School Finance and Small Schools

1. School Finance and Small Schools How current law impacts small schools in Texas Presented by the Texas Association of Rural Schools

2. Basic terms you will need to know • ADA (Average Daily Attendance) • The number of students in attendance on average each day of the school year • BA (Basic Allotment) • Amount the state sets for the basic program costs for a “regular” child • The BA is adjusted to account for the higher cost for districts in certain areas (CEI) • ABA (Adjusted Basic Allotment) • The ABA is adjusted by the small and mid-size district adjustments • AA (Adjusted Allotment) • The amount the state uses to calculate each district’s revenue Texas Association of Rural Schools

3. Chapter 42.103 Small Schools Formulas • At least 300 square miles • AA = (1+((1,600-ADA) x .0004)) x (ABA) • Less than 300 square miles • AA = (1+((1,600-ADA) x .00025)) x (ABA) Texas Association of Rural Schools

4. Small Schools Formula’s Impact • In our example, let’s assume • 400 ADA • Less than 300 square miles Texas Association of Rural Schools

5. Example 1 AA = 1+((1600-ADA) x .00025) x ABA AA = 1+((1600-400) x .00025) x ABA AA = 1+(1200) x .00025) x ABA AA = 1+(.30) x ABA AA = 1.30 x ABA Texas Association of Rural Schools

6. A school with 400 ADA and less than 300 sq. miles gets a 30% increase in weights for all students Texas Association of Rural Schools

7. Example 2 AA = 1+((1600-ADA) x .0004) x ABA AA = 1+((1600-400) x .0004) x ABA AA = 1+(1200) x .0004) x ABA AA = 1+(.48) x ABA AA = 1.48 x ABA Texas Association of Rural Schools

8. A school with 400 ADA and at least 300 sq. miles gets a 48% increase in weights for all students Texas Association of Rural Schools

9. An increase of 30% or 48% is truly significant for small schools regardless of wealth. Texas Association of Rural Schools

10. This is the life-blood of rural education in Texas Texas Association of Rural Schools

11. Chapter 42.104—Requires use of AA in determining Special Allotments • The Adjusted Allotment—which includes the impact of the small schools formula—is used in calculating five special allotments • Special Education • Career and Technology (Vocational Education) • Compensatory Education • Bilingual/ESL Education • Gifted and Talented Texas Association of Rural Schools

12. Importance of using AA in calculating special allotments • TEA originally tried to use ABA instead of AA in the calculation of these five special allotments • This would have resulted in a significant DECREASE in funding in ALL special programs… • …and would have ignored the extra cost to small districts • We must always maintain vigilance to protect the articles we fought for. Texas Association of Rural Schools

13. Chapter 42.105—Sparsity Adjustment for very small schools • HB 1126 in 1975 session • Intent was to guarantee at least one teacher for each grade taught • HB 72 in 1984 special session • Switched to a pupil-centered approach to finance that guaranteed credit of 10 ADA per grade • Same effect—one teacher for each grade Texas Association of Rural Schools

14. How the sparsity adjustment works • First example—K-12 district • Credited with 130 ADA…if • Have at least 90 ADA in current or preceding school year…or • Is 30 miles from the nearest neighboring high school Texas Association of Rural Schools

15. How the sparsity adjustment works • First example—K-12 district • Credited with 130 ADA…if • Have at least 90 ADA in current or preceding school year…or • Is 30 miles from the nearest neighboring high school Texas Association of Rural Schools

16. How the sparsity adjustment works • Second example—K-8 district • Credited with 75 ADA…if • Have at least 50 ADA in current or preceding school year…or • Is 30 miles from the nearest neighboring high school Texas Association of Rural Schools

17. How the sparsity adjustment works • Final example—K-6 district • Credited with 60 ADA…if • Have at least 40 ADA in current or preceding school year…or • Is 30 miles from the nearest neighboring high school Texas Association of Rural Schools

18. Chapter 42.106—Adjusted Property Value for Districts Not Offering All Grade Levels • K-6 and K-8 districts send their secondary students to neighboring high schools • The loss of the “count” of these students increases the sending school’s wealth • Decreases state funding • Increases recapture for wealthy districts • But, these receiving districts often charge tuition • Sending school retains costs • Purpose—Recognizes this tuition cost by adjusting property value of the sending district Texas Association of Rural Schools

19. The formula… ADPV = DPV – (TN/.015) where: • ADPV is the district’s adjusted taxable value • DPV is the district’s actual property value before adjustments • TN is the total tuition paid Texas Association of Rural Schools

20. The TN/.015 is the taxable value necessary to pay the tuition. By reducing the district’s value by this amount, state revenue goes up (or recapture goes down) by an amount necessary to pay the tuition. Texas Association of Rural Schools

21. An Example of How it Works Let’s assume our district in this example …has a property value of $20 million and …pays a tuition of $500 for each 30 pupils $500 x 30 students = $15,000 tuition paid Texas Association of Rural Schools

22. An Example of How it Works ADPV = DPV – (TN/.015) ADPV = $20,000,000 – ($15,000/.015) ADPV = $20,000,000 – ($1,000,000) ADPV = $19,000,000 This represents a recovery of 5% of the total tax roll of this district. Texas Association of Rural Schools

23. An Example of How it Works ADPV = DPV – (TN/.015) ADPV = $20,000,000 – ($15,000/.015) ADPV = $20,000,000 – ($1,000,000) ADPV = $19,000,000 This represents a recovery of 5% of the total tax roll of this district. $30,000 $2,000,000 $18,000,000 10% Texas Association of Rural Schools

24. Chapter 41.21—Wealth per Student in Certain Districts Not Serving All Grades • Expires 9/1/2004, but is a current hold-harmless based on 1999-2000 local and state revenue for wealthy districts • In 1999-2000, Chapter 41 districts were allowed to retain the ADA of students begin taught in a neighboring district. • This was allowed regardless of whether tuition was charged Texas Association of Rural Schools

25. Chapter 46.003—School Facilities Allotment FYA = (FYL x ADA x BTR x 100) – (BTR x DPV/100)) Not less than 400 Texas Association of Rural Schools

26. Chapter 46.005—Limitation on Amount of Facilities Allotment • Greater of: • $100,000; or • ADA times $250 • Impact: 400 ADA x $250 = $100,000 Texas Association of Rural Schools

27. Chapter 46.010 Projects by More Than One District • Two or more districts may “co-op” to build a shared facility at a single location • Each district is entitled to a 20% higher amount than otherwise entitled to under Ch. 46.005 • Purpose: Encourage efficiencies by sharing new construction without having to consolidate districts Texas Association of Rural Schools

28. Defending what we have fought for • Each of these provisions is a reflection of a specific need unique to small schools • These needs have not gone away. • If anything, with the new, increased demands, they are greater now than ever before Texas Association of Rural Schools

29. Summary • Small Schools Adjustments • Recognizes small classes and a need for more teachers • Use of small schools adjustments to calculate special allotments • Diseconomy of scale extends into special programs • Sparsity Allotment • Ensures revenue for minimum staffing • Adjustment for tuition paid by K-6 and K-8 districts • Recognizes actual expenses incurred by these districts in educating their students • Facilities Adjustments • Minimum of 400 ADA to achieve $100,000 project • Coop Incentive • Districts are allowed (even rewarded) to share new facility cost—without consolidating districts Texas Association of Rural Schools

30. Summary • Small Schools Adjustments • Use of small schools adjustments to calculate special allotments • Sparsity Allotment • Adjustment for tuition paid by K-6 and K-8 districts • Facilities Adjustments • Coop Incentive Texas Association of Rural Schools