School Finance Tutorial - Introduction
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Introduction to Tutorial
There are essentially three types of school finance formulas used by state governments: foundation, equalization, and formulas using both foundation and equalization elements. Between 1967 and 1990, Nebraska employed a formula that was meant to have a combination of foundation and equalization components. In reality, the school finance formula was underfunded, and, consequently, had very little equalization impact. The old formula essentially provided a foundation amount per student based upon grade range.In 1990, the Legislature passed LB 1059 into law over a gubernatorial veto. The measure also withstood a repeal effort by a citizen-sponsored referendum in the 1990 General Election. LB 1059 created the Nebraska Tax Equity and Educational Opportunities Support Act (TEEOSA) and had two basic objectives. First, the measure sought to equalize property tax burdens in support of public schools. Second, the measure sought to bring about more equity in educational opportunities for students and among districts. Since property tax relief was a major part of the underlying mission of LB 1059, the measure included both sales and income tax increases to help fund the new equalization formula. Beginning with LB 1059, total state aid to schools increased dramatically in the 1990s in an effort to shift funding away from property taxes.
From 1990 to the present, the Nebraska Legislature has periodically amended the provisions of the formula, but the emphasis has been to strengthen the equalizing effects for schools that need the state funding most. In fact, funding the formula, as much or more than the mechanics of the formula, is a constant and annual issue of legislative debate. The level of state funding is often the "driving" force behind the success or failure of the formula to function as intended. In an ideal setting, the level of funding would be driven by the needs of the formula. In reality, the state often establishes an amount it can afford in total aid, which then requires adjustments in the formula to "fit" within the funding level.
Use of this Tutorial
School finance formulas do not usually appear in easy-to- visualize mathematical expressions. The formulas are often buried within statutory language and accompanied by complicated legal jargon that offers little understanding to the casual viewer. As attempts are made to improve the formula, the more layers are added, and the more complicated it often becomes.The purpose of this tutorial is to unravel what many view as the mystery of the Nebraska school finance formula and to describe it in terms that both educators and noneducators can understand.
The State Aid Formula Chart attempts to portray the current formula in a simple mathematical equation in order to draw a picture of how the formula appears. The viewer can use this chart as a pictorial reference while learning about each component of the formula -- referring back to the chart as needed. The online Glossary of Terms may also be helpful as a reference, or for further clarification and study.
It is important to note that this tutorial represents a simplification of an otherwise complicated system to calculate state aid for school districts. The Nebraska Department of Education uses computers to assimilate data, calculate state aid, and, ultimately, certify state aid to each district. The data are actually "run" through a series of computations, adding various factors each time, before the final result is tabulated.
The formula yields different results for each school district due to various factors, including changes in student population, changes in valuation of property within a district, spending patterns of a district, changes in the formula, etc. This tutorial will introduce the viewer to the components of the formula and help to understand how the pieces of the formula fit together.