Two key facts to know about Wyoming’s K-12 education funding

By Gregory Nickerson
— June 18, 2013

During the course of reporting on Wyoming’s K-12 education system, two major themes have repeatedly come up in WyoFile’s conversations with sources.

The first theme is that Wyoming moves money around from wealthy school districts to those with less resources. You could call it playing Robin Hood on a $1.6 billion dollar scale.

The second theme is that changes to the federal revenue flow could make K-12 education into a major liability for the General Fund Budget.

Let’s take a minute to examine these two themes.

The state plays “Robin Hood” with school funding

Wyoming's school districts have a guaranteed level of funding calculated by the number of students in attendance among other factos.  If local revenues don't reach the guaranteed level of funding, the state School Foundation Program makes up the difference. If local revenue exceeds the guarantee, then the state "recaptures" money and sends it to the School Foundation Program. (Courtesy LSO)

This flow chart explains how local and state revenues combine to reach the “guaranteed” level of funding calculated for each school district. (Courtesy Legislative Service Office)

The funding for Wyoming’s 91,000 K-12 students is decided by a complicated formula that redistributes revenue from wealthy schools districts to those with less resources.

It starts with a “guaranteed” revenue target that is set by the state. All school districts are funded up to a guaranteed dollar amount set for each district. That number is determined by the average population of students attending, plus costs for special education and transportation, and other factors.

The local districts attempt to meet their “guarantee” threshold though local tax collections. Each district collects revenue from a 6-mill county property tax, a 25-mill district tax, property sales taxes, and a number of additional sources (see “Funding the Block Grant” chart).

If local tax revenue doesn’t reach the guaranteed amount, the extra money is made up by the School Foundation Program, which has a total budget of about $1.657 billion each biennium.

Federal Mineral Royalties form a substantial portion of revenue for the School Foundation Program. A Congressional reduction in the state share of royalties could leave Wyoming with a substantial shortfall that would have to be addressed with non-federal money. (Legislative Service Office — click to enlarge)

The School Foundation Program gets revenue from a variety of sources, the most important of which are Federal Mineral Royalties, property Taxes, state investment income, and “recapture” of excess revenue from wealthy districts. (Courtesy LSO)

Much of the School Foundation Program (SFP) revenue comes from Federal Mineral Royalties. The other major revenue sources are investment income, 12 mills of property tax, and “recapture” of excess funds from wealthy school districts. (See pie chart.)

If  districts bring in more tax revenue than their “guarantee”, the state then “recaptures” the excess and puts it into the School Foundation Program to be redistributed to the poorer school districts.

It’s something like a Robin Hood scheme, where money collected in mineral-rich Sublette County and Campbell County might flow to Niobrara County.

The system of revenue distribution came out of several Wyoming Supreme Court lawsuits that resulted in mandates for equal school funding across the state.

Wyoming’s K-12 funding is just part of a robust public education pipeline that also includes nearly $1 billion in biennial funding for the University of Wyoming and Community Colleges. In total, Wyoming spends about $3.3 billion every two years on public primary and secondary education. (See spending chart below.)

If federal funding drops, Wyoming must pick up the tab

This is a point that legislators and state budget experts mention again and again: the structure of Wyoming’s education funding could make it a major budget liability.

Over the past few decades, Wyoming has received enough revenue from minerals—much of it produced on federal lands—to operate the School Foundation Program almost entirely independent of General Fund operating revenue.

But if that federal funding stream slows or dries up, the School Foundation Program can become a liability to the General Fund or other state accounts.

Specifically, if the School Foundation Program doesn’t pull in enough revenue to meet the district “guarantees”, the unmet needs must be covered by funds referred to as “augmentations”. (See Funding the Block Grant chart.)

A variety of scenarios could lead to the need for augmentations to the SFP. WyoFile recently published an article that explained how federal cuts could impact Wyoming’s K-12 schools:

Picture 4

Wyoming’s entire education pipeline, from K-12 through the community colleges and UW, costs the state about $3.3 billion per year. The funding has grown substantially since 2005 as the state has tried to improve educational outcomes. (Courtesy LSO/Click to enlarge)

Each biennium, Wyoming’s General Fund pays a scant $18.9 million of the $2.443 billion needed to fund the Department of Education, school construction, and the operation of K-12 Schools.

Of that $2.443 billion total, about $231 million comes from direct federal funds, and nearly $800 million comes from Federal Mineral Royalties and Coal Lease Bonuses (aka federal energy money).

Percentage-wise, the state’s General Fund is paying about .77 percent of the cost for primary education, while direct or indirect federal payments cover about 42 percent.

While it might seem that Wyoming is well-off to have so much federal mineral money to pay for its schools, that situation actually creates a huge risk: if the federal money goes away, the state must bridge the gap in funding — from the General Fund, savings, or other state sources.

During each biennium since 2009-2010, the School Foundation Program has gotten about $600 million from Federal Mineral Royalties—more than one third of the $1.6 billion spent by that account each biennium.

A reduction of the state/federal split of federal mineral royalties from its current 49 percent to 37.5 percent (the pre-1976 level), could mean a drop of $100 million to the SFP.

In light of recent sequestration of Federal Mineral Royalties, that’s a risk Wyoming leaders are keeping a close eye on.

For more on K-12 funding in Wyoming, read this release from the Wyoming Department of Education.

— Gregory Nickerson is the government and policy reporter for WyoFile. He writes the Capitol Beat blog. Contact him at greg@wyofile.com.
 
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Published on June 18, 2013

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