Proposed Executive Budget Main Issues for Chardon New calculation - - PowerPoint PPT Presentation

Proposed Executive Budget

Main Issues for Chardon

• New calculation of state share and how it

uses median income as a factor

• Phase out of the tangible personal property

tax (TPP) reimbursement

Current Formula

• Uses a “Wealth Index”
• Has 2 possible components

○ Property Index also referred to as Valuation Index ○ Income Index

• If Property Index < Income Index, then only the Property

Index is used to determine Wealth Index

• If Income Index < Property Index, then Wealth Index is

composed of ⅔ Property Index and ⅓ Income Index

New (Proposed) Formula

• “Capacity Measure” replaces the “Wealth Index”
• Also has two possible components

○ Valuation index ○ Median income index

• Valuation index remains the same as under the current

formula

New (Proposed) Formula

• Districts are broken down into three groups based on

median income

○ Districts with median income below 88 percent of the statewide average median income ○ Districts with median income between 88 percent and 112 percent of the statewide average median income ○ Districts with median income above 112 percent of the statewide average median income

New (Proposed) Formula

• Median income < 88%

Capacity index = valuation index - difference between 88 percent and their actual income index

• 88% < Median income < 112%

Capacity index = valuation index

• Median income > 112%

Capacity index = valuation index + (difference between their actual income index and 112 percent times 20% in 2016, 40% in 2017, *60% in 2018, *80% in 2019, and *100% in 2020)

*This add-on is being phased in over 5 years.

New (Proposed) Formula

• Capacity measure is then converted to a

state share percentage

○ Capacity measures of 0.2 or below receive a state share percentage of 90% ○ Capacity measure between 0.2 and 2.0 receive a state share percentage on a continuum of between 90% and 5% ○ Capacity measures of 2.0 or higher receive a state share percentage of 5%

New (Proposed) Formula

• The “Guarantee”

○ Will be based on the prior year funding amount ○ Will decrease by 1% of total State and local resources each year For Example:

FY 2015 Revenue: $5,000,000 in state aid $30,000,000 total state and local FY 2016 Guarantee: $5,000,000 - ($30,000,000 * .01) = $4,700,000 FY 2017 Guarantee (assuming same total): $4,700,000 - ($30,000,000 * .01) = $4,400,000

New (Proposed) Formula

What does this all mean for Chardon Local Schools?

• Our median income is $39,994 or 121% of the statewide average median

income of $33,076. That puts us in the highest group for calculating the capacity measure, resulting in the following: FY 2016 FY 2017

Capacity Measure 1.62 1.64 State Share Percentage 22.2% 21.3%

New (Proposed) Formula

Using the proposed formula, our estimated core aid is as follows:

Amounts are taken directly from the simulations released by the Office of Budget and Management.

• Loss of $312,173 in FY 2016 and then another $106,849 in FY

2017

• Loss of $419,022 in annual revenue by FY 2017

Remember, the capacity measure calculation is being phased in over 5 years, so the number will continue to go down. FY 2015 FY 2016 FY 2017 $5,535,843 $5,223,670 $5,116,821

TPP Phase-Out

• The rate at which the reimbursements are phased out is determined by the

calculated capacity measure.

• Higher capacity measures mean faster phasing out of TPP.
• The 610 districts in the state are broken down into quintiles.
• Districts in the top quintile (highest capacity) will be phased out by 2% of

State and local resources per year. Each quintile’s percentage decreases by 0.25%, down to the bottom quintile (lowest capacity) of 1% of State and local resources per year.

TPP Phase-out

FY 2015 FY 2016 FY 2017 $977,841 $354,975 $0

Chardon Local School District TPP Reimbursement Revenue

Amounts are taken directly from the simulations released by the Office of Budget and Management.

• Chardon Local School District is in the highest quintile.
• Our TPP reimbursement would be phased out on the fastest schedule.
• What that means in terms of dollars for us is shown below:

Combined Loss for Chardon

FY 2016 FY 2017 Cumulative Annual Loss Core Aid $312,173 $106,849 $419,022 TPP Reimbursement $622,866 $354,975 $977,841 Total: $935,039 $461,824

$1,396,863