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UPDATE: District to seek $500 per pupil levy

By Tom Larson

Sun Tribune

The Morris Area School District is expected to put a $500 operating levy on the November election ballot, but there's no guarantee even that amount will prevent the district from making further budget reductions in the next two years.

The district School Board met in a special session on Thursday and unanimously approved formulating the levy request.

The board is expected to approve the official ballot question at its regular meeting July 19.

State funding has stagnated in recent years, and there are rumblings that school funding could come under the budget-cutting knife as the state braces for a deficit estimated between $5 billion and $8 billion for the coming biennium.

The district's levy question will ask taxpayers to vote on a renewal of a current $302 per-pupil levy that will expire next year, and add $198 to that total in an attempt to stave off more drastic cuts in 2011-2012 and 2012-2013. An inflationary factor also will be included in the ballot question.

The proposed $500 per student, 10-year levy will amount to a tax increase of about $60 per year for owners of properties valued at $100,000. Agricultural land wouldn't be taxed but commercial property would be.

Board chairman Kurt Gartland said district voters have been staunch supporters of the district, as is evident in previous successful levy votes. Voters also understand the strain state budgeting has put on school districts.

"They know that times are changing," Gartland said. "I think this will pass in November."

The school district can only provide information about the levy and the ballot question, and can't campaign for a yes vote.

Information will be prepared about the levy request and is expected to be presented in public forums, printed brochures, meetings with other local governments, and also disseminated via the media, the district's Web page, Facebook, email and other electronic platforms.

If the levy did not pass, Superintendent Scott Monson said he projects that the district would be facing deficits of about $620,000 in 2011-2012, and a deficit of about $650,000 in 2012-2013.

If the state reduces aid formulas between $200 and $400 per student, the district's annual budget deficits in the biennium could range between $807,000 and $1.41 million.

Situation now

The district has two operating levies on its books: a $302 per pupil levy approved in 2000, and a $385 per pupil levy approved in 2005. That's $687 per pupil that district taxpayers are levied for each year.

The district receives $5,124 per pupil per year under the basic state funding formula. How much money that brings into the district is based on enrollment, and Morris Area's enrollment has been in decline for several years. Other factors in play during the district's budget process are staff compensation increases, savings from retirements, annual utility expenses and miscellaneous expenses.

After 2011, the $302 levy comes off the books, and with state funding barely holding steady, the district will likely face budget cuts even if the $302 is restored and another $198 added to it, Monson said.

Board members and district administrators are hoping that taxpayers recognize that they have been proactive in addressing the budget problems and haven't continued to lean heavily on local taxpayers as enrollment declines and state funding remains in limbo.

Monson said that the district has cut it budgets by a total of $2.5 million since 1996, and that $1.8 million of that has been cut since 2003.

"We have tried to downsize as enrollment decreases," Monson said.

What's the need?

Even if there is no increase in state funding, the district's deficit is projected to be $319,000 in 2011-2012, and $349,000 in 2012-2013.

If the state reduces its school funding between 4 percent and 8 percent, Morris Area could be experiencing deficits of between $500,000 and $1.2 million in the next biennium.

The consequences for either taxpayers or the district are dire, and the way out involves a combination of levy renewal, a levy increase and more budget cuts.

Balancing the budget on levies alone isn't a realistic option. Monson estimated that to completely offset a $200 per pupil cut in state aid with levy money, voters would need to approve a renewal of the $302 levy and pass an addition $1,200 levy if the district is to avoid further budget cuts.

And even if state funding remained flat through 2013-2014, the district will still need the $302 renewal and an additional $650 per pupil to avoid budget cuts, he said.

"We're in a situation where, because of a variety of factors, that that's realistic," Monson said of the tenuous state funding situation. "Let's hope that doesn't happen, but you want to go into the situation with eyes wide open."

What if levies don't pass?

With no renewal of the $302 and the additional $198 levy, the district potentially would be looking at deficits of more than $600,000 in both 2011-2012 and 2012-2013. With 4 percent to 8 percent state funding cuts, those deficits could be more than $800,000 to $1.4 million.

Monson said every $100 per pupil increase amounts to about $90,000 to $100,000 in total funding for Morris Area.

What are other area schools doing?

It's difficult to compare district levies and why there are what they are in each case. But operating levies in West Central Minnesota are, on average, about $1,300 per pupil. If Morris Area voters renew and add to its levy, the total is about $885 per pupil.

Benson has the lowest levy at $536 per pupil. Campbell-Tintah is the highest at $3,450 per pupil. Those in between are: Chokio-Alberta at $2,500; Clinton-Graceville-Beardsley at $1,101; Cyrus at $1,112; Hancock at $1,150; Herman-Norcross at $1,327; Lac qui Parle at $1,100; Minnewaska Area at $655; Ortonville at $1,039; West Central Area at $950; and Wheaton at $844.

Board's reaction

The full board reviewed the $500 per pupil levy recommendation from the district's Finance Committee.

Board member Brent Fuhrman posed the question of whether the district was asking for enough, given that the state deficits are expected to be so large that school funding likely won't emerge from negotiations unscathed.

If state cuts come, the district can anticipate "not just cutting around the edges" of its own budget in coming years, he said.

"Are we sure we can still do business, keep this school at the level that it's at, with the amount we're asking?" Fuhrman said.

Board member Lory Lemke said that Fuhrman's question was a valid one, but that the committee knew it needed to strike a balance and not base the additional levy request on what the state's deficits might be in the years ahead.

Board member Dick Metzger said the additional $198 is "a reasonable amount, in our eyes, without knowing what's going to happen."

Board member Mark McNally made the proposal to keep the 2005 levy at $385 per pupil when the board, at times, was considering a higher total. Five years later, McNally said he's "comfortable" with the new levy proposal.

"The $198 does a fairly good job of show the public that we're not going too high and that we have to do some cutting," McNally said.

Board chairman Kurt Gartland agreed with the new levy amount, saying that if state funding is reduced, or even stays the same, budgets will need cutting, levies or no levies.

"We can't solve it just by taxing," Gartland said.

What will voters be asked?

The November ballot will contain just one question - renewals and additions are sometimes separated into two ballot questions, ostensibly to improve the chances of at least one winning approval.

The lone ballot question will be to ask taxpayers to vote on a new $500 total levy that would be added to the $385 levy that expires in 2015.

The board also approved adding an inflation factor built in to ensure the levy amount isn't compromised by fluctuations in the prices of such things as fuel and food.

Monson said his research of area school district shows that inflation factors raise the annual levy total by about 1 percent per year, and Fuhrman said it provides a "buffer" against future, unknown increases.

"The impact on taxpayers would be very small while it would really help us," he said.

Bottom line

"We have to get that levy renewed, at a minimum," Monson said.

Because school districts were spared cuts in the last session of the Legislature and Morris Area experienced an unexpected enrollment increase over projections, the district has about a $30,000 surplus fund balance for this year. The district has been trying to incrementally increase that total in recent years to avoid borrowing in times of unsteady cash flow. Some of that money could be used "as part of the budget solution," he said.

But Monson also reminded the board that about $125,000 in federal stimulus money, which was used to pay for Special Education fringe benefits, runs out next year. A renewal and the $198 additional levy could be a positive at a time when very little is.

"There's a good chance, with these levies, that we could get through the next three fiscal years without significant budget adjustments," Monson said.