An Amateur’s Guide to Wisconsin’s General School Aid Formula

The largest component of Wisconsin’s state budget by far is the amount spent on aid to the state’s 424 school districts.  Even after cutting the amount by nearly $400 million, the legislature still earmarked about $4.3 billion for general school aid for 2010-2011, in addition to appropriations for categorical aids and other school-related spending.

There are a gazillion ways that this general school aid total could be divvied up among the school districts.  The approach that the state has somehow settled upon turns out to be stunningly complicated.

What follows is my attempt to make the general school aid formula a bit more comprehensible.  I’ll try to explain the key components of the formula and plug in the appropriate numbers to show how each component applies to Madison this year.

Reading the relevant state statutes to gain a working knowledge of the formula is a task that is simply beyond human comprehension.  I have relied heavily for what follows on a Legislative Fiscal Bureau informational paper on State Aid to School Districts that can be found by clicking on the appropriate listing here.  

The Only Three Numbers that Matter      

The first step in our task is to identify the school-district-specific figures that are used in the formula.  The first is the number of students in the district.  For Madison, the number for 2011-2012 is 25,714.  The second is the total annual expenditures of the school district, as defined for these purposes.  For Madison, this figure is just under $284 million.  The third is the total property value within the school district.  The figure for Madison is a bit over $22 billion.

Next, we use these numbers to calculate the school district’s annual expenditures per student ($11,041 for Madison) and the property value in the district per student ($869,006 for Madison).  All else flows from these three numbers: Madison’s student count, its annual per-student expenditures, and its per-student property value.

The Three Components of the Formula

Once we have these figures, we can start applying the formula.  The starting point is the expenditures-per-student figure of $11,041.  There are three different steps to the state aid calculation and each is applicable to a different portion of this amount.

The first calculation determines what is called primary aid.  It is applied to the first $1,000 of per-student expenditures.  The secondary aid calculation is applied to that portion of per-student expenditures that is greater than $1,000 and less than a second figure that turns out to be quite important in how all the money ends up being distributed.  That second figure is equal to 90% of the prior year’s average total per-student expenditures for all the school districts in the state.  For 2011-2012, this figure is $9,496.  Secondary aid is therefore calculated on $8,496 of Madison’s per-student expenditures ($9,496 – $1,000).  The tertiary aid calculation is applied to whatever portion of annual per-student expenditures may be left over.  For Madison, that figure is $1,545 ($11,041 – $9,496).

Okay, take a deep breath.  Now we’re on to the calculation of primary, secondary, and tertiary aid.  For reasons I’ll explain, we’ll consider primary aid first and then tertiary aid, leaving secondary aid for last.

Primary Aid

As these things go, the calculation of a school district’s primary aid is relatively straightforward.  First, we multiply the student enrollment count by $1,000.  For Madison, that gets us to $25,714,000.  Next, we calculate a percentage of that figure, which gives us the primary aid total.

The percentage is based on the school district’s property value per student.  We have already determined that for Madison this number is $869,006.  Next, we compare that figure to $1,930,000.  (Don’t ask me how the $1,930,000 figure was selected.  It is specified in state law and remains constant from year to year.)

It turns out that $869,006 is 45.03% of $1,930,000.  We subtract 45.03% from 100% and get 54.97%.  This is the percentage of the primary aid total that Madison receives.  (The percentage is subtracted from 100% to reflect the fact that state aid goes down as a school district’s property values go up.)  The primary aid to which Madison is entitled is therefore 54.97% of $25,714,000, or $14,135,833.

This primary amount is guaranteed, no matter what happens with the secondary and tertiary aid calculations.

Madison’s Primary Aid Amount:  $14,135,833.

Tertiary Aid

On to the calculation of tertiary aid, which is a weird beast.  It rewards about half the school districts in the state and penalizes the other half.

Which half a school district falls into depends upon whether its property value per student is greater or less than the state average of $564,023.  If the amount is less, congratulations go out to the school district, because every additional dollar that school district spends will be matched by some amount of state aid.

Condolences are in order for school districts with per-student property values greater than the state average.  Every dollar these districts spend annually in excess of $9,496 per student (there’s that number again — 90% of the average district’s per-student expenditures) will result in a reduction in state aid.

It will come as no surprise to learn that Madison falls into the condolences category.  Madison’s per-pupil property value of $869,006 is 54.07 % greater than the state average of $564,023.

This means that, for state aid purposes, Madison pays a tax of 54.07% on each dollar it spends on schools in excess of $9,496 per student.  Since Madison spends $11,041, this works out to $1,545 per student that is subject to penalty.  Multiply this amount by our 25,714 students, take 54.07 % of that, and – voila! – Madison’s state aid is slashed by $21,485,465.

Let’s go over that again.  Because Madison is a relatively property-rich district, its level of expenditures on schools results in a reduction in state aid of more than $21 million.  If Madison had less per student in property value than the state average, the same level of spending would have resulted in additional state aid.

Madison’s Tertiary Aid Amount:  -$21,485,464

Secondary Aid                      

The final component of the formula is secondary aid.  We consider it last because there is no overriding principle to its calculation – it is simply a figure designed to ensure that everything comes out right in the end.

Secondary aid is calculated as a percentage of the per-student amount that a school district spends in excess of $1,000, up to a cap of that $9,496 figure that marks the boundary between secondary and tertiary aid.  Since Madison spends in excess of the secondary aid cutoff, the secondary aid percentage is applied to $8,496 times the district’s 25,714 students, or $218,466,144.

The percentage is again calculated by comparing Madison’s property value per student of $869,006 to another per-student property value figure.  The rub here is that this second figure is derived by the Department of Public Instruction to ensure that the formula distributes all the state aid that the legislature has included in the budget, but no more.  So there is some complicated formula that someone at DPI runs to calculate what per-student property value figure will yield percentages that result in a total amount in secondary aid that, when added to the primary aid total and the net tertiary aid total, distributes all the state aid that the legislature has made available.

For 2011-2012, the computer tasked with this assignment ultimately spit out a figure of $968,337.  Madison’s per-student property value of $869,006 is 89.74% of $968,337.  This means that the percentage of Madison’s secondary aid total that it can recover in state aid is 10.26% (100% – 89.74%).  Madison’s secondary aid is therefore 10.26% of $218,466,144, or $22,410,072.

Madison’s Secondary Aid Amount:  $22,410,072

The Grand Total

Finally, we must subtract Madison’s negative tertiary aid of $21,485,464 from the sum of its primary aid of $14,135,833 and its secondary aid of $22,410,072.  This yields a total amount in general state aid for the district of $15,060,441, or a fairly miserly $586 per student.

For 2010-2011, Madison received almost $50 million in general state aid.  Fortunately, the aid formula places a floor on the amount of state aid a district can receive – the statutory minimum is 85% of the last year’s total.  For 2011-2012 only, the legislature raised the floor to 90% of the last year’s total.

For complicated reasons, Madison’s general school aid is actually cut about 13% this year, to about $43.3 million.  While this is less than last year, it is also almost $29 million more than would be justified by the straight application of the state aid formula.  (This is actually misleading, because the secondary aid percentage – the sole purpose of which is to lead to the distribution of all the allocated state aid – is lower than it would have been, had the 90% minimum rule not been in effect.  So, without the 90% guarantee Madison would have qualified for some amount of state aid greater than $15 million and less than $43 million, but likely much closer to the lower figure.)

So there you have it — the formula for distributing general state aid among the state’s 424 school districts, in all its majesty.  My next blog post will offer some thoughts on the formula and suggestions for how it might be improved, in addition to the obvious one of blowing it up and starting over.

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2 Responses to An Amateur’s Guide to Wisconsin’s General School Aid Formula

  1. Laura Chern says:

    If I remember how this works, secondary aid is the amount that is always being cut by the legislature. I think it was supposed to make up 66% of the total state budget for all schools. Local property tax makes up the rest. Communities that can generate more in property tax because of high property values, get less of that 66% total. However, because the state has never actually paid what is required under the formula (the 66%), and because property tax is only allowed to raise a certain amount (less than the 3.8% QEO which I know is no longer) there have been budget gaps since 1995 and cutting of all local school budgets. I think the state portion, prior to this year, was down to 62%. This year there is a whole lot less money and a cap on raising revenue (I think). Had the legislature and governors past (Thompson and Doyle) provided the 66%, the formula would have worked a lot better and schools wouldn’t have been in already dire straights. With the Walker cuts, we have a whole new level of loss of revenue, somewhat made up by teacher wage cuts.

  2. Carol Carstensen says:

    For most of us it is easier, and simpler to understand a few things about the state formula:
    1. the assumption is that all children cost the same to educate;
    2. the formula is geared to equalize tax burden – school districts that want to spend about the same amount per student should bear equal tax burden (the intent is to give districts with lower property wealth per student – and therefore poorer – more state aid).

    The problem for Madison – and a few other districts – is that we have high property wealth per student but also a relatively (for the state) high student poverty. The formula does not deal with that problem.

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