, but membership is really dropping, causing their value per member to increase over time. As value per member increases, the formula gives less aid.
Equalization Aid - Longitudinal Data
Department of Public Instruction
4604-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
♦ District ■ State Ave
District Value per Member Compared to the State Average
Equalization Aid - Longitudinal Data
Department of Public Instruction
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04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
General Aid(includes Equalization Aid)
Equalization Aid Resources on the School Financial Services Website
“October 15, 2015 Equalization Aid Computation – Percentage Method – Algebraic Format”
Location: SFS Homepage > Longitudinal Data > Equalization Aid
http://sfs.dpi.wi.gov/sfs_buddev_eq (This website address will be changing)
“2015-16 Equalization Aid Formula Position”
“Multi-Year Longitudinal Analysis of General and Equalization Aid Formula Components”
Department of Public Instruction 48
Suggested Monitoring Activities
(after the summer program)
Confirm fees collected
Confirm expenditures for eligible supplies
Compare fees collected with actual costs
If you have an excess of revenues over expenditures then refund the under spent portion of the fee
This is done on a course by course basis
Department of Public Instruction
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Summer School Fees
What will auditors ask for?
PI-1804W-2 (Worksheet)
Summer school list of classes and fees
Should not be a flat fee (difficult to link a flat fee to actual expenditures)
Expenditures (by course) for the classes that charge fees
Run a detailed report of the appropriate function and object and identify for auditor those used for summer school
May be asked to pull some invoicesDepartment of Public Instruction
50
Summer School Fees
What will auditors test for? Fees are not charged as a flat fee across all
courses
Costs identified by course are eligible costs
Costs that are eligible do not exceed fees charged (by course)
For full presentation from WASBO Accounting Conference - March 18-20, 2014 go to:
http://sfs.dpi.wi.gov/sites/default/files/imce/sfs/ppt/Summer%20School_March%202014.pptx
This website address will be changing.Department of Public Instruction
51
Summer School Fees
Please give us a call if you have questions(all 608 Area Code):
Robert Soldner, Director 266-6968
Debi Towns, Asst Director 267-9209
Bruce Anderson, Consultant 267-9707
Carey Bradley, Consultant 267-3752
Dan Bush, Consultant
267-9212Gene Fornecker, Auditor
267-7882Brian Kahl, Auditor
266-3862Karen Kucharz, Consultant
266-3464Derek Sliter, Auditor
267-9218
Thanks to WASDA for the opportunity to speak to you today!
Department of Public Instruction 52
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