SF 2201 (LSB 6843SV (1) 91)

SENATE FILE 2201

BY  COMMITTEE ON EDUCATION

(SUCCESSOR TO SSB 3100)

A BILL FOR

An Act relating to school funding by establishing the state percent of growth and the categorical state percent of growth for the budget year beginning July 1, 2026, modifying provisions relating to property tax replacement payments, the regular program state cost per pupil, funding for school district budget adjustments, and school district enrollment, and including effective date and applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
STATE AND CATEGORICAL PERCENTS OF GROWTH AND PROPERTY TAX REPLACEMENT PAYMENTS

    Section 1.  Section 257.8, subsections 1 and 2, Code 2026, are amended to read as follows:
   1.  State percent of growth.  The state percent of growth for the budget year beginning July 1, 2023, is three percent. The state percent of growth for the budget year beginning July 1, 2024, is two and one-half percent. The state percent of growth for the budget year beginning July 1, 2025, is two percent.  The state percent of growth for the budget year beginning July 1, 2026, is one and seventy-five hundredths percent. The state percent of growth for each subsequent budget year shall be established by statute which shall be enacted within thirty days of the transmission of the governor’s budget required by February 1 under section 8.21 during the regular legislative session beginning in the base year.
   2.  Categorical state percent of growth.  The categorical state percent of growth for the budget year beginning July 1, 2023, is three percent. The categorical state percent of growth for the budget year beginning July 1, 2024, is two and one-half percent. The categorical state percent of growth for the budget year beginning July 1, 2025, is two percent, except for calculating the appropriation to the transportation equity fund under section 257.16C. The categorical state percent of growth for purposes of calculating the appropriation to the transportation equity fund under section 257.16C for the budget year beginning July 1, 2025, is five percent.  The categorical state percent of growth for the budget year beginning July 1, 2026, is one and seventy-five hundredths percent. The categorical state percent of growth for each budget year shall be established by statute which shall be enacted within thirty days of the transmission of the governor’s budget required by February 1 under section 8.21 during the regular legislative session beginning in the base year. The categorical state percent of growth may include state percents of growth for the teacher salary supplement, the professional development supplement, the early intervention supplement, the teacher leadership supplement, and for budget years beginning on or after July 1, 2020, transportation equity aid payments under section 257.16C.
    Sec. 2.  Section 257.16B, subsections 1 and 2, Code 2026, are amended to read as follows:
   1.  For each fiscal year beginning on or after July 1, 2023 2024, there is appropriated from the general fund of the state to the department of education an amount necessary to make all school district property tax replacement payments under this section, as calculated in subsection 2.
   2.  a.  (1)  For the budget year beginning July 1, 2023, the amount of each school district’s property tax replacement payment shall be the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year calculated under subparagraph (2).
   (2)  The per pupil property tax replacement amount for the budget year beginning July 1, 2023, is equal to the sum of one hundred fifty-three dollars plus the difference between the following:
   (a)  The regular program state cost per pupil for the budget year beginning July 1, 2023, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the budget year beginning July 1, 2023.
   (b)  The regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the budget year beginning July 1, 2023.
   b.  a.  (1)  For the budget year beginning July 1, 2024, the amount of each school district’s property tax replacement payment shall be the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year calculated under subparagraph (2).
   (2)  The per pupil property tax replacement amount for the budget year beginning July 1, 2024, is equal to the sum of one hundred fifty-three dollars plus the difference between the following:
   (a)  The regular program state cost per pupil for the budget year beginning July 1, 2024, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the budget year beginning July 1, 2024.
   (b)  The regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the budget year beginning July 1, 2024.
   c.  b.  (1)  For each the budget year beginning on or after July 1, 2025, the amount of each school district’s property tax replacement payment shall be the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year calculated under subparagraph (2).
   (2)  The per pupil property tax replacement amount for the budget years year beginning on or after July 1, 2025, is equal to the sum of one hundred fifty-three dollars plus the difference between the following:
   (a)  The regular program state cost per pupil for the budget year beginning July 1, 2025, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the applicable budget year under this paragraph beginning July 1, 2025.
   (b)  The regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the applicable budget year under this paragraph beginning July 1, 2025.
   c.  (1)  For each budget year beginning on or after July 1, 2026, the amount of each school district’s property tax replacement payment shall be the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year calculated under subparagraph (2).
   (2)  The per pupil property tax replacement amount for budget years beginning on or after July 1, 2026, is equal to the sum of one hundred fifty-three dollars plus the difference between the following:
   (a)  The regular program state cost per pupil for the budget year beginning July 1, 2026, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the applicable budget year under this paragraph.
   (b)  The regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by one hundred percent less the regular program foundation base per pupil percentage pursuant to section 257.1 for the applicable budget year under this paragraph.
    Sec. 3.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
DIVISION II
STATE COST PER PUPIL

    Sec. 4.  Section 257.9, subsection 2, paragraph i, Code 2026, is amended to read as follows:
   i.  For the budget year beginning July 1, 2026, and succeeding budget years, the regular program state cost per pupil for a budget year is the regular program state cost per pupil for the base year plus the regular program supplemental state aid for the budget year, plus five dollars.
    Sec. 5.  Section 257.9, subsection 2, Code 2026, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  j.  For the budget year beginning July 1, 2027, and succeeding budget years, the regular program state cost per pupil for a budget year is the regular program state cost per pupil for the base year plus the regular program supplemental state aid for the budget year.
    Sec. 6.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
DIVISION III
SCHOOL DISTRICT BUDGET ADJUSTMENT —— FY 2026-2027

    Sec. 7.  SCHOOL DISTRICT BUDGET ADJUSTMENT —— FY 2026-2027.
   1.  For the school budget year beginning July 1, 2026, the department of management shall add the amount of the school district’s budget adjustment under section 257.14, if any, to the combined foundation base under section 257.1, subsection 2, for the budget year.
   2.  For the school budget year beginning July 1, 2026, a school district’s budget adjustment under section 257.14 shall be funded by state foundation aid resulting from the calculation under subsection 1 and shall not be funded through school district property taxes.
    Sec. 8.  EFFECTIVE DATE.  This division of this Act, being deemed of immediate importance, takes effect upon enactment.
DIVISION IV
SCHOOL DISTRICT ENROLLMENT

    Sec. 9.  Section 257.6, subsection 2, Code 2026, is amended to read as follows:
   2.  Basic enrollment.  Basic enrollment for a budget year is the greater of a district’s actual enrollment for the base year and the district’s adjusted enrollment for the base year. Basic enrollment for the base year is the greater of a district’s actual enrollment for the year preceding the base year and a district’s adjusted enrollment for the year preceding the base year.
    Sec. 10.  Section 257.6, Code 2026, is amended by adding the following new subsection:
   NEW SUBSECTION.  7.  Adjusted enrollment.
   a.  Adjusted enrollment is determined annually on February 1, or the first Monday in February if February 1 falls on a Saturday or Sunday, and includes the same categories of pupils used to determine actual enrollment under subsection 1, paragraph “a”.
   b.  A school district shall certify its adjusted enrollment to the department of education by February 15 of each year, and the department shall promptly forward the information to the department of management.
   c.  The department of management shall adjust the adjusted enrollment and, if necessary, the basic enrollment of the school district for the audit year based upon reports filed under section 11.6, and shall further adjust the budget of the second year succeeding the audit year for the property tax and state aid portions of the reported differences in such enrollments for the year succeeding the audit year.
    Sec. 11.  APPLICABILITY.  This division of this Act applies to enrollment determinations occurring on or after July 1, 2026, used for school budget years beginning on or after July 1, 2027. 
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to various aspects of school funding.
   DIVISION I —— STATE AND CATEGORICAL PERCENTS OF GROWTH AND PROPERTY TAX REPLACEMENT PAYMENTS. The bill establishes a state percent of growth of 1.75 percent for the budget year beginning July 1, 2026. The state percent of growth is used to calculate the amount of supplemental state aid for a budget year as part of the state school foundation program. The bill also establishes a categorical state percent of growth of 1.75 percent for the budget year beginning July 1, 2026. The categorical state percent of growth is generally used to calculate the amount of supplemental state aid for each of the categorical funding supplements.
   Code section 257.16B provides for school district property tax replacement payments. For each budget year beginning on or after July 1, 2025, the amount of each school district’s property tax replacement payment is the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year. The per pupil property tax replacement amount for budget years beginning on or after July 1, 2025, is equal to the sum of $153 plus the difference between the following: (1) the regular program state cost per pupil for the budget year beginning July 1, 2025, multiplied by 100 percent less the regular program foundation base per pupil percentage; and (2) the regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by 100 percent less the regular program foundation base per pupil percentage.
   The bill modifies the property tax replacement payment calculation for budget years beginning on or after July 1, 2026. For budget years beginning on or after July 1, 2026, the amount of each school district’s property tax replacement payment is the product of the school district’s weighted enrollment for the budget year multiplied by the per pupil property tax replacement amount for the budget year. The per pupil property tax replacement amount for budget years beginning on or after July 1, 2026, is equal to the sum of $153 plus the difference between the following: (1) the regular program state cost per pupil for the budget year beginning July 1, 2026, multiplied by 100 percent less the regular program foundation base per pupil percentage; and (2) the regular program state cost per pupil for the budget year beginning July 1, 2021, multiplied by 100 percent less the regular program foundation base per pupil percentage. The regular program foundation base per pupil percentage is 88.4 percent.
   The division takes effect upon enactment.
   DIVISION II —— STATE COST PER PUPIL. Under the bill, for the budget year beginning July 1, 2026, the regular program state cost per pupil is the regular program state cost per pupil for the base year plus the regular program supplemental state aid for the budget year, plus $5. Then with the budget year beginning July 1, 2027, and succeeding budget years, the regular program state cost per pupil will again be calculated as the regular program state cost per pupil for the base year plus the regular program supplemental state aid for the budget year.
   The division takes effect upon enactment.
   DIVISION III —— SCHOOL DISTRICT BUDGET ADJUSTMENT —— FY 2026-2027. Code section 257.14 authorizes school districts to receive a budget adjustment equal to the difference between the regular program district cost for the budget year and 101 percent of the regular program district cost for the base year. If approved by the school district’s board of directors, such a budget adjustment is funded through school district property taxes. The bill provides that for the school budget year beginning July 1, 2026, the department of management shall add the amount of the school district’s budget adjustment under Code section 257.14, if any, to the combined foundation base under Code section 257.1(2). Code section 257.1 provides foundation aid from the state in an amount per pupil equal to the difference between the amount per pupil of foundation property tax in the district and the combined foundation base per pupil or the combined district cost per pupil, whichever is less. Accordingly, following the addition to the combined foundation base, the budget adjustment amount shall be funded by foundation aid from the state instead of property taxes.
   The division takes effect upon enactment.
   DIVISION IV —— SCHOOL DISTRICT ENROLLMENT. Under current law, a school district’s basic enrollment for a budget year is the district’s actual enrollment for the base year. Under the bill, a school district’s basic enrollment for a budget year is the greater of the actual enrollment for the base year and adjusted enrollment for the base year. 
   Under the bill, adjusted enrollment is to be determined annually on February 1, or the first Monday in February if February 1 falls on a weekend, of the base year, based on the same categories of students used to determine actual enrollment under Code section 257.6(1)(a). School districts are required to certify adjusted enrollment to the department of education by February 15 of the base year, and the department is required to promptly forward the information to the department of management for use in determining and adjusting tax and funding amounts.
   The division applies to enrollment determinations occurring on or after July 1, 2026, used for school budget years beginning on or after July 1, 2027.