Budget time compares to those sleepless nights when I worry about calling off school due to the weather.
It’s that time of the year when the real decision making skills of myself come under scrutiny of the public,
taxpayers and the parents of our students in the IKM-Manning School District. With the weather the sun
will always come out and make the day brighter. Budget time is very unpredictable because the days will
not always be brighter especially when reductions are being made that impact lives.
In previous articles I have tried to explain the funding process and those areas that impact our revenues
dramatically. Here are some of the basic principles to make school finance a little more understandable:
1. The number of children enrolled in each district determines a district’s budget/revenues. Our
numbers have been declining with a 28 decrease this past year.
2. 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 quality
education.
3. The Governor recommends the annual change in per pupil allowable growth. The General
Assembly is responsible for passing legislation to establish the annual increase in the “cost per
student/allowable growth”.
4. Property taxes matter. They determine how much money each district receives in state aid.
5. Funds are restricted. We can only use funds on what the legislature tells us we can.
6. Schools are budget limited. Most other public entities are property tax rate limited. This
difference is monumental.
7. Iowa law guarantees that every child in the state receives an “equal” amount of money to fund
his/her education. A district’s budget is basically derived from the number of children enrolled
in the district multiplied by the district’s cost per child. However, economic factors change from
year-to-year, and it is up to state lawmakers to decide just how much to increase the cost per child
to reflect the change. This increase is called “allowable growth.”
8. Under the basic finance formula, each district’s spending is based upon a district cost per pupil.
The total amount the district is allowed to spend is that per pupil amount times the number of
students enrolled. A district can spend less than the maximum, but cannot spend more. Over
the past few years we have been spending our “unspent balance”. This is the amount of the
total spending not expended during the fiscal year and includes any previous year’s cumulate
unexpended total spending authority.
9. An allowable growth rate is recommended by the Governor and established by the Legislature.
The rate is multiplied by the state cost per pupil to calculate an allowable growth rate per pupil.
All districts receive the same amount per pupil. Allowable growth per pupil is intended to further
provide equity in school districts throughout the state because the legislature set a principle
that each child is worth the same amount, no matter where he/she lives. This year the allowable
growth is 2% and IKM-Manning will receive $220,892 less than last year due to the declining
enrollment.
One major area concern for the IKM-Manning District has been our Unspent Budget Authority (Unspent
Balance) which is a unique feature of the Foundation Formula.
Schools are required to keep track of two sets of figures. First, the normal Fund Balance and secondly
their unused Spending Authority (Unspent Balance). Remember that the Iowa school funding formula is a
pupil based formula. Each district receives an amount of funding (think cash) and authority to (Spending
Authority) for each pupil. It becomes easier to understand if you think that each pupil has a “credit card
limit” on spending each year and that credit card bill is paid through a combination of State Foundation
Aid and through local property taxes.
Unspent Balance (Unspent Budget Authority) simply is the unused credit limit for all of the children who
have ever attended school in the district.
Why is Spending Authority so important? It is the legal limit on spending in the district. This is not the
same as the district’s fund balance or cash balance. It is illegal for districts to overspend their allowable
Spending Authority. Spending Authority is the way for the state to enforce per pupil spending equity in
the formula. If districts were able to spend as much as they were able to levy, very property rich districts
would be able to generate huge amounts of spending with very low property tax rate levy rates. Property
poor districts would be able to generate very little spending with very high tax rates. This would eliminate
per pupil student funding equity in the formula-the main stated goal of the formula.
Spending Authority is very important and especially important when the state is unable to fulfill its
obligation. For example, when the state has to reduce its expenditures, cash to school districts is reduced,
but not Spending Authority. This is critical to school districts because the funds are not there and the need
to fund will come from that Unspent Budget Authority (credit card limit). It is important for districts not
to use the Unspent Authority on perpetual expenses.
Again, I hope this makes understanding school funding a little more clearly to all.
Congratulations to Mrs. Rasmussen and all the cast in her last production. Everyone did a great job! We
have some very talented kids in our district.
Yours in education,
Dr. Ward
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