Minnesota K-12 Education Finance System Context and Overview House Education Finance Committee Presented by Tim Strom & Melissa Johnson January 17, 2013
Topics for Discussion 1) State Budget: where the money comes from where the money goes Change in tax revenue over time State Share of funding 2) School District Property Taxes: Property Tax Terminology Taxes Paid by Type of Government Tax Base Comparison 3) Student Enrollment change over time by region and size 4) Major Components of School Finance System: General Education Revenue Categorical Revenues Trends and Other Data 2
Where the Money Comes From: 13 State General Fund $19.653 Billion Source: HRD 3
Where the Money Goes: 13 State General Fund Spending $18.642 Billion Source: HRD 4
Where the Money Comes From: 14 State General Fund $18.614 Billion Source: HRD 5
Where the Money Goes: 14 State General Fund Spending $18.419 Billion Source: HRD 6
State and Local Tax Revenue History Source: DOR 7
State Share of School Funding The state aid for school districts, as a percentage of state aid plus levy (which excludes federal funds and other local funds such as fees for food service, etc.) had been fairly constant during the 1970s, 1980s and early 1990s. The state aid began increasing in the late 1990s, and the 2001 overhaul of the state s property tax system increased the state share of K-12 funding to nearly 90% of the total. Since that time, the state share has been steadily decreasing so that the state share for 2011 is now about 77% of total revenue. 8
State Share of State-Local Tax Revenue for K-12 Education, 1992 2013 90.0% 86.3% 80.0% 76.0% 70.0% 71.5% 60.0% 62.0% 50.0% 40.0% 30.0% 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 9
Property Tax Terminology Property Tax Base (Taxes Payable 2012) Taxable Market Value = Estimated Market Value Market Value Exclusion Market value exclusion = 40% of first $76,000 of value, less 9% of value over $76,000 (no exclusion for homes valued at $413,800 or above) Tax Capacity = Taxable Market Value X Class Rate Class Rates are statutory percentages applied to taxable market value: Residential Homestead: First $500,000 1.00% Remainder 1.25% Agricultural Land and Buildings (homestead) First $1,290,000 0.55% Over $1,290,000 1.00% Commercial and Industrial First $150,000 1.50% Remainder 2.00% Seasonal Rec. Residential First $500,000 1.00% Remainder 1.25% 10
Property Tax Terminology Property Tax Base (Continued) Sales Ratio = Estimated Market Value / Actual Sales Price (Computed by State Revenue Department based on comparison of assessor s estimates of market values with actual sales prices.) Adjusted Net Tax Capacity = Net Tax Capacity / Sales Ratio Referendum Market Value Equals estimated market value, excluding the following property classes: Ag Land & Buildings (Note: house, garage, and one acre are not exempt) Seasonal Recreational Residential Used only for operating referendum, transition and equity levy calculations Market value exclusion does not apply to these levies 11
Property Tax Overview Property taxes have been a major part of school district funding for more than 100 years. Changes made by the 2001 Legislature have substantially reduced the share of property taxes that go to school districts, but school districts are still the second largest user of property taxes. 12
Property Taxes Payable in 2012 By Type of Government $8.384 Billion Source: HRD 13
Taxable Market Value ($552 Billion) and Taxes Paid ($8.384 Billion) by Property Type Taxes Payable in 2012 Source: HRD 14
Student Enrollment and Counting Students Public school enrollment in Minnesota peaked in 1972 at the height of the baby boom at nearly 922,000 pupils. Public school enrollment fell sharply from 1973 to 1985 then increased at a moderate rate from 1985 to 2001. Statewide enrollment slowly declined from 2002 to 2009, began increasing in 2010, and is projected to continue to increase over the next decade. Enrollment changes are very different across the state. Most school districts have faced declining enrollment during the last 5 years. Minnesota has a few very large school districts and many very small school districts. 15
Minnesota School Enrollment 1960 to 2015 Source: HRD 16
School Enrollment by Region 2013 Source: HRD 17
School District 5 Year Enrollment Change by Region 2009 to 2013 North Northwest Northeast Central Southwest West Central East Central South Central Southeast 7 County Metro Source: HRD 18
Percent of Students Enrolled by School District Size Quintile 2013 67 Largest Districts 68 Smallest Districts 67 next Smallest Districts 67 Middle Districts 67 Second Largest Districts Source: HRD 19
Percent Change in Enrollment, 2004 2012, School Districts and Charter Schools 2004 2012 % Change Total Enrollment (adm): School Districts 817,834 788,999-3.5% Charter Schools 11,998 38,726 222.8% Districts + Charters 829,832 827,725-0.3% Demographics: Special Education 113,828 125,132 9.9% Free and Reduced Lunch 238,371 311,871 30.8% Limited English Proficient 53,507 64,623 20.8% Students of Color 157372 220,3334 40.0% Source: MDE 20
PK-12 Education Revenue Total Revenue by Funding Stream General Education Revenue Breakdowns Revenue Trends 21
Total Revenue for Education $10.725 Billion 2013 Source: HRD 22
General Education Revenue by Component $6.926 Billion 2013 Source: HRD 23
General Education Revenue $6.926 Billion in 13 General Education Revenue consists of several components including: Basic Aid--$4,991 million Extended Time--$71 million Compensatory Revenue--$461 million Limited English Proficiency (LEP) Funding--$40 million Small Schools Revenue--$16 million Operating Sparsity Revenue--$25 million Transportation Sparsity Revenue--$62 million Operating Capital Revenue--$197 million Equity Revenue--$93 million Gifted and Talented Revenue--$12 million Q Comp Revenue $70 million Transition Revenue--$30 million Pensions Adjustment Reduction ($31 million) Referendum Revenue--$860 million 24
School District Revenue Per Student 1984 to 2010 Source: HRD 25
Revenue per Student Less Building Debt and Special Ed Expenses Source: HRD 26
Inflation Adjusted Revenue per Student Less Building Debt and Spec Ed Expenses Source: HRD 27
Percent Change in General Revenue / ADM, 2003 to 2013, Including Referendums, Not Adjusted for Inflation Source: MDE 28
Percent Change in General Revenue / ADM, 2003 to 2013, Excluding Referendums, Not Adjusted for Inflation 40% 30% 20% 15.1% 25.6% 21.5% 17.5% 17.0% 21.6% 18.9% 10% 0% -10% -20% MPLS & ST PAUL OTHER METRO, INNER OTHER METRO, OUTER NONMET>=2K NONMET 1K-2K NONMET < 1K CHARTER TOTAL Source: MDE 29
Percent Change in General Revenue / ADM 2003 to 2013, Excluding Referendums Adjusted for CPI 40% 30% 20% 10% 0% 0.4% -10% -8.0% -2.9% -6.1% -6.5% -2.8% -5.0% -20% MPLS & ST PAUL OTHER METRO, INNER OTHER METRO, OUTER NONMET>=2K NONMET 1K-2K NONMET < 1K CHARTER TOTAL Source: MDE 30
State Share of Revenue for Major Equalized Levies 120% 100% 100% 80% 60% 40% 34% 42% 20% 0% 26% 10% 11% 3% 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Referendum Debt Service Health & Safety Oper Capital Source: MDE 31
Change in General & Special Ed Revenue By Component 2003 2013, $ in millions 2003 2013 Change % Change Referendum 292 860 568 195% Basic 4490 4,990 500 11% Special Education 631 990 359 57% Compensatory 263 461 198 75% Extended Time 0 71 71 New Q Comp 0 70 70 New Equity 35 93 58 166% Transition 0 30 30 New School Land Endowment Trust 0 24 24 New Small Schools 0 16 16 New Pension Adjustment -47-31 16-34% Compensatory One-time 0 15 15 New Gifted and Talented 0 12 12 New Sparsity 16 25 9 56% Transportation Sparsity 56 62 6 11% Compensatory Pilot 0 2 2 New Operating Capital 198 197-1 -1% LEP Total 37 40-7 -15% Training and Experience 25 0-25 -100% Subtotal 6,007 7,927 1,921 32% Source: MDE 32
Ratio of 95th to 5th Percentiles of Basic + Referendum + Equity Revenue / PU 1.4 1.35 1.371 1.3 1.296 1.25 1.2 1.15 1.186 1.1 1.05 92 94 96 98 00 02 04 06 08 10 12 Source: MDE 33
GENERAL FUND EXPENDITURE PERCENTS BY PROGRAM 2011 Source: MDE
GENERAL FUND EXPENDITURE PERCENTS BY OBJECT 2011 Source: MDE
Pupil-Teacher Ratios, 1996-2011 22.0 20.5 20.0 18.3 19.2 19.3 18.0 16.0 14.0 17.1 15.2 16.1 15.9 12.0 10.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Including Special Ed Excluding Special Ed Source: MDE 36
Pupil-Teacher Ratios Excluding Special Educ by Strata, 03 and 11 24 22 20 18 16 14 12 10 8 6 4 2 0 18 19 20 20 Mpls& St Paul Other Metro Inner Ring 21 21 Other Metro Outer Ring 20 20 Nonmetro >=2K 18 18 Nonmetro 1K-2K 16 16 16 Nonmetro < 1K 17 Charter 2003 2011 Source: MDE 37
Source: MDE 38
Source: MDE 39