What is the 'cap'?: Intricate formula determines school funding

If the Kenai Peninsula Borough School District wanted to find a new creative way to cut spending and boost student math scores, it might consider dropping textbooks and instead teaching students how to calculate the "cap" -- the maximum amount local government may contribute to the the district budget according to state statute.

The word, "cap," is getting a lot of airtime lately, as it typically does during the season of breakup and budget passage.

This year however, funding to the cap has become a bit more contentious.

Borough Mayor Dave Carey announced earlier this month he might not fund the school district to the maximum amount as requested, as has been the practice in recent years.

While it is ultimately up to the borough assembly whether or not to allocate the full $43 million to the schools, the question begs to be answered: where did this $43 million number come from?

Perhaps more important to some as well: why is it higher than last year?

In short, the cap is determined through a complex funding formula.

It would be easier to just leave it at that; but inquisitive minds ask for more.

The get an in-depth break down of the formula, it makes the most sense to sit down with someone experienced in using the formula over many years.

That's something Dave Jones, assistant superintendent of the district says he's always happy to do.

"It is not a simple thing," he said Thursday of trying to explain the formula.

From an aerial perspective however, the district gets the majority of its funding from two sources, the state and local government.

For the fiscal year 2010, the district board of education approved a $123,739,902 General Fund budget reliant on approximately 63 percent of its revenue coming from the state. Approximately 35 percent of the FY10 budget is to come from local government. The remainder comes from federal or other sources of revenue.

The state and local pieces not only make up most of the revenue, but they also are tied closely together.

State funding is determined in a 10-step foundation formula that starts by determining the district's Average Daily Membership.

While this may sound simple enough, the foundation formula not only includes student enrollment, but operations costs, the localized cost of doing business, special needs students, special education intensive needs and home-school students.

For example, in FY09 the district had an actual enrollment of 9,255.77 students but the calculated ADM allows the district to be compensated for 15,349.96 students.

The ADM is then multiplied by a base student allocation set by the state to determine the district's Basic Need.

In FY09 the district's Basic Need was about $84.1 million.

The state and the borough then split up this cost through one of two possible equations that determine the required local effort.

In equation one, the total taxable value of property in the borough is multiplied by four mills, .004.

In equation two, the previous year's Basic Need is multiplied by .45 percent.

Whichever equation provides the lowest figure is the one used.

In FY09, that was equation one, equaling $21.8 million.

The $21.8 million was then subtracted from the FY09 Basic Need to determine how much state aid the district would receive, $62.3 million.

The borough must contribute the required local effort of $21.8 million.

This however, is not the maximum the district can ask for from the borough.

The maximum is again determined using one of two possible equations.

In equation option one, the current year Basic Need is multiplied by 23 percent.

In equation option two, the tax base is multiplied by .002.

In this case however, the equation with the greatest amount is used, which for the district, has typically been equation one.

In FY09 for example, an additional local contribution of $19.3 million was allowed.

That $19.3 million plus the $21.8 million equaled the $41 million cap.

As to why it seems the cap keeps going up, even from this elevated view, it's easy to see that funding is reliant on a number of changing variables.

For example, assessed property values have climbed in recent years, as has the district's Basic Need, both of which can drive up the cap.

"What's happened in this year and the last couple years is that both of those have happened," Jones said.

If the increases in the cap seem drastic, Jones pointed out the district has undergone a history of seeing very little in the way of increases to funding.

"We were flat funded by the Legislature for 15 years," he said, "so basically the (Basic Need) increased minimally for 15 years. Now, that's started to increase."

Dante Petri can be reached at dante.petri@peninsulaclarion.com.