The Los Lunas Schools SEG Fund
Photo of the LLHS Tiger Band just for fun!
It’s a beautiful Saturday morning here in Los Lunas, and I’m sitting on the LLHS Tiger Band practice field watching and listening to the students rehearse (they’re doing an incredible job, by the way!). While I enjoy their music, I’ve also been digging into something a little less exciting but just as important: how our public schools are funded.
Each month, our Los Lunas Schools Chief Financial Officer gives a report during the Superintendent’s Report at the regular school board meeting. At the most recent meeting on August 19, the focus was on the funding our district has received to operate this school year—specifically, the SEG fund, which provides our operations budget. I’m happy to report that we’ve already received most of this funding, with the final disbursement expected in October. I’m also happy to share that these dollars are already allocated for important needs like staff salaries, supplies, and more. But that raises the question: what exactly is the SEG fund? I looked it up, and here’s a quick summary of what I’ve learned so far.
New Mexico actually funds its schools in a pretty unique way compared to most of the country. In many states, local property taxes are the main source of public school funding. But here in New Mexico, one of the biggest pieces of the puzzle is the State Equalization Guarantee, or SEG. The SEG was created back in 1974 as part of the Public School Finance Act, along with two other important funds—one for school transportation and another for supplemental distributions. Together, these funds are fueled by state income sources like gross receipts taxes, income taxes, interest on long-term investments, rent from state-owned properties, and even license fees and federal mineral leases.
From this general fund, each school district is allocated money through a formula that was originally developed with the help of the National Education Finance Project and is now written into state law under the Public School Finance Act. The formula can feel a little overwhelming, because it doesn’t just look at how many students are enrolled. It also factors in things like grade levels, special education services, fine arts and physical education programs, bilingual and multicultural education, extended learning time, the size and geography of the district, the number of at-risk students, and even the licensure and years of experience of staff. All of these pieces are meant to ensure that funding lines up as closely as possible with the real needs of each district.
The basic idea is that the formula sets a baseline for the cost of educating a typical student in grades 4–6 with no special programs or needs (grades 4–6 without additional programs or services were used as the baseline for the formula because they represent the lowest-cost standard student.). That baseline is assigned a value of 1 program unit. Students in other grades or with additional needs are assigned higher values to reflect the extra resources required. For example, a kindergarten student counts as 1.44 program units because it generally costs 44% more to educate kindergarten students. To see how this works, a school with 300 kindergarten students would multiply 300 by 1.44, giving 432 units for that grade alone. Additional units are added for students receiving special education, participating in fine arts or physical education, in bilingual programs, needing extended learning time, or considered at-risk. The formula also accounts for factors like district size, location, and the experience and licensing of staff. Once all the units are totaled, the state multiplies that number by the dollar value of a single unit to determine the district’s SEG funding. Then, energy conservation credits are subtracted from the total, giving the final dollar amount the district will receive.
It’s also helpful to understand how the state determines the dollar value of a program unit. The total money available in the SEG fund is divided by the total number of K–12 students reported across the state. That calculation gives the value of a single program unit, which is then multiplied by each district’s total units to determine their funding. Pre-Kindergarten is funded entirely through a separate fund and is not included in this calculation. Because the formulas are based on program units rather than a fixed dollar amount, they do not change from year to year. However, the actual amount of money a district receives can vary each year depending on the total funds available in the SEG to distribute.
Our school district also receives funding from other sources to support programs, services, and supplies—like the iPads and MacBooks in classrooms—so the SEG isn’t our only source of funding, but it is the largest. Since many people assume that our property taxes cover general school operations, I wanted to share what I’ve learned about how our public schools are actually funded.
P.S. Some of our property taxes do go to schools, but not for everyday operations. Instead, they help pay for new school buildings and ongoing maintenance.
Bibliography
New Mexico School Boards Association. How New Mexico Public Schools Are Funded. June 2016, www.nmsba.org/wp-content/uploads/2016/06/How-NM-Public-Schools-Are-Funded.pdf.
New Mexico Legislature. Public School Funding Formula Overview. May 27, 2021, www.nmlegis.gov/handouts/ALESC%20052721%20Item%205%20.1%20-%20Funding%20Formula%20Primers.pdf.