Base for Financial Planning & Equality

Base for Financial Planning & Equality Presented by: Randy & Amy

Tonight’s Agenda • Revenue, Income, Fiduciary Money • Tax Groups • Tax Evaluation Criteria • Landmark Cases in Equity Treatment • Vertical and Horizontal Equity • Guidelines and Conclusions

Introduction to Revenue: the base • “As a future school leader, you should be able to explain the system for financing public schools” • The way the accounting system sorts $ into financial records are: • There are three basic sources for money in schools: • Income • Revenue • Fiduciary Money

What exactly is Revenue ? • Revenue = tax collections (federal, state, local) by public or for-profit corporations • It is usually received prior to offering any services • It is usually spent on instructionally-related expenses • It is labeled (for accounting purposes) as government money

Where does money come from?

There are Four Tax Groups • Income: (personal and business) – this is earned money • Wealthy: (property) – this includes homes, automobiles, etc. Individual states have different approaches to collecting this tax • Sales and Excise: (consumption) – this is tax on consumables • Privilege: (fees, etc…) – this includes curricular fees for supplies, extracurricular charges, incidental costs (yearbooks), supplemental fees for special courses, nonuser fees

Evaluating Taxes • Yield: does this cover the expenditures? Is it flexible? • Elasticity: what is the change in tax yield to change in the economic growth? • Equity: does a tax treat everyone fairly? • Incidence/Impact: what is the domino effect on other taxes? • Progressive, proportional, regressive: are there more taxes with more income, is it equal to income, or does it favor less tax for more income? • Cost: how much does it cost to collect and manage the tax?

Bond Revenue • Bond sold to raise capital for expensive projects beyond the fiscal year. • Can be retired or sold • Primarily from an addition to the local tax levy • Multiplier affect can bring short term financial stimulation to community

Income • Income is money received in exchange for goods or services • Examples include food sales, concessions, ticket sales, building rentals, etc… • Lotteries

Fiduciary Monies • This money comes from donors, funders, foundations, student clubs, school auctions, graduating classes, trusts, etc…

History of Education Equality • Access (14th Amendment, Brown, etc.) • Treatment (Serrano, Rodriguez, etc.) • Outcome (NCLB, Grad. Standards, etc.)

Case Study One: Serrano v. Priest 1969, California Supreme Court Case: - Disparity in property wealth within a district created inequity in funding - Education a fundamental right within the state constitution Outcome: - property tax used = YES - Fiscal Neutrality = YES (wealth of the state determines spending level per student)

Case Study 2: San Antonio ISD v. Rodriquez • 1973, US Supreme Court Case • Found that students in poor districts did not meet definition of “suspect classification” • Thus, not eligible for equal protection, AND • Education not a fundamental right guaranteed in the Federal Constitution

Case Study 3: Robinson v. Cahill 1973, New Jersey State Supreme Court Found: - Same as Rodriguez (no suspect class and not a federal fundamental right) However, also found: NJ State Constitution violated by not providing a “thorough and efficient” system for education and ordered the state legislature to fix. A very unpopular state income tax was passed to relieve the property tax burden.

Skeen v. State of MN, 1993 • Lower court found education a fundamental right. • MN Supreme Court reversed the lower court: Fair as long as state money is distributed equally • Local differences permissible beyond the base amount provided by state.

Impact of these Hallmark Cases • Clearly established that education is a state responsibility. • Legal Challenges based on “treatment” through $ spent. • Legislatures left fix the problems • Ongoing challenges to state finance systems continue

Horizontal & Vertical Equity • Both try to equalize outcomes • H = the concept of treating similar students equally (all calculus students treated similarly) • V = the concept of treating unequal students unequally (disabilities require unequal treatment)

Creating a National Public Ed Policy • Really based on trying to develop measurable and standardized Outcomes • Example, NCLB • Complicated balance of power between states and federal government.

Categories of State & Federal Aid • Grants • Unrestricted • Typically based in equal access and Horizontal equity • Usually in lump sum amounts used on all students • Restricted • Often awarded for the support of Vertical Equity • Generally a formula involved for allocation towards specific students or programs • Federal money passes through the State agency (SEA) which then passes to Local agency (LEA); SEA retains a % of the $

Guideline for Administrators • You must responsibly develop systems to provide Financial Equity • Difficult balance between expectations and constraints • Data (students, staff, scores) driven decisions based on measuring definable outcomes • Beliefs, law, standards, what is “best” shape your decisions

Further Research What is “adequate”? Examine formula for state funding What is “equitable”? Is “sameness” the same as “fairness”

Conclusion • Money comes in from a variety of sources • Political and economic forces directly influence decisions about financing education - administrators are actors in the political system • Administrators must be aware of the impact of these forces on a local level • Educational equity is the mandate and the goal

Base for Financial Planning & Equality