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Policy Points from Iowa Fiscal Partners

Posts tagged school aid

Sensible context on school aid growth

Posted March 29th, 2016 to Blog

There are many ways to measure Iowa’s lagging commitment to public schools. One is a comparison of growth in school aid to growth in state revenues.

As K-12 schools are a significant share of the state budget, it seems sensible that we would expect at least similar numbers of growth in one vs. the other.

Basic RGBThat is not the case.

While not a perfect comparison — there are moving parts with both figures — you can get an idea of the general trend in the accompanying graph. Net General Fund revenues have been coming in with average yearly increases around 4 percent,* while the key school-aid number, for Supplemental State Aid, has averaged about half that.**

The numbers below are taken from the latest Revenue Estimating Conference report, available here: https://dom.iowa.gov/sites/default/files/documents/2016/03/rec-projections-2016-03-16.pdf

  • The actual ending balance for FY2015 (the budget year ending last June 1) showed a net over-the-year revenue change from FY2014 of 5.1 percent. For that same period, schools had 4 percent Supplemental State Aid — the only year that high since FY2010.
  • For the current year, the most recent official revenue estimate is for a 3.3 percent state revenue increase, while schools are operating on budgets reflecting 1.25 percent per-pupil growth.
  • For FY2017, the estimate is for a 4.4 percent state revenue increase, and the deal just hatched at the Statehouse — 13 months late — is for schools to see 2.25 percent per-pupil growth.
  • For FY2018, for budgets to be approved a year from now, the state is expecting 4.1 percent revenue growth. The school aid number for FY2018 by law was to have been set a month ago so school districts could properly plan their budgets when enrollment counts are set this fall, and to negotiate staff contracts without big uncertainties. That number has not been set and apparently will not be during this legislative session, as neither the House nor the Governor is interested.

Understand, the revenue growth number is held artificially low by the growing and incessant demand for business tax breaks that undermine revenues. So the net revenue number would be much higher if legislators wanted it. Instead, they continue to give away hundreds of millions of dollars before they even reach the state treasury.

If the Legislature were to curtail business tax credits even slightly, plenty of money would be available to properly fund education and other actual public priorities that are the traditional and best-focused business of state government.

Alas, that is not the political world in which we live.

*The average growth for general fund revenues includes both actual results for FY11 through FY15, as well as projections by the Revenue Estimating Conference for FY16 and FY17.
**Supplemental State Aid — which is a percentage for per-pupil cost growth that districts must use in building an enrollment-based budget — includes the recent deal approved by the Senate and House and expected to be signed by Governor Branstad.
Owen-2013-57Posted by Mike Owen, Executive Director of the Iowa Policy Project
mikeowen@iowapolicyproject.org
Mike Owen is a former journalist in Iowa and Pennsylvania. He covered state government for the Quad-City Times from 1980-85 and was editor and co-publisher of the West Branch Times from 1993-2001. He is serving his third term on the West Branch Board of Education, and is a member of the Professional Advisory Board of the University of Iowa School of Journalism and Mass Communications.

Unspoken budget choices for Iowa

Posted March 2nd, 2016 to Blog

DSCN5662-detail240200There’s a reason we can’t have the things we need. We keep giving money away, often without a good understanding of why we’re doing it.

A good example is the so-called “coupling” legislation now moving through the Iowa Legislature. It would do some sensible things, but others — not so much, and not for the reasons being promoted. Read more about it in this Iowa Fiscal Partnership policy brief.

Most of the cost of the coupling bill is for a business tax break. The Farm Bureau recently quoted one of its local leaders, Washington County Farm Bureau vice president Tye Rinner, that this provision is “really important to us right now.”

“We’re all in limbo right now waiting to see what’s going to happen and that’s keeping us from making the investments in equipment, buildings and other capital purchases, which would also create jobs in our rural communities,” Rinner was quoted.

Unfortunately, that message has little to do with the legislation under consideration. What is missed is that the bill at the Statehouse would make changes for only one tax year — and it’s one already past. The changes are retroactive to tax year 2015.

So if farmers or other business people wanted to make a capital investment that would benefit from the kind of tax provisions being proposed, they would not get the break. They’d be too late.

On the other hand, the bill would reward decisions already made. It’s not an incentive to do something they would not have done anyway — and it’s very costly. It’s about $98 million that was not in the budget for the current year, and would hit the ending balance.

In perspective, this must be seen as a budget choice, put up against other ways to use that $98 million, which would go against the resources on hand for the new fiscal year. You might have noted the difference between the House and Senate on a school aid number is 2 percent in supplemental state aid, whether to set per-pupil cost growth at 2 percent or 4 percent. The difference is about $85 million, according to the Iowa Association of School Boards.

So as you can see, we can subsidize business people to do something they already did without a subsidy, or for less money we can have a 4 percent increase in school aid. The House speaker says we can afford the first choice, but not the second. Both positions cannot be so.

2010-PFw5464Posted by Peter S. Fisher, Research Director for the Iowa Policy Project.
Contact: pfisher@iowapolicyproject.org