Ed Klamfoth retired in 2024 after 36 years in public education in Iowa, the last sixteen as a superintendent. This column was first published in the Waverly Democrat.

I was recently asked to submit an article for the Waverly newspaper explaining school funding and how it works. To do so in a piece like this is a difficult task for several reasons, not the least of which are the great many nuances and details associated with the topic and the word limitation for this column. So to narrow things down a bit, I asked if there were specific questions I might address. There were, and I’ll try to answer those questions here.

One important note—there are many different “buckets” of money that schools receive. I am only addressing the General Fund in these responses.

Question 1: What is the association between local property taxes and State Supplemental Aid (SSA)?

In Iowa, public K-12 school funding is determined using the school foundation formula, first created in 1971. Prior to its adoption, schools were funded almost exclusively through local property taxes. The foundation formula created a scenario where schools were funded by both state aid and local property taxes. When first implemented, property taxes made up about half of the funding in a local district. Today, the property taxes make up closer to one-third. And this shift has been intentional.

Since 2013, Iowa has used a system where the state pays the full cost of SSA increases instead of passing part of it to local property taxpayers. As a result, increases in state funding per pupil in K-12 schools do not automatically raise property taxes the way they used to.

That’s not to say that property taxes paid to schools don’t increase from one year to the next, however. There are certain factors (too many and too detailed to get into here) that can cause an increase. However, it’s important to note that the property tax rate is driven mainly by the school funding formula. Local school boards have limited abilities to increase or decrease the property tax rate.

Question 2: How do private school vouchers (Education Savings Accounts) affect the budgets of public schools?

For the 2026-27 school year, state and local tax revenue will provide $8,148 in funding for each student. Districts lose that much for each student who leaves a district to attend a private school. To give you a local example of how much that could be, in the most recent certified enrollment count, there were 209 Waverly-Shell Rock resident students receiving Education Savings Account (ESA) funding. That amounts to $1,702,932 in potential losses.

I say “potential” because not all of those 209 students would attend Waverly-Shell Rock, even if there were no ESAs. For example, St. Paul’s (a Lutheran school in Waverly) has always had a solid enrollment.

That said, there are families who have enrolled their children in private schools who would not have done so without the ESA. This is a significant blow to the budget.

Some argue that when your enrollment goes down as a result of students attending elsewhere, you can eliminate staff. That is a solid argument if all of the students leaving for the private school were in the same grade. If you lose 40 third-graders, you can eliminate two third-grade teachers. However, if those 40 students are spread throughout the system (thirteen grades), that’s only three students per grade, on average which doesn’t allow a district to eliminate staff nearly so neatly.

In addition, it’s important to point out that somewhere between 75-85 percent of school general fund budgets go toward salaries and benefits. By their nature, schools are very people-reliant.

Another aspect that needs to be considered is at the state level. The cost for ESAs in 2026-27 is estimated to be around $314 million. That’s more money that the state has to come up with for education, making it likely that there could be less to go around.

Question 3: What kinds of adjustments are public schools making in response to funding increases set below the rate of inflation for several years?

There are several things that I know schools are doing. First, as I mentioned previously, the majority of school budgets go to salaries and benefits. Therefore, cutting back on paper purchases or turning down the heat, while helpful, has a limited impact. As a result, if they need to make substantial reductions, schools are forced to reduce staff. This can result in larger class sizes and/or reduced course or extra-curricular offerings.

Another adjustment is to provide annual salary increases that are below the rate of inflation (if an increase is offered at all). Some public school districts have reduced benefits (districts paying less for health insurance premiums, for example) to help offset budget shortfalls.

Reducing staff and providing low or no annual pay increases creates negative impacts for districts. For some, employees begin to look elsewhere, and districts lose high-quality staff. It can also have an impact on morale, which could impact work quality.

Some who read this might ask why schools can spend large sums of money on things like athletic fields, parking lots, or new/renovated schools, yet look to reduce staff. It’s a question I heard often over my sixteen years as a superintendent.

Without getting into the weeds too far, the simple answer is that schools have different funding sources that are to be used for different and specific purposes. You can think of them as silos, each with a different source of funding and a different purpose. In most cases, schools can’t mingle those funds. So, the money used to repave the parking lot cannot, by law, be used for salaries and benefits. Deciding not to pave that parking lot would not help the general fund budget.

One final thought. School budgets are driven by two things—state funding and enrollment. In Iowa, a majority of school districts are seeing their enrollments decline. When that’s combined with low levels of SSA increases, districts face very difficult decisions. And this is not just a small school issue. Several of the larger districts in the state are currently facing budget shortfalls of several million dollars. Our elected officials can’t do much to increase enrollments, but they could certainly help with school funding.