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Texas Public School Finance
Transcript of Texas Public School Finance
State and Local Perspectives: Where does the money come from and where does it go?
Local Perspective: Where does the money come from?
Where does the money go?
Chapter 41 Eligibility:
- bonded indebtedness
* form of local revenue
* raised from a separate tax levy
- lease-purchase agreements
* one alternative method of financing real property purchases and improvements
* district enters into a contract to lease and ultimately purchase a new facility or equipment (contract may not extend for more than 25 years)
2 Types of local property tax levies:
1. local maintenance tax for meeting operating costs
2. debt service tax to cover costs of indebtedness, including bonded debt
Local Revenues acquired for 4 basic purposes:
1. FSP first-tier local share (local fund assignment)
2. Local share of the second-tier guaranteed yield program
3. Local enrichment above the aid provided by the state
4. Retirement of debt
Where does the money go?
Small and mid-sized district adjustments
Weighted pupil system
Revenues from Local Sources:
- Texas has 4 sources
state funds / local property taxes / other local funds / federal funds
- account for approx. 50.4% of annual school revenues
- prior to 1982-83 nearly all budgeted local revenues derived from local property tax (exceptions: earnings from investments, building use fees, tuition charges, gifts, & royalties
Revenues from Federal Sources:
- approx. 7.6% of total local education revenues
- generally targeted monies
-EX: educationally disadvantaged students, handicapped students, & school lunch and breakfast programs
- fed. revenues vary widely among districts, depending on local policies, extent of poverty in the district, amount of federal tax-exempt property in the district, & other factors
- fed. aid constitutes essential source of funds for specific programs
Expenditures by Function:
- instructional services and pupil services account for nearly 3/4 of all current operating expenditures (73.3%)
- if instructional-related services and plant maintenance and operations are added in= 87.8%
- remaining 12.2% accounted for by administrative expenses at all levels and a small amount per pupil for community services
- some state aid is restricted in how it is used
EX: state aid for pupil transportation must be expended entirely for transportation, but it is permissible to spend up to 15% of the allocations for sped programs, career and technology ed, compensatory ed and bilingual ed in functions other than instructional services
Expenditures by Object:
- payroll expenses (salaries & benefits) account for the vast majority of school district budgets (normally accounts for 80% of operating expenses)
- The other 19.6%:
* purchased and contracted services
* supplies and materials
* other operating expenses
Viewing Expenditures from the Basic School Finance Structure:
- local share
* state shares the cost of the Tier 1 with each district through the local fund assignment (LFA)
- school district's local share is the first amount expended by the district from local tax funds
- sometimes termed "equalized local tax effort"
Guaranteed Yield Tax Rate:
- "second tier" rate above the Tier 1 local share tax
- district is "guaranteed" a specified yield for each cent of tax effort up to 64 additional cents per $100
- also includes a local share (the local yield from the second-tier tax rate)
- the state merely makes up the difference between the district's actual yield and the guarantee level.
Unequalized Local Enrichment:
- the amount has nearly been eliminated as dictated by school finance equity theory
- local response to the need for quality educational programs, the need for increased teacher pay, and the need to finance unfunded or partially funded mandates
- the basic issue of unequalized local enrichment has been adequacy of state support
Bonds and Capital Outlay:
- historically funding of capital outlay construction in Texas schools has been a matter for local taxes
- include not only construction but also furniture, equipment, land, and school buses
- not all such capital costs are funded from the annual local tax levy; payments from bond proceeds and earned interest on bond proceeds must also be factored in
- 1995-96, 93 school districts were subject to recapture and wealth-reduction requirements of Chapter 42, which sent an estimated $332 million in recaptured funds directly to other school districts or the state
- districts with property wealth in excess of $280,000 per WADA are required to select one or more options:
1. consolidation with another district
2. detachment of territory
3. purchase of attendance credits from state
4. contracting for education of nonresident students
5. tax base consolidation with another district
- no school district chose options 1, 2 or 5.
- chose either 3 or 4 (2/3 of the districts that were required to reduce their wealth decided to purchase attendance credits from the state)
Jacque Sulak and Hermann Pereira
Cost of Education Index
Tier II Weighted students in WADA
Taxable Value of property
Categorial Aid Outside the FSP