Iowa City schools losing $1.3 million in revenue because of private school vouchers

IOWA CITY — The revenue lost because of families using taxpayer-funded tuition assistance to attend private schools is just one factor in cuts the Iowa City Community School District is making in its budget.

The end of federal pandemic funding also figures in, as does per-student state aid that’s not keeping up with inflation, officials said.

The district’s school board meets at 6 p.m. Tuesday to hold a public hearing and vote on the $195 million general fund proposed budget, which is down 6.5 percent from this year’s budget. The meeting will be at the district’s administration office, 1725 N. Dodge St. in Iowa City.

Adam Kurth, the district’s chief financial officer, estimates the district is losing $1.3 million in revenue and spending authority because about 140 students enrolled in the district last year are now attending private school.

The district estimates that without the Education Savings Account program, which assists families with private school tuition and school supplies, an additional 70 to 80 students would be enrolled in the Iowa City public schools, Kurth said.

“That’s where the impact really shows up,” he said.

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While public school districts receive about $1,200 for every student within their district who uses an Education Savings Account, Kurth said it’s still a “net loss” to their budget.

“We are receiving funds for those students who we previously never would have received any funding,” he said. “The caveat is if we have a student who leaves the district in large part because of the (Education Savings Account) program.“

“The amount of funding we’ve effectively lost appears like any other enrollment decline, and that’s much greater than $1,200 per student,” Kurth said.

The $1,200 per student the district receives for the private school students amounts to about $565,000. It is “categorical funding” that can’t be added to the general fund because it’s reserved for particular categories of students, special programs or special purposes.

The budget

The district’s estimated 2024-25 general fund budget is $195 million, about a 6.5 percent decrease from the current fiscal year, Kurth said. The fiscal year begins July 1 this year and ends June 30, 2025.

That’s $5.5 million less than this year’s general fund budget, the largest fund in the budget, with 86 percent of it going to pay salaries and benefits for teachers and staff. Most of that money comes from the per-pupil state aid, set at $7,826 in the new budget year, up from this year’s $7,635.

Kurth said the 2.5 percent increase in per-pupil state aid next year doesn’t “truly reflect our increase in costs.” For example, employee health insurance costs are going up 8 percent to 15 percent.

“It creates real budget challenges,” Kurth said.

The district expects it will have to cut another $2 million from its 2025-26 budget next year.

“That is very large, and it’s not something the Iowa City school district has faced before,” Kurth said. “That’s really heavily tied to that influx of federal money, and, frankly, some of those resources we put into place during the pandemic to address the well-documented learning loss. We tried to make sure our students had the resources they needed, and there’s a lot of costs associated with that.”

In cutting the budget, the school board earlier this year voted to close Hills Elementary School at the end of this school year. Curriculum purchases are being delayed. And the district is reducing staff through attrition and adjusting a model to control class sizes.

In Iowa, enrollment is the driving factor determining how much state funding a district receives. State aid runs a fiscal year behind. The district's student count in October 2023 will be used to determine funding for the fiscal 2025 budget.

During the 2019-20 school year, the district had about 14,500 students. This dropped to 14,200 students during the 2020-21 pandemic school year, and rebounded to 14,440 students this year.

Property taxes

Under the proposed budget, property owners in the district would pay a proposed levy rate of $16.82 per $1,000 in taxable valuation, about a 55- cent increase from the current property tax rate.

For a homeowner with a $200,000 home, the property tax bill for schools would be $1,558 per year, or about $130 a month.

One of the contributing factors to a rising tax levy is the increase in management fund costs, which pays for property, liability and cybersecurity insurance for the district.

“Those costs are going to go up, and we can do our best to work with insurance providers and make sure we’re proactive about safety to limit those costs, but ultimately, we’re beholden to them,” Kurth said.

About 10 percent of the district’s overall levy — $1.84 — is to fund a $192 million general obligation bond referendum approved by voters in September 2027, to fund the second half of a 10-year facility master plan. The bond will expire by 2039.

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