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Capitol Update: Ten Key Points Addressing the Upcoming July 1 Equalization Aid Estimate from WASBO

By Wisconsin School Administrators Alliance staff | July 1, 2024

Good Afternoon,

WASBO crafted the information below addressing the upcoming July 1 equalization aid estimate. DPI published the aid estimate today, as state law requires. Here are ten key points to use if you receive questions and need additional support:

  1. The July 1 equalization aid estimate is published by DPI every year, as required by statute, along with a press release. Since the first week of July tends to be a slow news period, the aid estimate receives more media attention than it perhaps deserves. It is after all only an estimate which will be superseded by actual data on October 15. Nevertheless, it is important that business officials, superintendents, and board members not be caught off guard by the July 1 announcement.
  2. Equalization aid is the largest single line item in the state budget. It provides financial assistance to school districts to achieve two basic policy goals:
    1. To reduce reliance upon local property taxes as the sole source of revenue for school districts.
    2. To guarantee that a basic educational opportunity is available to all pupils regardless of the local fiscal capacity of the school district in which they reside.
  3. Wisconsin school districts are subject to a revenue limit formula, which in effect puts a cap on school district property tax levies. The mechanics of the revenue limit formula dictate that equalization aid has an inverse relationship to property taxes (i.e. more of one means less of the other). For instance, an increase in equalization aid does not mean an increase in total school district revenue, as might be assumed. No, instead, more equalization aid means less reliance on local property taxes.
  4. The July 1 aid estimate is based on 2023-24 budgeted expenditures for all 421 school districts. However, the October 15 aid estimate will use a completely different data set. The October 15 aid estimate uses audited 2023-24 actual expenditures for all 421 school districts (i.e. not budget data). This is why the July 1 aid estimate may vary significantly from the October 15 aid estimate.
  5. In the state budget, the equalization aid allocation for 2024-25 is approximately $224.9 M higher for 2024-25 than 2023-24. On a statewide aggregate basis, this will cover most (but certainly not all) of the levy increase allowed by the revenue limit increase of $325 per pupil.
  6. The 2023-25 state budget increased the school levy tax credit (SLTC) as a policy preference instead of putting those funds into equalization aid. School levies would be lower if lawmakers had put the funds into equalization aid rather than SLTC. The SLTC creates a different distribution, generally favoring taxpayers in high property value school districts.
  7. Similarly, lawmakers maintained the existing $742 ‘Per Pupil Categorical Aid.’ Like the SLTC, Per Pupil Categorical Aid creates a different distribution than equalization aid. Generally, Per Pupil Categorical Aid favors taxpayers in high property value per pupil school districts.
  8. ESSER spending has no effect on equalization aid in that it is a ‘deductible receipt’ in the equalization aid formula.
  9. Voters in the Milwaukee Public Schools approved an operating referendum in April 2024 which will allow MPS to increase its revenue limit authority by $252 M phased in over the next four years. The MPS referendum has no impact on equalization aid distribution for 2024-25. However, there is another potential impact in on equalization aid in 2024-25 related to MPS. It has been publicly reported that MPS may be subject to a ‘prior year accounting adjustment’ of between $35 M to $50 M. If this occurs, those funds would be returned to the equalization aid pool for general distribution across the state in 2024-25. The July 1 aid estimate will not capture this potentiality.
  10. Finally, let’s not lose sight of the big picture in Wisconsin school funding. As of 2022, the most recent U.S. Census data available, Wisconsin per-pupil spending on K-12 was 7.2% below the national average, ranking 25th among the 50 states. Twenty years before, in 2002, Wisconsin ranked 11th among the states and spent 11% above the national average. Wisconsin experienced the largest change in state ranking in the nation during that time span.

Please feel free to share this memo with school board members or other interested parties as you see fit.

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