property taxes: e-12 property taxes in context
DESCRIPTION
Table of Contents. Constitution, Trends, Basic Terms. Education Budget: Aid. Property Taxes: E-12 Property Taxes in Context. “The Big Plan”: A Brief Look Back. E-12 Levy Trends and Components Over Time. What About the Operating Referendum?. Percent of Districts That Have One. - PowerPoint PPT PresentationTRANSCRIPT
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Property Taxes: E-12 Property Taxes in Context
Education Budget: Aid
E-12 Levy Trends and Components Over Time
Constitution, Trends, Basic Terms
“The Big Plan”: A Brief Look Back
Table of ContentsTable of Contents
What About the Operating Referendum?
Where to Get More Info/Questions
Percent of Districts That Have OneBallot Question Trends Over TimeApproval Percentages Over Time
Shifts
Education Finance: ConstitutionEducation Finance: Constitution
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““The stability of a republican form of government The stability of a republican form of government depending mainly upon the intelligence of the depending mainly upon the intelligence of the people, it is the duty of the legislature to establish people, it is the duty of the legislature to establish a general and uniform system of public schools. a general and uniform system of public schools. The legislature shall make such provisions by The legislature shall make such provisions by taxation or otherwise as will secure a thorough taxation or otherwise as will secure a thorough and efficient system of public schools throughout and efficient system of public schools throughout the state.”the state.”
-- MN State Constitution, Article 13, -- MN State Constitution, Article 13, section 1section 1
Basic Terms: Revenue/Levy/AidBasic Terms: Revenue/Levy/Aid
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RevenueFunds available for school districts to spend
Revenue raised from taxation on property in a school district
Aid provided by state legislature to school districts
Aid
Levy
Rule of Thumb
REVENUE = AID + LEVY
Basic TermsBasic Terms
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Fiscal Year
A statutorily determined amount of tax capacity per pupil that determines the amount of aid and levy in a given district. Districts with tax base above the equalizing factor receive no aid.
Equalizing Factor
EqualizationThe process of reducing the impact of property wealth to
generate revenue for school districts by appropriating state aid. State aid is appropriated in higher amounts for districts with relatively less property wealth.
ANTCAdjusted Net Tax Capacity = The tax base used in
many K-12 formulas to measure the relative wealth of property in each district.
RMKVReferendum Market Value = The market value of all
taxable property in a district excluding seasonal rec and agricultural lands.
A 12 month budgeting period. For school finance & the state of MN, a fiscal year begins July 1 and ends June 30. School year 2011-12 is the same as FY 2012.
Education Finance: TrendsEducation Finance: Trends
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SCRFA,
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Education Finance: TrendsEducation Finance: Trends
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SCRFA,
ELNaumanMinnesota Department of Education Data
Education Finance: TrendsEducation Finance: Trends
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SCRFA,
ELNaumanMinnesota Department of Education Data
Education Finance: TrendsEducation Finance: Trends
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SCRFA,
ELNaumanMinnesota Department of Education Data
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Education Finance: TrendsEducation Finance: Trends
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Education Finance: TrendsEducation Finance: Trends
Education Finance: Aid/Levy Split Education Finance: Aid/Levy Split PolicyPolicy
The higher a district’s property value, the more revenue is raised through levyThe higher a district’s property value, the more revenue is raised through levy For a given amount of revenue the poorer district will receive a greater percentage For a given amount of revenue the poorer district will receive a greater percentage
of state aid/the wealthier district will receive lesser amounts of state aidof state aid/the wealthier district will receive lesser amounts of state aid Formula Examples: Operating Referendum, Operating Capital, Equity, Formula Examples: Operating Referendum, Operating Capital, Equity,
Transition, Qcomp, Debt ServiceTransition, Qcomp, Debt Service
ExampleExample::
0100200300400500600700800900
1000
Dist#1
Dist#2
Dist#3
Dist#4
Dist#5
Dist#6
Increasing Property Value Per Pupil
Rev
Val
ue P
er P
upil
State Aid
Property TaxLevy
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13
Source: Department of Management and Budget, Nov ‘11
Fcst
Education Finance: AidEducation Finance: Aid
14
Source: Department of Management and Budget, Nov ‘11
Fcst
Education Finance: AidEducation Finance: Aid
15
Source: Department of Management and Budget, Nov ‘11
Fcst
Education BudgetEducation Budget
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Education Finance: Property Education Finance: Property TaxesTaxes
Total = $8,118.7 million
SCRFA,
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JPaulson
17MN State Senate Fiscal Staff
Education Budget: Property Tax Education Budget: Property Tax TrackingTracking By Fund, FYs 12-15 By Fund, FYs 12-15
Based on Nov 11 Forecast
E-12 Property TaxesE-12 Property Taxes
(in millions)FY 2012FY 2012 FY 2013FY 2013 FY 2014FY 2014 FY 2015FY 2015
General FundGeneral Fund 1,308.71,308.7 1,347.91,347.9 1,389.61,389.6 1,414.41,414.4
Community Service Community Service FundFund
75.175.1 75.675.6 75.775.7 77.277.2
Debt Service FundDebt Service Fund 804.3804.3 813.0813.0 831.9831.9 854.0854.0
OPEB/Pension Debt SvceOPEB/Pension Debt Svce 59.859.8 65.865.8 68.568.5 69.569.5
Total Schl Dist LeviesTotal Schl Dist Levies 2,248.02,248.0 2,302.32,302.3 2,365.72,365.7 2,415.12,415.1
Credits & AdjCredits & Adj (72.9)(72.9) (15.1)(15.1) (14.3)(14.3) (14.3)(14.3)
Total Certified LeviesTotal Certified Levies 2,175.22,175.2 2,287.22,287.2 2,351.42,351.4 2,400.82,400.8
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““The Big Plan”: A Look BackThe Big Plan”: A Look Back2001 Education Reform
Supplemental & Transition Revenue programs “rolled” into Referendum Authority.
General Education Property Tax Replaced with State Aid
Levy = $1.3 billion; Total State Cost $880 million after “netting”
credits from education homestead credit.
$415 per pupil of referendum authority transferred to GenEd formula allowance.
$120 million of Referendum, Supplemental, & Transition Levy Replaced with State Aid.
Based on Nov 11 Fcst.
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Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections. Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections.
Education Finance: Property TaxesEducation Finance: Property Taxes
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Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections. Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections.
Education Finance: Property TaxesEducation Finance: Property Taxes
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Education Finance: Property TaxesEducation Finance: Property Taxes
Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections. Data based on Based on Nov 11 forecast . Levies for FY 13 and later are projections.
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Education Finance: Operating Education Finance: Operating ReferendumReferendum
SCRFA,
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Education Finance: Operating Education Finance: Operating ReferendumReferendum
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The Bauerly
amendment
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Education Finance: Operating Education Finance: Operating ReferendumReferendum
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Minnesota Department of Education Data
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Education Finance: Operating Education Finance: Operating ReferendumReferendum
SCRFA,
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Education Finance: Operating Education Finance: Operating ReferendumReferendum
SCRFA,
ELNauman*Includes Tax Base Replacement Aid. Projections for FY 2012 and FY 2013.Minnesota Department of Education Data
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Education Shifts Education Shifts
Current Payment
60/40
Auto-
Buyba
ck
Final Payment
Entitlem
ent
90/10
Recognition
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Basic TermsBasic Terms
The percentage of an entitlement that is paid in the fiscal year after the state aid is generated. Difference between prior year’s entitlement and that year’s current payment (MS127A.45, subd. 9).
The amount of state aid that the state pays to districts and charter schools in a given year. In most cases, an appropriation consists of a portion of an aid entitlement from the “current” fiscal year and a “final” payment from an aid entitlement from the prior fiscal year.
Appropriation (Education Context)
Final Payment
Aid Entitlement100 percent of the state aid a district or a charter
school is eligible to receive in a given fiscal year. Aid may actually be paid in a separate fiscal year
Current PaymentThe percentage of an entitlement that is paid in
the fiscal year in which the state aid is generated.
Payment ScheduleA schedule which expresses the amount of education
aid entitlements that are paid as a “current” payment and the amount that is paid as a “final” payment. Must add to 100%.
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Basic TermsBasic Terms
An adjustment to the balance of current and final payment percentages which constitute the state aid appropriation made to schools.
In an “unshifted” environment, school aid payments are comprised of a combination of 90% of the current year’s entitlement added to 10% of the prior year’s entitlement.
Payment Shift
The appropriation is metered to schools in 23 payments throughout the year – roughly every two weeks
Beginning in FY 12, the aid payment shift percentage is 60/40.
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E-12 Programs on Payment E-12 Programs on Payment ScheduleSchedule
• General Education• Abatement Aid• Consolidation Transition Revenue• Nonpublic Pupil Aid• Nonpublic Pupil Transportation Aid• Compensatory Formula Aid• Charter School Building Lease Aid• Charter School Start-Up Aid• Integration Aid• Literacy Incentive Aid• Success for the Future• Tribal Contract Schools• Special Education – Regular• Special Education – Excess Cost• Travel for Home-Based Services• Transition Programs – Students with
Disabilities• Health and Safety Aid
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E-12 Approps on Payment E-12 Approps on Payment ScheduleSchedule
• Debt Service Equalization Aid• Alternative Facilities Bonding Aid• Deferred Maintenance• Basic Support Grants for Libraries• Multicounty, Multitype Library Systems• Regional Library Telecommunications Aid• School Readiness• Early Childhood Family Education Aid• Health and Developmental Screening Aid• Community Education• Adults with Disabilities Program Aid• School Age Care Aid• Adult Basic Education Aid
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SchoolSchool Payment Shift Payment Shift
Entitlements(amounts generated
by formula)
2010 2011 20122009$100
Current Payment$90
$100Appropriations
2013
Mechanics of Payment Schedule (Without Shift)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
90%/10%
90%/10%
90%/10%
90%/10%
$90 $90$90$90
Final Payment+ $10
FromFY
2008
+ $10 + $10+ $10 + $10
$100 $100 $100 $100
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SchoolSchool Payment Shift Payment Shift
Entitlements(amounts generated
by formula)
2010 2011 20122009$100
Current Payment$90
$100Appropriations
2013
Mechanics of Aid Payment Shift (2010-11 biennium & Feb 2011 Fcst law)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
73%/27%
70%/30%
90%/10%
90%/10%
$73 $90$90$70
Final Payment+ $10
FromFY
2008
+ $10 + $30+ $27 + $10
$ 83 $97 $120 $100
Entitlements: Under a payment shift, there is not adjustment to entitlements. A payment shift creates a delay of WHEN schools receive aid. It does not reduce the amount. SCRFA,
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SchoolSchool Payment Shift Payment Shift
Entitlements(amounts generated
by formula)
2010 2011 20122009$100
Current Payment$90
$100Appropriations
2013
Where We’re At Today (2011 E-12 Education Bill)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
73%/27%
70%/30%
60%/40%
60%/40%
$73 $60$60$70
Final Payment+ $10
FromFY
2008
+ $10 + $30+ $27 + $40
$ 83 $97 $90 $100
FY 2010-11 Biennium
FY 2012-13 Biennium
Confusing Comparison: The shift percentage in FY 2012 is 10 percentage points lower than the prior year, BUT is 30 percentage points lower than the Feb Fcst for FY 2012.
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Basic TermsBasic Terms
Property Tax Recognition Shift
(PTRS)A PTRS is an accounting entry that takes a
portion of a district’s property tax revenue and moves it back one year. (ie. PT revenue that would otherwise be revenue in FY 2012 is shifted into FY 2011)
The second step is to reduce state aid in an amount equal to the property taxes shifted forward. This generates one-time savings.
The current PTRS was enacted by the legislature in 2010. The amount shifted will grow over time as property taxes grow.
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Property Tax Recognition ShiftCalendar Year 2011
Oct Jan ‘11 May July 1
Property taxes paid
FY 2011
FY 2012
Dec
Property taxes paid
Property tax revenue recognized by
districts
Property tax revenue recognized by
districts
School property taxes currently paid in two separate years, BUT prior to FY 2011 both May and October payments were “recognized” by districts as revenue in the later fiscal year.
Prior to Change
Rules governing recognition dates based on statute and UFARS.
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Property Tax Recognition ShiftCalendar Year 2011
Oct Jan ‘11 May July 1
Property taxes paid
FY 2011
FY 2012
Dec
Property taxes paid
Property tax revenue recognized by
districts
Property tax revenue recognized by
districts
Prior to ChangeLegislative Change – Creating a Shift
Step #1 –Change
Levy Recognition
Step #2 – GenEd
Appropriation Reduction
Aid cut in FY 11 by $515 million*
Increase Levy Revenue by $515 million * in FY 11
*Based on Nov 11 Fcst SCRFA,
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ContingentContingent Shift Buy-Back Shift Buy-Back
Because shifts have historically been used as a defacto Because shifts have historically been used as a defacto “budget reserve” a system was created in 2004 to pay “budget reserve” a system was created in 2004 to pay them back automatically. This law remains in effect them back automatically. This law remains in effect today.today.
Shifts are paid back when the Commissioner of MMB Shifts are paid back when the Commissioner of MMB “determines that there will be a positive unrestricted “determines that there will be a positive unrestricted budgetary general fund balance at the close of the budgetary general fund balance at the close of the biennium.”biennium.”
In order of precedence: (1) Cash flow account, (2) In order of precedence: (1) Cash flow account, (2) budget reserve, (3) payment shift,(4) property tax budget reserve, (3) payment shift,(4) property tax recognition shift and two other small payments.recognition shift and two other small payments.
This process used once already. Shifts from 2002 & This process used once already. Shifts from 2002 & 2003 sessions were paid back in two years. The Nov 2003 sessions were paid back in two years. The Nov ‘11 forecast repaid the cash flow account and nearly ‘11 forecast repaid the cash flow account and nearly restored the budget reserve. restored the budget reserve.
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Contingent Shift Buy-BackContingent Shift Buy-BackMS.16A.152 Budget Reserve and Cash Flow AccountsMS.16A.152 Budget Reserve and Cash Flow AccountsIf on the basis of a forecast of general fund revenues and expenditures, the If on the basis of a forecast of general fund revenues and expenditures, the
commissioner of management and budget determines that there will be a positive commissioner of management and budget determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium, the unrestricted budgetary general fund balance at the close of the biennium, the commissioner of management and budget must allocate money to the following commissioner of management and budget must allocate money to the following accounts and purposes in priority order:accounts and purposes in priority order:
(1) the cash flow account established in subdivision 1 until that account reaches (1) the cash flow account established in subdivision 1 until that account reaches $350,000,000;$350,000,000;
(2) the budget reserve account established in subdivision 1a until that account (2) the budget reserve account established in subdivision 1a until that account reaches $653,000,000;reaches $653,000,000;
(3) the amount necessary to increase the aid payment schedule for school district (3) the amount necessary to increase the aid payment schedule for school district aids and credits payments in section 127A.45 to not more than 90 percent rounded aids and credits payments in section 127A.45 to not more than 90 percent rounded to the nearest tenth of a percent without exceeding the amount available and with to the nearest tenth of a percent without exceeding the amount available and with any remaining funds deposited n the budget reserve;any remaining funds deposited n the budget reserve;
(4) the amount necessary to restore all or a portion of the net aid reductions under (4) the amount necessary to restore all or a portion of the net aid reductions under section 127A.441 and to reduce the property tax revenue recognition shift under section 127A.441 and to reduce the property tax revenue recognition shift under section 123B.75, subdivision 5, by the same amount………..section 123B.75, subdivision 5, by the same amount………..
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Contingent Shift Buy-BackContingent Shift Buy-Back
Cash Flow Account *Cash Flow Account * 255255
Budget Reserve*Budget Reserve* 653653
E-12 Aid Payment E-12 Aid Payment ShiftShift
2,1252,125
Property Tax Property Tax Recognition ShiftRecognition Shift
565565
State Airports FundState Airports Fund 1515
Fire Safety AccountFire Safety Account 1111
Total Contingent Total Contingent SpendingSpending
$3,624$3,624
* Nov ‘11 forecast allocated $255M to * Nov ‘11 forecast allocated $255M to cash flow account & $648 M to cash flow account & $648 M to budget reserve.budget reserve.
FY 2012 Contingent Spending If PaidFY 2012 Contingent Spending If PaidBack in FY 2012 Based on End-of-Session EstimatesBack in FY 2012 Based on End-of-Session Estimates
(dollars in millions)(dollars in millions)
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Education FinanceEducation FinanceEducation Shift Savings – A History of
Legislative Changes
Fiscal Year
2003 Payment 83/17 ( $437.5 M) Nov. 2005 Fcst
Type Level Amount
When Enacted (if known)
Year PaidBack
2004** Payment 80/20 ($185.3 M) Nov. 2005 Fcst2004** PTRS 48.6 ( $230.3 M ) Feb. 2006 Fcst
1983 PTRS 32% ($240.7 M) Partially in ’85, ’96-’991985 PTRS 24% shift reduced1988 PTRS 27% shift expanded 1996-1999 1990 PTRS 31% shift expanded 1996-19991992 PTRS 37% shift expanded 1996-1999 1993* PTRS 50% shift expanded Partially in ‘94
1994 PTRS 37.4% shift
reduced 1996 PTRS 18.1% shift reduced 1997 PTRS 7% shift reduced 1997 Payment 90/10 shift reduced 1999 PTRS 0% PTRS eliminated
*Previous shift high point in FY 1993, $688 million owed to schools.
**2004 the Legislature passed the contingent shift buyback language. SCRFA,
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Education FinanceEducation FinanceEducation Shift Changes – A History of
Legislative Changes
Fiscal Year Type Level
Amount When Enacted
(if known)
Year PaidBack
2005 Payment 81.9/18.1 $116.3 M Nov. 2004 Fcst
2005 Payment 84.3/15.7 $143.7 M Feb. 2005 Fcst
2006 Payment 84.3/15.7 $355.0 M Nov. 2005 Fcst
2006 PTRS 10.8% $265.9 M Nov. 2005 Fcst
2006 PTRS 0% $72.9M Feb. 2006 Fcst
2011* PTRS 48.6% ($561.5M ) Based on pos fcst
2010* Payment 73%/27% ( $1,160.4M) Based on pos fcst
* Shifts initially created by Gubernatorial unallotment process and subsequently codified into law.
2011 Payment 70%30% ($207.7M) Based on pos fcst
2012 Payment 60%/40% ($739.2M ) Based on pos fcst
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Questions/Questions/Discussion?Discussion?
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Department of Education; Division of Program Finance
http://education.state.mn.us
Senate Counsel, Research and Fiscal Analysishttp://www.senate.leg.state.mn.us/departments/office_bio.php?
Is=85&office_id=1007
Legislative Reference Library, K-12 Education Links to the World
http://www.leg.state.mn.us/lrl/links/educat.asp
Department of Finance, Budget Information http://www.budget.state.mn.us
Where to Get More InformationWhere to Get More Information
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Where to Get More InformationWhere to Get More Information
“Financing Education in Minnesota” is published annually by the Minnesota House of Representatives Fiscal Analyst Department
http://www.house.leg.state.mn.us/fiscal/files/06fined.pdf“Minnesota School Finance: A Guide for Legislators” is
published by the Minnesota House of Representatives Research Department
http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf
“E-12 Budget -- Education Finance Overview” is published every biennium by the Minnesota Senate Counsel, Research and Fiscal Analysis Office
http://www.senate.leg.state.mn.us/departments/scr/presentations/index.php#header
Continued…
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Minnesota Senate Education Minnesota Senate Education StaffStaff
Nonpartisan Staff
Ann Marie Butler, Counsel 651/296-5301
Kent Hranicka, Research Analyst 651/296-0558
Eric Nauman, Fiscal Analyst 651/296-5539
Caucus Staff
Ed Cook, Majority Research 651/296-0129
Danna Elling, DFL Research 651/296-7089
Greg Marcus, Education Committee
Administrator 651/296-5312