Senate File 304 - Introduced SENATE FILE 304 BY SMITH A BILL FOR An Act relating to school district funding by establishing a 1 district cost per pupil equity budget adjustment, modifying 2 limitations on the cash reserves, and including effective 3 date provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 1684XS (4) 87 md/sc/jh

S.F. 304 Section 1. Section 257.2, subsection 2, Code 2017, is 1 amended by striking the subsection. 2 Sec. 2. NEW SECTION . 257.14A District cost per pupil equity 3 —— budget adjustment. 4 1. The board of directors of a school district with a 5 regular program district cost per pupil that is less than the 6 highest regular program district cost per pupil among all 7 school districts in the state for the same budget year that 8 wishes to receive the budget adjustment under this section may 9 adopt a resolution requesting the budget adjustment by May 15 10 preceding the budget year and shall within ten days of adoption 11 of the resolution notify the department of management of the 12 amount of the budget adjustment requested, subject to the 13 limitations of subsection 2, paragraph “a” . The department of 14 management shall approve the budget adjustment for an amount 15 not to exceed the maximum budget adjustment amount authorized 16 under subsection 2, paragraph “a” . 17 2. a. For budget years beginning on or after July 1, 18 2017, each school district for which a budget adjustment is 19 approved under subsection 1 shall be eligible for a budget 20 adjustment for that budget year in an amount not to exceed 21 the lesser of the difference between the school district’s 22 regular program district cost per pupil and the highest regular 23 program district cost per pupil among all school districts 24 in the state multiplied by the district’s budget enrollment 25 and the difference between the school district’s cash reserve 26 limitation under section 298.10, subsection 3, and fifteen 27 percent of the school district’s general fund expenditures for 28 the year previous to the base year minus the unexpended fund 29 balance for the year previous to the base year. The resolution 30 adopted under subsection 1 may specify a budget adjustment 31 amount that is less than the maximum amount authorized under 32 this paragraph. 33 b. The school district shall fund the budget adjustment 34 by using cash reserve funds, interest on cash reserve funds 35 -1- LSB 1684XS (4) 87 md/sc/jh 1/ 6

S.F. 304 earned during the base year, or both. If, however, the school 1 district funds the budget adjustment solely with interest on 2 cash reserve funds earned during the base year, the amount of 3 the budget adjustment shall not reduce the school district’s 4 cash reserve limitation determined under section 298.10, 5 subsection 3, paragraph “b” . 6 3. A budget adjustment received under this section shall 7 not affect the eligibility for or amount of any other budget 8 adjustment authorized by law for the same budget year. In 9 addition, a budget adjustment under this section shall be 10 limited to the budget year for which the adjustment was 11 authorized and shall not be included in any computation of a 12 school district’s cost for any future budget year. 13 Sec. 3. Section 257.34, Code 2017, is amended to read as 14 follows: 15 257.34 Cash reserve information. 16 1. If a school district receives less state school 17 foundation aid under section 257.1 than is due under that 18 section for a base year and the school district uses funds 19 from its cash reserve during the base year to make up for 20 the amount of state aid not paid, the board of directors of 21 the school district shall include in its general fund budget 22 document information about the amount of the cash reserve used 23 to replace state school foundation aid not paid. 24 2. If a school district uses funds from its cash reserve, 25 including interest earned on such funds, during the base year 26 to fund a budget adjustment under section 257.14A, the board of 27 directors of the school district shall include in its general 28 fund budget document information about the amount of the cash 29 reserve used for such purpose. 30 Sec. 4. Section 298.10, subsection 3, Code 2017, is amended 31 to read as follows: 32 3. a. For Except as provided in paragraph “b” , for fiscal 33 years beginning on or after July 1, 2012, the cash reserve 34 levy for a budget year shall not exceed twenty percent of the 35 -2- LSB 1684XS (4) 87 md/sc/jh 2/ 6

S.F. 304 general fund expenditures for the year previous to the base 1 year minus the unexpended fund balance, as defined in section 2 257.2 , for the year previous to the base year. 3 b. For fiscal years beginning on or after July 1, 2018, the 4 cash reserve levy for a school district that received a budget 5 adjustment under section 257.14A, shall not exceed the amount 6 determined under paragraph “a” minus the sum of all budget 7 adjustments received by the district under section 257.14A for 8 all previous budget years, excluding those budget years for 9 which the budget adjustment was funded solely with interest 10 earned on cash reserve funds. 11 Sec. 5. Section 298A.2, Code 2017, is amended to read as 12 follows: 13 298A.2 General fund. 14 1. All moneys received by a school corporation from taxes 15 and other sources must be accounted for in the general fund, 16 except moneys required by law to be accounted for in another 17 fund. 18 2. Interest earned on cash reserve funds during a budget 19 year may be added to the district’s existing cash reserve 20 amount within the general fund or may be designated by the 21 school board to fund a budget adjustment under section 257.14A 22 for the following budget year. Interest amounts designated to 23 be used for a budget adjustment under section 257.14A shall not 24 be included in district cost. 25 Sec. 6. IMPLEMENTATION. Notwithstanding the deadline 26 for adopting a resolution to approve the budget adjustment 27 in section 257.14A, subsection 1, for the school budget 28 year beginning July 1, 2017, the resolution of the board of 29 directors of a school district shall be approved not later than 30 June 10, 2017. 31 Sec. 7. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 32 immediate importance, takes effect upon enactment. 33 EXPLANATION 34 The inclusion of this explanation does not constitute agreement with 35 -3- LSB 1684XS (4) 87 md/sc/jh 3/ 6

S.F. 304 the explanation’s substance by the members of the general assembly. 1 This bill establishes a district cost per pupil equity 2 budget adjustment and modifies limitations on the amount 3 of allowable school district cash reserves. The board of 4 directors of a school district with a regular program district 5 cost per pupil that is less than the highest regular program 6 district cost per pupil among all school districts in the 7 state for the same budget year may annually adopt a resolution 8 requesting to receive the budget adjustment authorized in 9 the bill. Following adoption of the resolution the board of 10 directors must, within 10 days of its adoption, notify the 11 department of management of the amount of the budget adjustment 12 requested. The department of management shall approve the 13 budget adjustment for an amount not to exceed the maximum 14 budget adjustment amount authorized in the bill. 15 For budget years beginning on or after July 1, 2017, each 16 approved school district is eligible for a budget adjustment 17 for that budget year in an amount not to exceed the lesser of 18 the difference between the school district’s regular program 19 district cost per pupil and the highest regular program 20 district cost per pupil among all school districts in the 21 state multiplied by the district’s budget enrollment and 22 the difference between the school district’s cash reserve 23 limitation under Code section 298.10, subsection 3, and 15 24 percent of the school district’s general fund expenditures 25 for the year previous to the base year minus the unexpended 26 fund balance for the year previous to the base year. The 27 budget adjustment amount may be less than the maximum amount 28 authorized under the bill. The bill requires the school 29 district to fund the budget adjustment using cash reserve 30 funds, interest earned on cash reserve funds, or both. If, 31 however, the school district funds the budget adjustment solely 32 with interest earned on cash reserve funds during the base 33 year, the amount of the budget adjustment shall not reduce the 34 school district’s cash reserve limitation provided for in the 35 -4- LSB 1684XS (4) 87 md/sc/jh 4/ 6

S.F. 304 bill. 1 The bill specifies that the budget adjustment received does 2 not affect the eligibility for or amount of any other budget 3 adjustment authorized by law for the same budget year and that 4 the budget adjustment under the bill is limited to the budget 5 year for which the adjustment was authorized and shall not be 6 included in any computation of a school district’s cost for any 7 future budget year. 8 Under the bill, if a school district uses funds from its cash 9 reserve, including interest earned on such funds, during the 10 base year to fund a budget adjustment authorized in the bill, 11 the board of directors of the school district shall include in 12 its general fund budget document information about the amount 13 of the cash reserve used for such purpose. 14 The bill provides that interest earned on cash reserve 15 funds during a budget year may be added to the district’s 16 existing cash reserve amount within the general fund or may 17 be designated by the school board to be used to fund a budget 18 adjustment authorized in the bill. However, the interest 19 amounts so designated shall not be included in district cost. 20 Currently, Code section 298.10 directs the department of 21 management to limit the school district’s cash reserve levy to 22 a level that is not in excess of 20 percent of the general fund 23 expenditures for the year previous to the base year minus the 24 unexpended fund balance for the year previous to the base year. 25 The bill provides that for fiscal years beginning on or after 26 July 1, 2018, the cash reserve levy for a school district that 27 received a budget adjustment under the bill shall not exceed 28 the amount determined under the current law limitation minus 29 the sum of all budget adjustments received by the district 30 under the bill for all previous budget years, excluding those 31 budget years for which the budget adjustment was funded solely 32 with interest earned on cash reserve funds. 33 Notwithstanding the May 15 deadline for adopting a 34 resolution to approve the budget adjustment provided for in the 35 -5- LSB 1684XS (4) 87 md/sc/jh 5/ 6

S.F. 304 bill, for the school budget year beginning July 1, 2017, the 1 resolution of the board of directors of a school district must 2 be approved not later than June 10, 2017. 3 The bill takes effect upon enactment. 4 -6- LSB 1684XS (4) 87 md/sc/jh 6/ 6