“Iowa School Finance: How student enrollment in each district determines district revenues"

Every year, public schools in Iowa spend billions of dollars to educate children, sparking taxpayers to ask school board members, administrators, and lawmakers: "Where does that money go?" The Hampton-Dumont Community School District is writing this article to help taxpayers understand how districts spend money and to dispel the mysteries surrounding school funding.

Here is the overall idea: For the 2025-2026 school year, Iowa PK-12 schools received approximately $6.12 billion in general fund support to educate about 496,000 Iowa children. The total state appropriations for school aid under the school finance formula for the 2025-26 school year amount to 64% of that total, or $3.93 billion. The remaining 36% ($2.19 billion) comes from local property taxes earmarked for school programs. These totals ensure that each district receives roughly equal per-student funding. Where it goes from there is a bit more complicated, but just as important to understand.

"The school finance formula is complicated and nuanced because it has 50 years of legislation attached to it. However, understanding the basics can give you a good idea of the pressure faced by local districts," notes Ken Sturgis, the School Finance Director at Iowa School Finance Information Services (ISFIS).

While Iowa school finance is complex, some basic principles can help make it understandable.

1. The number of children enrolled in each district determines a district's budget and revenues.

2. The Legislature, through the school finance formula, "equalizes" funding statewide, so the "revenue per student" received at each school district is roughly the same, and every student has access to a quality education.

3. The Governor recommends the annual change in per pupil allowable growth or state supplemental assistance (SSA). The Iowa Legislature is responsible for passing legislation to establish the annual increase in the "cost per student/allowable growth" (SSA).

4. Property values matter (regardless of whether it's commercial, industrial, agricultural, or residential). Property values determine the proportion of funds to school districts that come from property taxes v. state aid.

5. School district funds are restricted. Schools can use funds only for what is allowed under the legislative code.

6. Schools are budget-limited. This budget limit is a ceiling on what schools can spend. Most other public entities are tax rate-limited. This difference is monumental.

In an effort to explain where those tax dollars are going and why, this article is the first of several that will address each of the principles affecting school funding.

Again, Iowa's school funding formula is child-based, meaning that a school district's revenue and allowable spending are based on the number of students enrolled as of the enrollment count date. The enrollment count of students on October 1 of each year is used to establish the district's budget for the following school year. This means that school revenues are always a year behind the actual number of children districts serve in their classrooms. For the Hampton-Dumont School District, our enrollment as of October 1 is 1,044 students.  This is a decrease of 43 students from 2024-2025.  This is before any students included from the CAL District.

"Because the school finance formula is enrollment-based," Sturgis explained, "changes in the number of children enrolled in the district can have substantial impacts on that district's budget."

Because enrollment in our district has been declining over the past several years, this has created significant budget pressures. As a simplified example, the district's "cost" or revenue per child is currently $9,477.88 per year for all funding sources. Losing the 43 children this year will reduce our district's revenue by - $407,548.84 for the next school year. Due to our district's enrollment actually drops below the prior year, our budget will be subject to the minimum growth known as the "budget guarantee" of 1 percent. However, the budget guarantee only lasts for one year, and our fixed costs, such as transportation, utilities, staff salaries and benefits, technology, curriculum, and facilities maintenance, continue to rise despite our best efforts to economize.

For the 2024-25 school year, 207 school districts, or 67.3% percent of Iowa’s 325 school districts had declining enrollment and are facing similar issues to those our school district faces. For the 2025-26 school year, that number has grown to 240 districts, or 73.8% of Iowa’s 325 school districts. Those districts with increased enrollment also face challenges around adequate staffing, facilities, etc.