Relating to incentives for whole grade sharing and school district reorganization or dissolution

Description

Senate File 2403 extends the currently expired whole grade sharing supplementary weighting and reorganization incentives until July 1, 2031 (FY 2032).

Background

2019 Iowa Acts, chapter 101 (School Districts — Whole Grade Sharing, Reorganization, or Dissolution Incentives Act), extended school district reorganization incentives until the end of FY 2024. The current provisions, originally enacted in 2001 and effective for school reorganizations between FY 2002 and FY 2007 (2001 Iowa Acts, chapter 126 School Finance — Miscellaneous Changes), were reauthorized for school reorganizations between FY 2008 and FY 2014 during the 2007 Legislative Session (2007 Iowa Acts, chapter 130 School District Reorganization and Sharing Incentives). Previously, the provisions were reauthorized for FY 2015 through FY 2020 during the 2014 Legislative Session (Iowa Code section 257.11A). Incentives include the following:

• Uniform levy rate reductions replaced with State aid. The uniform levy rate is $5.40 per $1,000 of assessed valuations. The rate reductions are phased out over a three-year period. For districts with enrollments of fewer than 600 students, the uniform levy rate will be reduced $1.00 in year one, $0.50 in year two, and $0.25 in year three. If a school district that has an enrollment exceeding 600 students merges with a district that has an enrollment of fewer than 600 students, then the larger district will instead receive a reduction in the uniform levy total equal to the reduction in the uniform levy total that the smaller district receives. For example, if the rate reduction in year one generated a reduction in the uniform levy totaling $500,000, the district with an enrollment that exceeded 600 would have its portion of the uniform levy reduced by $500,000.
• Whole grade sharing and joint employment. School districts are eligible for supplementary weighting for pupils who attend class in another school district, attend class taught by a teacher employed by another school district, or attend class taught by a teacher jointly employed by two or more school districts that share the services of that teacher.
• Reorganization supplementary weighting. School districts that have a whole grade sharing agreement, meet specific requirements, and reorganize by FY 2024 may receive supplementary weighting equal to the whole grade supplementary weighting amount received in the year prior to the reorganization for resident students. Districts can receive reorganization incentive supplementary weighting for up to three years. However, the combination of whole grade sharing supplementary weighting and reorganization incentive supplementary weighting cannot exceed six years.

The supplementary weightings and reorganization incentives are funded through a mix of State aid and property taxes, which are calculated through the school finance formula. State aid costs associated with each of these supplementary weightings have varied due to the size and number of districts that are eligible to receive supplementary weighting. The property tax portions associated with each of these supplementary weightings have varied due to the size and number of districts that are eligible to receive supplementary weighting. Uniform levy reductions are paid by State aid through the school finance formula. The State aid cost for the uniform levy incentives depends on the enrollment and taxable valuation of a district. School Reorganizations/Dissolutions Since 2002 Prior to the enactment of reorganization incentives, there were 371 school districts in FY 2002. The response to the initial reorganization incentives was limited, with the number of districts decreasing by nine between FY 2002 and FY 2008, a reduction of 2.4%. However, since the reauthorization of the incentives, reorganizations have increased and the number of districts in FY 2025 has dropped to 325, a 12.4% reduction since FY 2002. Enrollment declines have also contributed to the reduction in the number of school districts. Figure 1 shows a timeline of the number of districts since FY 1995 and when reorganization incentives were enacted and reauthorized.

Figure 1 — Number of School Districts in Iowa — FY 1995 - FY 2025

State Aid

Figure 2 shows the amount of State aid provided in uniform levy reductions, the amount of State aid provided for reorganization incentives, and whole grade sharing and joint employment for FY 2005 through FY 2025. Since FY 2004, State aid costs for uniform levy reduction have totaled $18.6 million, the estimated State aid cost for reorganization incentives has totaled $19.7 million, and whole grade sharing and joint employment have totaled $14.9 million, for a total cost of $53.2 million.371 362 1995 1999 2003 2007 2011 2015 2019 2023

Fiscal Year

Reorganization

incentives begin

First reauthorization of

reorganization incentives

Second reauthorization of

reorganization incentives

Third reauthorization of

reorganization incentives Reduction of 9 districts (2.4%) Reduction of 26 districts (7.2%) Reduction of 11 districts (3.3%) Figure 2 — State Aid Costs by Category (in Millions) There are currently eight school districts that have received whole grade sharing supplementary weighting for two years.

Assumptions

The number of districts that will be eligible to receive supplementary weighting for whole grade sharing and joint employment, and the number of districts that start or continue to make progress toward reorganization before July 1, 2031 (FY 2032), are unknown. The decision to pursue whole grade sharing and reorganization is a school district decision.

Fiscal Impact

The estimated fiscal impact of all provisions in the Bill is currently unknown and will depend on the number of districts eligible to receive supplementary weighting for whole grade sharing and joint employment, as well as the number of districts that start or continue to make progress toward reorganization.

From the period of FY 2004 through FY 2024, the total State aid cost for uniform levy reduction cost, supplementary weighting for whole grade sharing and joint employment has totaled $53.2 million, or an average of $2.2 million per fiscal year.

Sources

• Department of Education
• Department of Management
• LSA calculations