Each year at about this same time, school districts all over the State of Iowa work to prepare a budget and tax rate for the following school year. In accordance with State Statutes, this process must be completed by April 15th each year. Financing for Iowa schools has some unique parameters that I’d like to share with you.
First, there are several different funds that schools may have. In other words, there isn’t just one big pot of money that can be used for whatever the district needs. Each district has a General Fund, which is mainly for the operations of the district. Districts also have a Management Fund, a Physical Plant and Equipment Fund, a Secure and Advanced Vision for Education (penny sales tax) fund, a Food Service Fund, and an Activity Fund. Some districts also have a Debt Service Fund and a Public Education Recreation Fund. Each of these funds have a specific purpose and some restrictions on how the money can be spent.
The General Fund receives revenues based upon the numbers of students who are residents of the district multiplied by the cost per pupil, which is determined by the Iowa Legislature. The revenue is a combination of local property taxes and state aid. The district also receives other revenues referred to as miscellaneous income which can be from grants, textbook fees, Federal funds, donations, and open enrollment of student in from neighboring districts to name a few. The General Funds are then used for items such as salaries, benefits, transportation, textbooks, utilities and maintenance as well as other operating expenses.
The Management Fund receives revenues from property taxes only. This fund is very restrictive in that it can only be used to pay for property/liability insurance, unemployment and retirement benefits.
The Physical Plant and Equipment Levy fund or PPEL, receives revenues from property taxes. The Earlham District has a Board approved $.33/$1,000 taxable valuation and a voter approved $1.00/$1,000 taxable valuation. Like the management fund, the PPEL fund is restricted in what the funds can be used for. For example, replacing a school bus or the roof on the building is an allowable use for the PPEL fund. At one time, the Earlham District used PPEL funds for repayment of bonded indebtedness. But, the PPEL funds are not allowed by State Statute to be used for salaries, benefits, textbooks or supplies.
The Secure and Advanced Vision for Education or SAVE fund is similar to the PPEL fund, but not exactly the same. The revenues from this fund are generated through the collection of a one cent sales tax and distributed to schools on a per pupil basis. The use of SAVE funds are very similar to the use of the PPEL funds listed above. The Earlham District is currently using the majority of the SAVE funds to pay for the football field/track project. In addition, these funds have been used in the past by the district to lower the property tax rate to repay the bonded indebtedness.
The Food Service fund is for the breakfast and lunch programs. This is a self-supporting fund in which revenues from sales of breakfast and lunch as well as subsidies from the State and Federal governments provide the revenues to pay for the cost of operating the program. This includes the cost of the food, supplies and labor costs.
The Activity fund is much like the Food Service fund as it is a self-supporting fund. Within the Activity fund are funds for athletics, FFA, Student Council and a host of other organizations. Each organization raises the funds to support their activity.
Debt Service funds are voter approved funds for major building projects that are paid through property taxes. The district is currently paying off General Obligation Bonds for the 2003 addition to the building that included elementary classrooms, music rooms, the practice gym and the auditorium.
The Public Education and Recreation Levy is a property tax levy that very few school districts in Iowa have available. It is a voter approved property tax levy and normally it is used for playgrounds and other open areas used by the school and the general public for recreation purposes. Earlham School does not have this levy.
As you can see, there are several different funds and although I tried to provide an overview, hopefully you can see that different funds receive revenues from different sources and have restrictions as to what can be purchased by each fund.