Revenue Limit Explanation and Example

In Fall, 1993, the Wisconsin legislature (s. 120.90) instituted a limit or control on the revenue a school district is entitled to receive in any specific year from a combination of general state aid (equalization, special adjustment, and integration aids) and select local "controlled" levies (general operations - Fund 10, capital projects - Fund 41, and non-referendum debt - Fund 38). General state aids and the General Fund (Fund 10) tax levy can comprise from 70-90% of a district's total General Fund revenues, so the results of this computation have a significant impact on district finances.

There are four basic steps in calculating a school district's revenue limit:

Step 1: The new-year revenue base is constructed by summing the previous year's general aids received and the actual prior year’s local controlled levies for general operations (Fund 10), capital projects (Fund 41), and non-referendum debt (Fund 38). The revenue base per member is then computed by dividing the new-year revenue base amount by an average of the district's most recent three September membership totals (excluding the current year for which the limit is being calculated.)

Step 1 Example: Assume a fictitious district received $3,000,000 in general aid and levied $2,850,000 in controlled levies (Funds 10, 41, and 38) in the prior year. This district's new-year revenue base would be $5,850,000. Then, assuming the average of the three previous September membership counts (i.e. "base membership average") for this district was 650 ((600+650+700)/3), the revenue base per member would be $9,000 ($5,850,000/650).

Step 2: Add the per-pupil "allowable increase" to the revenue base per member just calculated in Step 1. The allowable per-member increase is an inflationary increase determined by the legislature. All districts use the same dollar-amount increase.

Step 2 Example: Assuming the inflationary increase was $250 per member, our sample district's revenue base per member of $9,000 would be increased by $250. This new revenue per member of $9,250 is known as the "maximum allowable revenue per member" for this district in the new year.

In 1995-96, new legislation established a floor for the maximum allowable revenue limit per member, indexed to a new amount every year. So if, at this point in the calculation, our district amount of $9,250 was less than the legislative floor (or minimum) for this year, our district's maximum allowable revenue per member would be that greater amount, and not $9,250.

Step 3: Determine a new three-year membership average. This new average, known as the "current membership average," uses the previous two September membership counts and the September membership count for the current year (the year for which the limit is being calculated).

Step 3 Example: So, assume the membership number for the current year is 675, the "current membership average" computation would be ((650+700+675)/3), getting a result of 675. (Districts are also allowed to add 20% of their summer school membership number to the fall membership count before computing the three year average.)

Step 4: The maximum allowable revenue per member ($9,250) is multiplied by the new three-year average (675). The total amount of revenue limit authority allowed in the new year for our sample district is now $6,243,750 ($9,250 x 675).

At this point, a district's maximum allowable revenue limit per member can further be increased by amounts attributable to various factors which include: new costs that may occur when a district attaches property from another district, costs of new service responsibilities assumed from another governmental unit, loss of Federal Impact Aid funds, approved referenda to increase the revenue limit for operating expenses, or increases allowed for declining enrollment. Any of these additional amounts (exemptions) need to be approved by DPI. Exemptions are classified as non-recurring or recurring. Recurring exemptions, if not levied for in the current year, may be levied for in a subsequent year, whereas non-recurring exemptions must be levied for in the year for which they apply.

Once the final revenue limit (with exemptions) is determined, districts use the October 15 Aid Certification (provided by DPI) to reduce their final revenue limit, arriving at the total amount to be apportioned across their "controlled levies" - general operating fund (Fund 10), capital projects fund (Fund 41), and non-referendum debt (Fund 38).

In addition to the levies discussed thus far, districts may also levy for referendum-approved debt (Fund 39), community service (Fund 80), and prior-year levy chargebacks. These "non-controlled" levies are outside of the revenue limit. “Controlled” and “non-controlled” levy amounts are summed to arrive at the all-fund tax levy which is then apportioned across all taxable property in the school district.

One final note about the revenue limit: Districts are not required to levy the total amount allowable in their revenue limit each year. They may choose to underlevy; however, by not levying the maximum allowed in a specific year, the district may lose some its future levy authority.

For questions about this information, contact dpifin@dpi.wi.gov (608) 267-9114

Last updated on 2/25/2008 12:04:35 PM