How Delayed State Budget May Impact School Districts

With the 2017-19 state budget now more than a month and a half overdue, increasing attention is being paid to the impact the delayed passage of the budget will have on schools, as evidenced by this Wisconsin State Journal article.

In a recent memo to members of the Legislature’s budget-writing Joint Finance Committee (JFC), the Department of Public Instruction (DPI) has outlined the impact of the delay on various state school finance calculations for the 2017-18 school year, for public school districts, as well as private choice schools and independent charter schools.

One of the key dates is October 15, when the DPI is required by state law to certify state general school aid amounts for public school districts.  School districts rely on these amounts and other data provided by the DPI in order to set their tax levies by the November 1 deadline.

The DPI indicates the 2017-19 biennial budget must be signed into law by October 3 to enable it to accurately run the October 15 General Aid Certification.  The DPI plans to release these numbers to districts on Friday, October 13, because October 15 falls on a Sunday this year.

Although no specific changes are proposed in the budget to the state general school aid formula (i.e., no additional aid dollars are added) in the first year of the budget, the general aid calculation has grown increasingly complex in recent years as it now incorporates a number of aid deductions related to vouchers.

That calculation now includes a deduction from all school districts for the Independent Charter School Program, district-by-district aid deductions for statewide and Racine voucher programs and the special needs voucher program as well as a specific aid deduction to Milwaukee Public Schools (MPS) for the Milwaukee voucher program.

Because school districts have the authority to adjust their property tax levies to make up for these deductions, missing this deadline may result in insufficient state aid deductions, which the DPI indicates would increase costs to the state’s general fund.

Another deadline identified by the DPI is October 27.  In order for school districts to set their property tax levies with an adjusted revenue limit that accurately reflects their aid deductions for resident pupils who participate in the statewide or Racine voucher programs or receive special needs vouchers, the DPI indicates the budget must be signed into law by October 27. The DPI warns that failure to meet this deadline may result in districts under-levying the revenue limit adjustment allowed for aid deductions for choice and charter programs. Districts would not have the ability to be made whole for the aid deducted from their allotment once their levies have been set as this offset comes from increasing property taxes.

Under current law, per pupil payments for the various “choice” programs are indexed to the annual increase, if any, in the per pupil revenue limit adjustments and the increase in per pupil categorical aids provided to public school districts.  In the absence of a signed budget bill, the DPI has no authority to increase the per pupil payment to schools in these programs above current law levels.  Under the governor’s original budget proposal, those per pupil payments were slated to increase by $217.  It is uncertain what the actual increase will be because the budget hasn’t been finalized and the status of some of the governor’s proposed aid increases (e.g., Sparsity Aid–see separate blog post) is unclear.

The lack of finality regarding these per pupil payments to “choice” schools will affect the amount of aid deducted from public schools, which in turn will affect those public school district’s ability to adjust their revenue limits and levies to compensate for these aid deductions and set their levies.

And, speaking of Sparsity Aid, the delay in passage of the budget likely means that the state’s smallest and most rural school districts will not receive their Sparsity Aid payments on the same timeline as prior years.  Historically, these aids have been paid in September, but the DPI memo indicates that with continued uncertainty about the amount of these payments and which districts will qualify to receive payments, these payments will likely be delayed and will not be paid out in September.

Finally, districts hoping to use the low-revenue ceiling adjustment could be out of luck if the budget isn’t signed into law by October 27.  Whether this adjustment will be provided to low revenue districts in the 2017-18 school year remains unclear. Assuming current proposals are approved by lawmakers and the governor, the DPI will need time to adjust revenue limit worksheets to enable these adjustments and time to double check district levies to make sure districts haven’t exceeded their revenue limit authority if they use the low-revenue ceiling.

DPI: Implications of Delayed Passage of the 2017-19 Biennial Budget Bill