The Tax Equity and Educational Opportunities Support Act (Provided by the Education Committee - December 2001 Revision)

• In 1990, the Tax Equity and Educational Opportunities Support Act (T.E.E.O.S.A.) restructured the funding of public education in Nebraska. This Act is often referred to by its Legislative Bill number, 1059.
• The goals of the Act were to equalize school funding and provide property tax relief
• Spending limitations were also put in place to assure that some of the increased aid would be translated into property tax relief and to allow districts with low spending histories to increase their spending more rapidly.
• The formula has been modified to some extent in each session since its adoption. The most major modifications were the results of LB 1050 in 1996, LB 806 in 1997, and LB 149 in 1999.
• One of the changes is that aid is based on local systems rather than districts.
• Local systems consist of a district with a high school and any elementary only districts that are either affiliated with the high school district or a part of the high school system.
• Elementary only districts that are affiliated with more than one high school may be part of more than one local system and the data for the district is divided among the local systems based on the valuation affiliated with each high school district.
• The basic formula for the distribution of state aid is:

Needs - Resources = Equalization Aid.

• The formula is simple, but becomes more complex as needs and resources are defined.
• Formula needs are measured by multiplying the number of students in each of three grade ranges by a grade range weighting, demographic factors, and the cost grouping cost per student then adding the local system's transportation and special receipts allowances.
• Cost groupings are used to approximate what it typically costs to educate a student in a school in that category of sparsity based on the costs incurred by other schools in that category of sparsity.
• The costs used in the cost grouping cost calculations are the general fund expenditures minus transportation and special receipts allowances.
• The demographic factors adjust for the concentration of students in poverty, the number of students with limited English proficiency, the number of students living on Indian land, and extreme remoteness.
• The transportation allowance is the amount paid as required transportation reimbursements to parents plus the lesser of the local system's transportation costs or the mileage multiplied by 4 times the state mileage reimbursement rate.
• The special receipts allowance is the amount a local system received from the state for special education, state wards, and accelerated or differentiated curriculum programs.
• Formula resources consist of local property tax resources, allocated income tax funds, net option funding, and other receipts received by the local system.
• Local property tax resources are measured using adjusted valuations multiplied by an assumed tax rate called the local effort rate.
• The local effort rate is set at 10 cents below the maximum levy for the certification of state aid.
• Currently, the maximum levy is $1.00 and the local effort rate is $0.90.
• Aid for each school year is recalculated before the next year using new data. If a local system received too much or too little aid, then the following year's aid is adjusted.
• The valuations used in the calculation of state aid are adjusted to 100 percent of market value for residential and commercial property and 80 percent for agricultural property by the Property Tax Division. The taxable valuation in most local systems is less than the adjusted valuation used to determine aid.
• Two more resources for local systems are allocated income tax funds (otherwise known as the rebate) and net option funding.
• The amount of rebate received by each local system is based on the amount of income taxes paid by the residents of the local system multiplied by an allocation percentage.
• The allocation percentage is calculated by dividing the total amount of rebate available ($102,289,817 minus net option funding) by the total resident income taxes collected in the state.
• Net option funding is provided to the districts (not local systems) for the number of option students optioning into the district minus the number of students optioning out of the district. Districts that have more students optioning out, do not receive net option funding.
• The payments per student are the lesser of the district's cost grouping cost per student or the statewide average cost grouping cost per student.
• Net option funding is paid out of the $102,289,817 available for rebate prior to the calculation of the allocation percentage.
• Districts that consolidated prior to August 2001 will also receive incentive payments based on the movement of students into lower cost categories.
• Other receipts that count as resources for the local systems include fines, license fees, state ward funding, special education reimbursements, etc.
• TEEOSA aid provides most of the aid for K-12 education. For fiscal year 2000-01, TEEOSA aid was about $550 million.

Special Education Reimbursement

All schools are reimbursed for special education expenses in the year after the expenses are incurred. The reimbursement is limited to a certain percentage of the "allowable excess cost". The excess cost is the difference between educating the student pursuant to his or her individualized plan and the cost of educating a regular student. This excess cost is further limited to what the Department of Education "allows" pursuant to its rules and regulations.

The reimbursement percentage is determined by the amount of appropriation provided by the state for that year. In other words, school districts receive a prorated share of their excess allowable costs. The reimbursement percentage declines if increases in appropriations fail to keep pace with the growth in the total excess allowable costs of all districts. The percentage is generally around 80 percent.

For fiscal year 2000-01, special education reimbursement was about $140 million.

Apportionment

Apportionment aid is a distribution of aid from the Permanent School Fund, which is revenue from Educational Lands and Funds. It totals about $25 million annually and is distributed to public schools per student based on the school census of school-aged children in the district. In other words the public school receives aid attributable to private school or home-schooled children living within their boundaries.