I don’t make any claims to be the most exciting fella you’ll ever meet. I’m not up on the latest tv shows, movies, top 40 music, which NFL teams look good, and I only found out who won the Mayweather/McGregor fight because it was on NPR this morning. If you catch me at the water cooler I’m most likely to tell you about the lecture I watched last night on measuring the geometry of the universe with cosmic microwave background radiation…or I’ll start talking to you about where school revenues come from. I’m sure those of you who don’t work with me will be disappointed to miss out on my elementary understanding of cosmology but luckily you can read about school revenues here!
Let’s start at the top. School systems receive a good deal of funds from the Federal Government, mostly in the form of grants and are referred to as restricted funds. These restricted funds are so named because their use is restricted to specific purposes. These funds are available for use by school systems to expand programs above and beyond what a school system does on its own and are issued to school districts as reimbursements essentially. These funds are supplemental, not for the General Fund which school boards oversee.
Examples of Federal funds to school systems would be as follows:
- IDEA B – Individuals with Disabilities Act
- $142M for Kentucky
- Provides funds for excess cost in educating those with disabilities
- IDEA – Preschool
- $7.4M For Kentucky
- Title I – Part A
- $201M For Kentucky
- Funding to improve achievement in high-poverty areas
- Title I – Part C Migrant
- $4.7M For Kentucky
- Eligibility to highly mobile children through age 21
- Title I – Part D Neglected & Delinquent
- $1.8M for Kentucky
- Typically sub grants through Department of Juvenile Justice & Department of Corrections
- Title II – Part A Teacher Quality
- $33M For Kentucky
- To increase number of highly qualified staff through recruiting, training, mentoring
- Title II C – Perkins
- $6.2M For Kentucky
- Based on population and poverty
- For software, instructional materials, equipment, but not consumables
- Title III – Limited English Proficient
- $3.2M For Kentucky
- Kentucky reported 136+ languages
- For tutors and resource materials
- Stuart B McKinney – Homeless
- Almost $1M For Kentucky
- Fees for enrichment programs, tutoring, transportation, mentoring, training to parents
- Title VI - Rural and Low Income
- $5.1M For Kentucky
- Based on Average Daily Attendance of less than 600 or 20% below poverty line
- Teacher recruitment & retention, professional development, parent involvement
Again, these funds are supplemental and are over and above the services that districts already provide. If these funds decrease, districts typically don’t stop offering the applicable services to students but have to find alternative ways to fund them. When the U.S. Department of Education speaks of cutting their budget, these are the expenditures that they are talking about.
The Commonwealth of Kentucky is the next big funder of public schools. Funding a system of common schools is the only spending mandate on the legislature in the Kentucky Constitution and the bulk of that funding comes from SEEK or Support Education Excellence in Kentucky. Additional funding from Kentucky comes in the form of grants for services such as Extended School Services, Professional Development, Preschool, Safe Schools, and Instructional Resources.
SEEK funds are based on Average Daily Attendance in each district and fluctuate on many other factors in each district such as district “wealth” expressed as property assessments. SEEK funds work in relation to local tax revenues, we’ll come back to this once we introduce local revenues.
On the local level, school districts collect revenues directly from the population that resides there the same way county and city governments do through property taxes and occupational taxes. Districts use these funds combined with SEEK funding to provide for the schools. The combination of local and SEEK funding compromise the general fund of a district.
Ultimately, the source of all funding is the tax payer. The federal government collects taxes through various means but only the state government, city and county governments, and school systems collect revenues from property tax.
Shelby County tax rates in 2016 were as follows:
All of the tax rates are based on the property value assessments and are expressed in cents per $100 of value. So, if you have a home assessed at a value of $100,000.00 outside the city limits of Shelbyville or Simpsonville then you would pay a property tax bill including $122 for the State of Kentucky, $246 for Shelby County, and $715 for the Shelby County Public Schools District.
If property value assessments increase then revenues from taxes go up without a change in the tax rate.
Now the same home is assessed at $105,000.00 so the property tax on that home would be $128.10 for Kentucky, $258.09 for Shelby County, and $750.75 for SCPS.
On the surface, increases in property value assessments seem like a real boost for school funding and as far as the local revenues better assessments provide, they are a boost. When you add SEEK funding to the mix though, it starts to get murky.
SEEK funds, as I mentioned earlier, are calculated for each district based on property assessments. The idea is that school districts in higher value areas get less SEEK funds than school districts in poorer areas.
Let’s look at an example where we break down the property assessment value, local tax funding, and SEEK funding per pupil in Shelby County.
In 2015, the assessment value per pupil was $574,651. The local tax funding was $1724 and SEEK was $3955.
In 2016, the assessment value per pupil was $598,790. The local tax funding was $1796 and SEEK was $3840.
Forecasts for 2017 include an assessment value of $628,773 per pupil. Local tax funding of $1886 and SEEK funding of $3714.
You can see from the numbers pulled from Kentucky Department of Education’s website that each if the last 3 years the assessed value of Shelby County property has increased and local tax funding as a result has increased per pupil. Meanwhile, SEEK funding to the district has decreased each of those years as has combined local and SEEK funding per pupil. The combined per pupil funding dropped $43 between 2015 and 2016 and another $36 from 2016 to 2017.
Now that the assessments are available for 2017, SCPS has enough data to know that the assessments will result in $745,798 more in local revenues to the school system. Because of the increased assessments however, the district will lose $585,906 in SEEK funds. So, the district sees a net increase of only $159,892 this year with no change in tax rate.
This would be great if the number of students stayed steady at about 6800 average daily attendance as well as other variable costs such as utilities, supplies, insurance, and salaries.
The student population of SCPS is growing at a rate of 42 students per year on average. That means we need 2 more teachers on average, another school bus, and two more classrooms. The County Employee Retirement System is splitting from the state pension fund and may need an increased contribution of approximately $484,000 from SCPS next year alone. Classrooms are bursting at the seams and plans are underway to build a new Preschool through 8th school to take 8th grade classes out of the growing high schools and provide more elementary school space.
So as assessments increase and student population grows there is a slow decline in per pupil funding available.
Schools have some options to increase revenues including levying an occupational tax (currently there is no school occupational tax for schools in Shelby County) or an increase of up to 4% on property tax. A 4% increase in the property tax rate would change the rate from $0.715 to $0.731 or an additional $16 on that $100,000 house I used as an example earlier. That slight increase would provide $573,648 for the district which almost cancels out the $585,906 lost in SEEK funding.
I will mention that the tax rate for SCPS is $0.715 per $100 has not changed in five years. Does the tax rate need to increase every year? Probably not. How much longer can the district afford to leave it unchanged? That’s the million-dollar question.
Cost cutting and efficiency in the use of resources has trimmed about $6.6M from the district budget between 2014 and 2018. By not raising taxes over the last five years the district has left $9.6M in the pockets of the taxpayer. I believe we are at a point of diminishing returns through cost savings and keeping the tax rate unchanged. A small correction now by increasing the rate can help keep pace with growth. No action, I fear, will begin to dig a hole that may not be fully realized for several years.
School funding is simple! Right?
In 1500 words I’ve only scratched the surface.
The big take away here is that funding is complicated. A decrease in federal or state funding puts the burden on the local level and the decision becomes either to act to maintain the standard for our students or to start regressing.
I have been asked why people who don’t have kids should pay taxes for education. The answer is simple, the bank teller, grocer, journalist, farmer, contractor, electrician, tailor, or police officer that you count on every day to provide services necessary to your life was once a student and most likely, they were a student in a public school.
Whatever the cost of educating our youth, the alternative is vastly more expensive.
I support a tax rate increase in 2017 and will vote accordingly. As always, I'm happy to hear your concerns and questions at email@example.com.