School finance proposal: report to the education committees of the Arizona Legislature

              SCHOOL FINANCE PROPOSAL
A Report t o the Education Committees
o f the Ari zona Legi sl ature
January 3, 1985
Prepared by Legi s l a t i ve S t a f f
Lockwood
TO: MEMBERS OF THE HOUSE AND SENATE EDUCATION COMMITTEES
FROM : LEGISLATIVE STAFF
DATE : January 3, 1985
SUBJECT: School Finance Proposal
The attached school finance proposal i s the r e s u l t o f a review o f the
current school finance s t r u c t u r e ( see separate report, School Finance i n
Arizona, 1980- 81 t o 1984- 85). S t a f f o f the Senate, House of
Representatives, and Department o f Education, with the advice o f a
Technical Review Committee composed o f selected school d i s t r i c t
personnel conducted the review and developed the framework o f t h i s
school finance proposal during the summer and f a l l a t the request o f the
Chairs o f the House and Senate Education Committees.
The current school finance system i s i n i t s f i f t h year; it was imple-mented
as a r e s u l t o f the Special L e g i s l a t i v e Session on Tax Reform and
School Finance which was held i n 1979- 1980. The review of t h i s system
indicated t h a t it could be modified t o meet current needs and address
s p e c i f i c problem areas. Many o f these p a r t i c u l a r issues were brought to
the L e g i s l a t u r e ' s a t t e n t i o n by i n d i v i d u a l school d i s t r i c t s and organiza-t
i o n s o f school d i s t r i c t s . This input i n problem i d e n t i f i c a t i o n was
most important t o the e f f o r t and we are thankful f o r it. This proposal
i s intended t o address most, i f not a l l , o f these concerns.
The proposal i s d e l i b e r a t e l y general a t t h i s stage i n order t o give an
o v e r a l l p i c t u r e of the proposed changes and t h e i r i n t e r r e l a t i o n s h i p s .
Because of t h i s , the specific f i n a n c i a l impact on each i n d i v i d u a l school
d i s t r i c t has - not been determined. Based upon comments made a t the
January 3 p u b l i c hearing concerning t h i s proposal, c e r t a i n components o f
the proposal w i l l be modified. A f t e r modifications are made, the s t a f f
w i l l f u r t h e r define the proposal and determine the impact on i n d i v i d u a l
d i s t r i c t s . Depending upon the impact, the proposal may be f u r t h e r
modified p r i o r t o i t s presentation to the Education Committees i n the
upcoming l e g i s l a t i v e session. The Technical Review Committee w i l l
continue t o be included i n t h i s review and m o d i f i c a t i o n process. As
soon as i n d i v i d u a l school d i s t r i c t impacts are determined, they w i l l be
made available t o the Education Committees and the school d i s t r i c t s .
It i s hoped t h a t the school finance proposal w i l l be contained i n a
single omnibus piece o f l e g i s l a t i o n which can be acted upon as quickly
as possible i n the upcoming l e g i s l a t i v e session so t h a t school d i s t r i c t s
w i l l have ample time t o conduct t h e i r budget process.
SCHOOL FINANCE PROPOSAL
TABLE OF CONTENTS
I. SCHOOL FINANCE REFORM
Changes i n Basic Finance Structure
Puui 1 Transuortation
- PAGE
1
- Capital Levy Equal i z a t i o n - Budget F l e x i b i l i t y - M& O and Capital - Tax Rates and State Aid
Small School D i s t r i c t Proposal s 7
- T u i t i o n f o r 03 D i s t r i c t s 7 - Budget Exemption f o r Weights f o r Small School D i s t r i c t s 8 - D i s t r i c t s with 4 o r Fewer Teachers 9
- Cons01 i d a t i o n Assistance 10
Other Issues 11
- M& O Override Provisions - Excess U t i l i t i e s - Desegregation
- Weight f o r Seriously Emotionally Handicapped Pupils
I I . EDUCATIONAL IMPROVEMENT
County Services f o r Small School D i s t r i c t s
K- 3 Improvements
- Increase i n K- 3 Weights - Increase i n Kindergarten Day
Funding f o r Other Improvements
I I I. EST I MATED COST ANALYSIS
SCHOOL FINANCE REFORM
CHANGES I N BAS I C FINANCE STRUCTURE
OVERVIEW
The proposed changes in the basic finance structure would allow additional flexibility in
budgeting of available funds. Since both the Capital Outlay Transfer and Capital Levy
Transfer provisions expire at the end of the 1984- 85 school year this proposal offers
options to continue to allow school district governing boards to decide, based upon
local needs, between capital and operational expenditures. With the proposed
equalization of the capital levy fund, school districts of similar characteristics would
have generally equal revenue available to m e e t t h e operational and capital needs of the
school district. Under both Option I and Option I1 districts would decide from the total
amount of funds available from the existing Revenue Control Limit ( RCL) and the
existing Capital Outlay Revenue Limit ( COXL) the amount to budget for operational
and the amount to budget for capital expenditure.
Under this proposed new concept districts would also decide, from the total capital
funds available, the amount needed for major capital purchases ( building, vehicles, etc.)
and the amount needed for other capital purchases. The money placed in the major
capital expenditure budget could be accumulated from year to year. Option I1 allows a
portion of the Revenue Control Limit and the Capital Outlay Revenue Limit to be
placed into the major capital budget.
Neither Option I nor Option I1 would allow any of the equalized capital levy funds t o be
placed in the Maintenance and Operation Budget.
CAPITAL LEVY FUND EQUALIZATION
Capital Levy would be equalized upon the existing statewide revenue amount per
student based upon a $ 0.60 levy applied against all property in the State. This would be
approximately $ 145 per student for 1984- 85. Possible adjustments to this amount
include the following:
( a) 10% and 20% increases that currently exist for small districts;
( b) a factor to adjust districts with extensive transportation programs; and
( c) variations between elementary and high school similar to the existing capital
outlay formula.
CAPITAL LEVY FUNDS AND ACCUMULATION
Monies placed in the Capital Levy Fund could be accumulated for up to five years.
Maximum limits could be established on a per student or total district basis. An appeal
process could be included, which would allow districts t o exceed the maximum limit
with State Board of Education approval.
CAPITAL OUTLAY OVERRIDES
Capital outlay overrides would be budgeted separately by school districts and a school
district with a CORL override would be required to budget the full CORL amount in
capital outlay.
SCHOOL PLANT FUND IN CAPITAL OUTLAY
Since the use of School Plant Fund monies in capital outlay is unlimited, either a limit
on these funds would be needed, or all school plant monies for capital outlay would go
into capital outlay. In addition, a district using school plant monies in capital outlay
would be required to budget the full CORL in capital outlay.
During the school year, school districts should be allowed to over- expend either the
Maintenance and Operation Fund or the Capital Outlay Fund, except total expenditures
could not exceed the original total of the two funds.
STATE AID CALCULATION
Instead of the existing state aid system with different qualifying tax rates for
Maintenance and Operation and Capital Outlay the proposed system would have one
qualifying tax rate. For example, the existing state support levels for Maintenance and
Operation and Capital Outlay could be combined with the new equalized Capital Levy
to establish a total s t a t e support level for each district. From this total support level a
school district would subtract the amount that would be raised from a local qualifying
tax rate. This local qualifying tax rate could be a total of the existing Maintenance and
Operation rate $ 1.63, the existing Capital Outlay rate $ 0.43, and the maximum Capital
Levy rate $ 0.30, or a total of $ 2.36.
CHANGES IN BASIC FINANCE STRUCTURE
Budget System
Option I
Other Capital Major Capital
Expenditures
' lMOCO1l ( SB 1382)
I terns
( Buildings, Vehicles, etc.)
Accumulation Possible
( 5 year)
Equalized
Capital Levy
r
R C L
.1
C O R L
Y
Maintenance
and
Operation
Budget
4
Capital
Outlay
Budget
Capital
Levy
Sudget
CHANGES IN THE BASIC FINANCE STRUCTURE
Budget System
Option I1
" MOCOtl ( SB 1382)
Maintenance and
Operation Budget
PUP I L TRANSPORTATION
SUMMARY
The proposed p u p i l t r a n s p o r t a t i o n formula i s a m o d i f i c a t i o n o f the
f i n d i n g s presented i n the Price Waterhouse Pupil Transportation Cost
Study which was conducted p r i o r t o the 1982 l e g i s l a t i v e session. A
density component i s included i n the formula. The proposed formula
provides support for t o and from school p u p i l t r a n s p o r t a t i o n and
academic, vocational and technical education and a t h l e t i c t r i p s .
The support l e v e l f o r t o and from school p u p i l t r a n s p o r t a t i o n w i l l
be based on a d o l l a r amount o f support per mile. The amount o f mileage
used w i l l be t h e g r e a t e s t number of miles t r a v e l l e d i n the p r i o r three
yea r s .
The support l e v e l f o r academic, vocational and technical education
and a t h l e t i c t r i p s w i l l be based on a percentage o f the t o and from
school p u p i l t r a n s p o r t a t i o n support l e v e l .
PROPOSED FORMULA
A. TRANSPORTATION SUPPORT LEVEL ( TSL)
TSL i s the sum of the following:
1. State Support Level f o r t o and from school.
2. State Support Level f o r Academic, Vocational and Technical
Education and A t h l e t i c Trips.
1. State Support Level for t o and from School =
a) Determine reatest Approved E l i g i b l e D a i l y Route mileage f o r
the p r i o r + t ree years.
b ) M u l t i p l y by 175.
c ) Determine number o f E l i g i b l e Students transported i n year
selected i n ( a ) .
d ) D i v i d e ( a) by ( c ) t o determine the number o f miles per
student.
e) Determine where the d i s t r i c t f i t s i n the f o l l o w i n g table
based upon the amount determined i n ( d) -- miles per
student.
State Support Level
C l a s s i f i c a t i o n
per Daily Route mileage .
f o r FY 83- 84
0.5 o r less $ 1.50
more than 0.5 through 1.0 $ 1.25
more than 1.0 $ 1.50
Mu1 ti p l y mileage amount determined by c l a s s i f i c a t i o n by ( b) , which i s
y e a r l y mi 1 eage.
2. State Support Level f o r Academic, Vocational , A t h l e t i c Trips
M u l t i p l y State Support Level amount determined for t o and from
school by the following:
D i s t r i c t Type
C l a s s i f i c a t i o n ( 02) o r ( 03) ( 04 ( 05)
0.5 o r less 0.15 0.10 0.25
more than 0.5 through 1.0 0.15 0.10 0.25
more than 1.0 0.18 0.12 0.30
Beginning i n FY 84- 85 amounts increased by GNP I m p l i c i t Price D e f l a t o r .
B. TRANSPORTATION REVENUE CONTROL LIMIT
For FY 85- 86
1. Determine increase i n TSL from FY 84- 85 t o FY 85- 86 using
the new formula.
2. Determine operational expenditure budget f o r p u p i l
t r a n s p o r t a t i o n adopted f o r FY 84- 85 and add amount
determined i n ( 1 .) preceding. The r e s u l t i s the d i s t r i c t ' s
FY 85- 86 TRCL.
For FY 86- 87
1. If FY 85- 86 TRCL i s greater than FY 85- 86 TSL, d i s t r i c t
uses p r i o r - y e a r TRCL plus increase i n TSL f o r each future
year.
2. If FY 85- 86 i s less than FY 85- 86 TSL, d i s t r i c t uses
p r i o r - y e a r TRCL plus increase i n TSL plus 113 o f the
d i f f e r e n c e between the TSL and TRCL i n FY 86- 87, plus 2/ 3
o f the difference between the TSL and TRCL i n FY 87- 88 and
i n FY 88- 89 and subsequent years, the TRCL w i l l equal the
TSL.
C. COMPUTATION FOR FY 85- 86
TSL: Compute f o r FY 84- 85 using data from FY 81- 82 through FY
83- 84; use support 1 eve1 s indicated.
: Compute f o r FY 85- 86 using data from FY 82- 83 through FY
84- 85; use support l e v e l s indicated increased by GNP
Imp1 i c i t Price Def 1 ator.
SMALL SCHOOL DISTRICT PROPOSALS
A. TUITION FOR 03 DISTRICTS
Specify t h a t t u i t i o n costs f o r regular and special education
students and the costs o f t r a n s p o r t a t i o n between home and school
charged t o another d i s t r i c t s h a l l n o t exceed the actual costs o f
serving the students o f the other d i s t r i c t , as prescribed by the
USFR. D i s t r i c t s charging t u i t i o n o r t r a n s p o r t a t i o n costs t o
another d i s t r i c t must estimate charges f o r the budget year by May 1
of t h e c u r r e n t year, and f i n a l i z e the charges by the f o l l o w i n g May
1.
2. RCL f o r 03 d i s t r i c t s i s the sum o f :
a) BRCL f o r elementary students.
b) t u i t i o n charged f o r high school students i n c l u d i n g any
t r a n s p o r t a t i o n charge ( based on l a s t y e a r ' s student count .
c ) TRCL f o r a l l students except those transported by another
d i s t r i c t .
3. For override purposes, d i s t r i c t s may include H. S. TRCL if the
d i s t r i c t a c t u a l l y transports them but not t u i t i o n f o r H. S.
students.
4. A f t e r adjustments are made i n amount o f t u i t i o n charged ( because o f
changes i n cost o f t u i t i o n o r number o f students due t o sudden
growth), the 03 d i s t r i c t s s h a l l reduce expenditures if t u i t i o n i s
lower and may a d j u s t budget if t u i t i o n i s higher.
5. 03 d i s t r i c t s must pay t u i t i o n on a fixed schedule:
a) One- fourth o f the t o t a l amount estimated by September 30,
December 31, and March 31.
b) The remaining amount owed a f t e r adjustments are made must be
paid by June 30.
6. 03 d i s t r i c t s may receive c a p i t a l levy monies f o r high school
students i f they t r a n s p o r t them.
I B. WEIGHTS FOR SMALL SCHOOL DISTRICTS
I 1. Small school d i s t r i c t s would be divided i n t o two groups as follows:
Small D i s t r i c t s Small Isolated D i s t r i c t s
I a. Fewer than 600 elementary a. Fewer than 600 elementary or high
or high school students. school students.
b. Contains a t l e a s t one school b. A l l schools are more than 30 miles
which i s less than 30 miles from any other school which teaches
from another school which one o r more of the same grades and
teaches one o r more of the i s operated by another Arizona
same grades and i s operated school d i s t r i c t .
by another Arizona school
d i s t r i c t .
- 2. Weights for both small school d i s t r i c t s and small i s o l a t e d school
I d i s t r i c t s would be adjusted so t h a t a t every student count l e v e l an
increase i n even one student adds budget capacity. ( Currently,
d i s t r i c t s lose budget capacity when they move from 100 t o 101 and from
499 t o 500 students.) These adjustments would also ensure t h a t no I weights are lower than they are c u r r e n t l y . I n addition, the weight f o r
small i s o l a t e d d i s t r i c t s would be increased so t h a t the weight for 1- 100
students i s approximately 30% higher than the basic weight. ( For small
d i s t r i c t s t h i s porportion remains the same, a t approximately 20%.) The
proposed weights are as follows:
ELEMENTARY WEIGHTS
I Current Proposed
Student Count Weight Sttident Count Weight- Small Isolated Weight- Small
EXAMPLES OF WEIGHTS
HIGH SCHOOL WEIGHTS
Current - Proposed
Student Count - W eight Student Count Weight- Small Is01a ted Weight- Small
1- 100 1.522 1- 99 1.669 1.559
101- 499 1.395 100- 499 1.468+. 0005 ( 500- SC)
I
1.398 + - 0004 ( 500- SC)
500+ 1.268 500- 599 1.268+ .002 ( 600- SC) 1.268 + .0013 ( 600- SC
600+ 1.268 1.268
EXAMPLES OF WEIGHTS -
!
100 1.668 1.558
C. BUDGET EXEMPTION FOR
DISTRICTS WITH FOUR OR FEWER CLASSROOM TEACHERS
1. D e f i n i t i o n o f teachers counted
I n determining the number of teachers for t h i s exemption, only
count f u l l - t i m e equivalent teachers p a i d o u t of the M& O budget.
2. Sudden growth provision ( r e t r o a c t i v e t o January 1, 1985):
a. If an " exempt" d i s t r i c t experiences an unexpected increase i n
the number o f students a f t e r the budget has been adopted, the
d i s t r i c t governing board may p e t i t i o n the county school
superintendent, requesting a u t h o r i t y t o revise i t s budget t o
i n c l u d e t h e a d d i t i o n a l costs for these students.
b. The county school superintendent s h a l l forward the p e t i t i o n
together w i t h h i s o r her recomnendation and a copy of the
proposed budget t o the Board of Supervisors.
c. The Board of Supervisors s h a l l hold a hearing on the p e t i t i o n
w i t h i n 20 days a f t e r r e c e i p t and s h a l l determine whether the
p e t i t i o n s h a l l be allowed, allowed a f t e r r e v i s i o n , o r denied.
D. CONSOLIDATION ASSISTANCE
1. Revise t h e s t a t u t e s dealing w i t h school d i s t r i c t boundaries ( o r
make a p r o v i s i o n i n session law) t o make it easier f o r school
d i s t r i c t s t o consolidate.
2. Provide d i s t r i c t s w i t h assistance i n meeting i n i t i a l expenses o f
c o n s o l i d a t i o n ( and compensation f o r loss of small d i s t r i c t weights)
by allowing d i s t r i c t s which consolidate t o increase t h e i r RCL by
10% i n the f i r s t year of consolidated operation, 7% the second
year, and 4% the t h i r d year.
OTHER ISSUES
M& O Override Provisions
a. If fully funded by property t a x , an RCL override is good for
either 1, 2 or 3 years. I t is proposed that the time period be
extended to provide for 4 and 5 year overrides, as well.
b. Currently, the maximum RCL override is the dollar amount equal
to 10% of the RCL for the f i r s t year passed. As the RCL
increases in future years and the dollar amount of the override
remains constant, the override amount will become less than 10%
of the current- year RCL. Conversely, if the RCL declines in
future years, the dollar amount of the override will exceed 10%
of the current- year RCL. I t is proposed that override
elections in the future not be tied to a specific dollar
amount, b u t rather to a percentage of the RCL, which will phase
out the override over the time period that the override is in
effect. The following chart illustrates the percentage of the
RCL allowed t o be budgeted for an approved override.
YEAR
# Years Override Approved 1 2 3 4 5
2. Excess Utilities
a. I t is proposed that the provisions allowing excess u t i l i t i e s t o
be paid only from transportation savings and interest earned on
investment of M& O monies be changed so that excess u t i l i t i e s
will be paid directly by property taxes.
b. Additionally, i t is proposed that districts be allowed t o
revise their excess u t i l i t y budget in the spring in order to
help reduce the need for overestimation of the excess u t i l i t i e s
amount when the budget is initially adopted.
Desegregation Costs
Laws 1983, Chapter 267, Section 5 allowed an exemption from the RCL
for compliance with a court order of desegregation for FY 83- 84 and
FY 84- 85. I t is proposed that the provision be placed in permanent
statute.
The cost would be paid by either a property tax, or accumulated
capital levy funds.
4. Weiaht for Seriouslv Emotionallv Handica~~ ePdu ~ i l s
a. It is proposed that certain seriously emotionally handicapped
( SEH) pupils be given a Group B weight of 1.5.
b. A SEH pupil would qualify a district for this Group B weight if
the district were unable t o provide satisfactory education and
service through i t s own personnel and had placed the pupil in a
private special education program.
c. The school d i s t r i c t would be required t o verify that the
student was diagnosed as SEH pursuant to section 15- 761 and
that no appropriate program exists in the school d i s t r i c t and
t h a t no such program could feasibly be instituted by the school
d i s t r i c t .
EDUCATIONAL IMPROVEMENTS
A. COUNTY SERVICES FOR SMALL SCHOOL DISTRICTS
E x i s t i n g System
ARS 15- 365 c u r r e n t l y provides for the operation o f service programs
by the County School Superintendent. The e n t i r e cost of a county
service program must be paid by the p a r t i c i p a t i n g l o c a l school
d i s t r i c t s . Many counties have found these cooperative programs t o be
an e f f e c t i v e method o f meeting the special service needs o f i n d i v i d u a l
school d i s t r i c t s .
2. Proposal
Provide f i n a n c i a l assistance f o r the expansion o f county service
programs t o a s s i s t small school d i s t r i c t s . The county service program
could employ specialized s t a f f and contract f o r services, including
a d m i n i s t r a t i v e assistance ( paperwork), t h a t would meet the needs o f
small d i s t r i c t s i n the county. For example, the county could employ a
speech t h e r a p i s t t o provide speech services t o a number o f small
d i s t r i c t s or the county could employ specialized s t a f f t o a s s i s t schools
i n the implementation o f g i f t e d or b i l i n g u a l programs. The county
service program would be designed by the small school d i s t r i c t s and
county superintendent i n each county t o meet the unique needs i n the
county.
3. Funding
From the proceeds o f the $ 0.50 county levy f o r education, an amount
would be set aside t o support a p o r t i o n o f the cost o f a county service
program f o r small school d i s t r i c t s . Any a d d i t i o n a l funds would come
from the small d i s t r i c t s which receive services. Each county or group
o f counties would receive $ 50,000 plus $ 4,500 per school d i s t r i c t for
each d i s t r i c t with fewer than 600 students. I n a d d i t i o n , o t h e r l a r g e r
d i s t r i c t s i n the county could contract f o r services from the county
program.
Because some counties have very few d i s t r i c t s with fewer than 600
students, the counties would be combined f o r the purposes o f t h i s
program. The service programs would be provided t o counties s i n g l y o r
i n groups as follows:
Apache, Navajo, and Coconino
Gila, Greenlee, and Graham
Pima and Santa Cruz
La Paz and Yuma
Cochi se
Maricopa
Mohave
Pinal
Yavapai
No. o f D i s t r i c t s
B. K- 3 IMPROVEMENTS
1. Increase K- 3 Weights
Increase weights for K- 3 students. For example, an increase i n the
K- 3 weight o f .04 would provide schools w i t h an a d d i t i o n a l expenditure
capacity o f approximately $ 11 m i l l i o n f o r the 1985- 86 school year. This
would allow f o r t h e e q u i v a l e n t of 440 a d d i t i o n a l teachers a t the K- 3
l e v e l .
2. Increase Kindergarten day
Provide budget capacity f o r d i s t r i c t s t o increase the amount o f
i n s t r u c t i o n a l time per day for kindergarten students by one hour per day
by counting p u p i l s i n 120 minute programs a t 0.50 and those i n 180
minute programs a t .75.
C. FUNDING FOR OTHER IMPROVEMENTS
Other educational improvements being considered t h i s session
include a request f o r increased funding for vocational education
programs and funding f o r career ladder programs. D e t a i l s o f these
proposals are expected t o be included i n separate l e g i s l a t i o n , but t h e i r
possible f i n a n c i a l impact must be considered when the school finance
proposal i s discussed.
* 33,\/ bL'
f
SCHOOL FINANCE PROPOSAL
ESTIMATED COST ANALYSIS
The current gap between the c o n s t i t u t i o n a l aggregate spending l i m i t
and the t o t a l budgets o f a l l school d i s t r i c t s i s about $ 34 m i l l i o n . If
t h i s l i m i t i s not t o be exceeded, then t h i s l i m i t a t i o n must be taken
i n t o consideration when various proposals f o r increasing money spent on
education are considered. The f o l l o w i n g t a b l e gives approximate amounts
f o r various proposals under consideration; f i n a l amounts would depend on
actual l e g i s l a t i v e action.
Ite m
Increased Funds Cost To Impact On
To Schools ( M) State ( M) Const. L i m i t ( M)
o Changes i n basic
finance s t r u c t u r e . ---
o Increase i n small school
d i s t r i c t weights. $ 7.0
o County services. $ 1.0
o Increase i n K- 3 weights. $ 11.0
o Increase K day. $ 20.0
o Voc. ed. funding increase. $ 5.0
o Career 1 adders. $ 12.5
o Misc. ( t r a n s p o r t a t i o n ,
small d i s t r i c t changes,
ADE appropriations,
special ed. changes,
etc. ) -$ 4.0
TOTAL $ 60.5 $ 52.5 $ 33.0