Explaining Changes in Equalization Aid From Year to Year
State Equalization Aid is a significant portion of the revenue stream for many Wisconsin school districts, and when that aid amount changes significantly, district staff and others may seek an explanation.
There can be many reasons why a specific district experiences a notable aid change from year to year, as both state and local factors can effect a district's Equalization Aid eligibility. From the state perspective, changes in the amount of state money available for general school aids, shifts in the statewide shared cost ceilings or changes in the state average property value per member can all contribute to an aid shift.
Locally, changes in a district's individual property value, membership and/or shared cost can affect aid. Perhaps the easiest way to determine what is happening to a district within the Equalization Aid formula is to look at what is happening in the district over time--in particular, how the district's specific data pieces are changing in relation to what is happening in other districts.
The following two easily-identified statistics can quickly explain what might be happening to a district:
District Shared Cost Per Member as Percent of Secondary Ceiling
The Secondary Ceiling in the Equalization Aid formula is computed as 90 percent of the state average Shared Cost per-member. The Secondary Ceiling statistic reflects what districts are doing as a group. By observing how a single district's Shared Cost per-member is changing over time in comparison to how the Secondary Ceiling is changing over time, you can see the magnitude and direction of how the district of interest is changing in comparison to how the group is changing. For example, if the district in question was spending at 105 percent of the Secondary Ceiling a few years ago and is now spending at 100 percent of the Secondary Ceiling, this shows that, on average, this district's cost is not keeping pace with what is happening in the other districts as a group.
District Shared Cost is used to compute Equalization Aid and the general rule is that less cost usually means less aid or less of an increase in aid. This "rule of thumb" is actually reversed for districts with higher property value (districts with greater than 100 percent of the state average property value-per-member), where less cost usually means more aid in these districts. So, the other important detail necessary to explain aid changes is knowing whether your specific district is a higher-than-average property value district.
District Equalized Value Per Member as Percent of State Average
The State Average Property Value Per Member in the formula is a statistic derived by dividing all the property value in the state by all the members in the state. This statistic is the average property value per-member for the group. Similar to the methodology from above, observing how a single district's Property-Value-Per-Member is changing over time in comparison to how the State Average Property-Value-Per-Member is changing over time can indicate the magnitude and direction of how the district of interest is changing in comparison to how the group is changing.
For example, if the district in question had 104.5 percent of the state average property value per member a few years ago and now has 100 percent of the state average property value per member, this district's property value per-member is not keeping pace with what is happening in other districts as a group. District Property Value-Per-Member is used in the Equalization Aid formula, and the general rule is that as property value per member decreases, aid from the state increases.
Longitudinal Excel Spreadsheet
The following longitudinal Excel spreadsheets contain district-specific aid formula factors as well as the variables discussed above that, in tandem, will assist users in determining the possible reasons behind changes in aid. While these two statistics may not completely explain the aid shift in every situation, they are strong indicators of what is happening to the district. Each spreadsheet contains Excel graphs of select data elements.
Note: Spreadsheets contains district aid amounts PRIOR TO the Choice/Charter Deductions, whereas the Revenue Limit computation uses aid amounts AFTER the Choice/Charter Deductions have been applied.
For current-year Equalization Aid worksheets (July 1 Estimate, Percentage Method, Bar Graphs, Aid Formula Position), a detailed explanation of the formula and additional Equalization Aid resources, see Equalization Aid.
Please contact a School Financial Services consultant if you need assistance in explaining changes in aid.