Children in Oklahoma are entitled to a free education from 4 year-old programs through 12th grade. With a few exceptions like charter schools, families avail themselves of this state service by attending schools operated by locally elected boards of education. As we saw looking at OCAS data most of the cost is paid for with revenues generated by statewide taxes and by local property taxes levied within each school district. This post is mostly about how the state revenues are allocated among school districts.
The revenues generated by property taxes vary wildly among school districts mostly because the value of taxable property within districts varies greatly depending on local home values and what business operations are located there. Such disparities have been the subject of litigation here (Fair School Finance Council v State of Oklahoma) and elsewhere (San Antonio Independent School District v. Rodriquez ). Oklahoma has in place a state aid formula that allocates state revenues to school districts in a way that equalizes most operational funds roughly based on student population. The primary provisions are found at Title 70, Okla. Statutes, Sections 18-200.1 & 18-201.1. Look at our State Revenues chart with some highlighting and a couple of additional columns for a simple explanation of how this works:
Look at the second column from the right highlighted and titled Formula. It totals up the revenues that go into the formula, namely the 35 mills of local property taxes in the general fund, 75% of the county 4-mill tax, the four yellow highlighted state dedicated revenues, and the gorilla amount that is appropriated by the state legislature each year from the state’s general fund and some dedicated amounts (courtesy of HB 1017). Each of these revenue sources has its own history and idiosyncrasies, like the county 4-mill was the original funding for segregated schools, like the volatility of gross production, and like both property taxes and motor vehicle being subjects of recent statewide litigation. So there’s a lot of ifs, ands and buts in the process but the bottom line is those revenues all totaled together accounted for 76% of all school districts’ operating funds new revenue in 2016 and for 61% of all new revenue. So if it in fact fairly allocates that much of the state’s school funding it’s doing pretty well. Add to that the insight from the last column, highlighted in blue, which lists the revenues from all funds that either follow the employee (health insurance) or the students and we find that over 95% of the general/co-op funds and almost 82% of all funding is pretty fairly allocated among school districts. Let’s see how the actual formula works by reviewing the FY 2016 State Aid Allocation sheet for the entire state; here it is (omitting some minor adjustments at bottom):
There are three parts, Foundation, Transportation and Incentive Salary. Transportation is very small compared to the first and the last which allocate $1.8 billion, so we’ll ignore it. Next notice the revenue sources listed under Foundation–ad valorem (property taxes), 4-mill, school land, gross production, motor vehicle and REA–are the same ones highlighted in yellow in the first table and are called “chargeables”. The chargeable for Salary Incentive is a bit harder to discern being the $30.3 million at item 2 then multiplied by 20. Let me explain why.
Our state constitution provides for levy of 35 mills in support of school districts’ general fund operations. 15 mills were always permanent while the remainder, up to 20 mills, had to be voted annually for most of the state’s history until districts were allowed to vote making it permanent also. So when the Incentive Aid was put in place it was structured mathematically to require a district to vote the maximum 20 mills to receive the maximum available aid. Notice on the statewide form line 4 the (00.0), that would be (20.0) for most all districts. For right now suffice it to say that the only Salary Incentive chargeable revenue is 20 mills of local property tax; the other 15 mills is listed under the Foundation section. Later on we’ll simplify this greatly.
Now let’s circle back and compare what shows on this State Aid Allocation sheet with the revenue highlighted in the summary chart above. That total is $3,500,870,848 being the revenue actually received in FY2016 from the seven revenue sources that are part of the state aid calculation. From the Allocation sheet these are the projections used:
$1,066,821,517 from the “Total Chargeables” line which is the total of the prior year collections from the dedicated sources and the current year projection for 15 mills of local property taxes.
$606,435,690 which is the current year projection for close to 20 mills of local property taxes and is the result of multiplying the Adjusted District Valuation of $30,321,784.516 X 20; this statewide calculation is not exact for reasons too in the weeds even for me, but is close enough to see how this all fits together. This amount is also a “chargeable”.
And $1,826,404,722 which is the “Basic State Aid” total shown to be paid out according to the state aid formula; this money comes from the annual state appropriation and I think is the largest single line item of our state government’s annual budget.
$3,499,661,929 is the total of these three and is amazingly close to the actual collections of $3,500,870,848—as they say “pretty good for government work”.
Now that we know what revenues are included and their total amount we turn to how they are apportioned among school districts. Essential to understanding this part of the state aid formula is how school districts’ “weighted average daily membership” (WADM) is calculated, because it is on that basis, primarily, that the $3.5 billion is divvied up. At the core of WADM is ADM, average daily membership, which is simply how many students were enrolled, on the average, over the 175 or so school days in the school year. In the initial count, ADM, each student has a weight of 1, so for a district having an average daily enrollment over the year of 1,000 its ADM is 1,000.
Now comes the real fun. Because it is believed that different students cost different amounts to educate, certain categories are given weights in an attempt to allow for the expected higher cost. First there are Grade Weights, which include the 1 for each student, from 1.0 for grades 4-6 to 1.2 for grades 7-12 and 1.3/1.5 for Kindergarten and 1.5 for Out of Home Placement. So a thousand students in the sixth grade start out weighted 1,000, but the next year as 7th graders they are weighted 1,200.
The highest weights are for students receiving Special Education services which range from speech services only at .05, to Learning Disability at .4, to intellectual disability at 1.3, to severely emotionally disturbed at 2.5, to deaf at 2.9, and to blind at 3.8, as examples. Therefore, a blind 7th grader has a weight of 5.0 and a sixth grader receiving speech therapy is weighted 1.05.
Other weights added on are for Gifted at .34, Bilingual at .25, and Economically Disadvantaged (determined by qualification for a free or reduced price lunch under the federal school lunch program) also at .25. To summarize, a ninth grade student with a learning disability who qualifies for a free lunch is weighted 1.85. Here’s the statewide totals for our example year FY2016:
Divide the total WADM of 1,108,650.14 by total ADM of 686,281.45 and we see that the average Oklahoma student carries a weight of 1.62. Anyhow the state aid formula provides that our goal is for every school district to receive from the seven revenue sources that totaled $3.5 billion in FY2016 the same amount per WADM. The formula then generates a state aid factor which is the total expected revenue from the Allocation sheet, not actual because we don’t know that in advance, being our $3,499,661,929 total less the stuff like transportation that doesn’t go through the formula, so something like $3.47 billion divided by the WADM (higher than actual because districts can use highest of three years) shown on the Allocation sheet of 1,122,952.01 suggests a factor of about $3,090. The factor actually shown on the sheet is $3,034.60 which is calculated thus: $1592 + $72.13 X 20. We’re not exact, but again close enough to know we see the forest without getting lost in the trees (I love trite banality).
Here’s how a school district can estimate its state aid in five steps:
1. Calculate your WADM, example 5000
2. Calculate the total state aid factor, $1592 + 20 x $72.13 = $3032.60
3. Target Revenue then is 5000 x $3032.60 = $15,163,000
4. From the Target subtract chargeables which are the sum of:
35 mills local property tax $2,000,000 (current assessment X millage)
75% of county 4 mill $480,000 (prior year)
Gross production $220,000 (prior year)
Motor vehicle $1,250,000 (prior year)
Rural Electric $190,000 (prior year)
State land earnings $510,000 (prior year)
Total Chargeables then is $4,650,000
5. Result is State Aid amount for that district calculated like this:
$15,163,000 – $4,650,000 = $10,513,000 in state aid.
Let’s check out how this looks for three real school districts now at the beginning of FY2019, with WADM’s near this example of 5000. Here are the Allocation sheets for Collinsville, Western Heights and Pryor.
For each, Step 1 uses its prior year WADM which will be adjusted mid-year. Step 2 calculates the FY2019 initial state aid factor, being $1751.44 + 20 x $83.53 = $3,422.04, which is a huge increase over FY2016 due to the pay raise funding. Step 3 multiplies Step 1 times Step 2 to get the Target revenue for each district which is in proportion, of course, to its WADM since the factor is the same for all. Step 4 totals the chargeables estimates using approximately 35 mills times the district’s current valuation and the prior year’s actuals for the other five. Finally, Step 5 is the difference between Steps 3 and 4, being the amount the chargeables total is shy of the Target Revenue, which is the amount that needs to be made up in state aid.
Even though Collinsville is smaller than Western Heights by almost 1700 WADM, it will receive more state aid, $9.134 million compared to $5.605 million, because its chargeables are predicted to be much less per WADM. Without state aid it cannot begin to pay its teachers or offer educational services anywhere near to what Western Heights is able to do. But, if the projections are accurate, then they each will have about the same total revenue passing through the formula per WADM. In this way state aid balances out the disparity in local and state dedicated revenues and makes it possible for teachers to be paid and students educated with comparable resources across the state.
Then there’s Pryor. Because its chargeables total more than the Target Revenue (thanks to Google locating there) it will get no state aid, but still will have more revenue per WADM than the other two districts. It is “off the formula”. There are several districts that do not receive state aid and usually it is their property tax wealth, i.e. Valuation Per Student, that sets them apart. To find this statistic I go to the School Profiles Reports from Oklahoma Office of Educational Accountability
https://www.schoolreportcard.org/report-card
The statistic is Valuation Per Student, i.e. the district’s total ad valorem assessed valuation divided by its average daily membership. Statewide the number is $49,471. Here is Union’s report showing a very close to average $50,422.
On the chart following is the amount for each of the three districts and my FY2016 example.
Next time we’ll see how to use what we’ve learned.
As always lunch is on me for the first to ID the photo location.
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