Information about the 2010-11 DASD Budget and Tax Levy

Note:  Click on an image below to enlarge, or click here  for a full copy of this article in DASD News.

On Thursday, October 28th, the Board of Education of the DeForest Area School District established the tax levy for the 2010-2011 school year. The total levy necessary to support school operations, make payment on long-term debt, and fund capital expenses is $21,543,415, representing an 8.49% increase over the 2009-2010 levy. How is this levy amount determined and why is there an increase? Although there are a number of contributing factors, the levy increase results primarily from the state legislative action to reduce the state’s contribution to funding for public schools thereby shifting a greater burden to local taxpayers.

State decides “bottom line”

School district general fund spending is controlled through a revenue limit formula that limits the amount of revenue a school district can collect from two sources, state aid and local property taxes.  By establishing how much revenue a district can actually spend, the state essentially establishes the “bottom line” for a school district’s operating budget. For the last two years, the state has significantly decreased the allowable revenue growth for the district.  The current revenue limit structure requires annual budget adjustments and reductions.

The graph below shows the decrease in new revenue allowable in 2009-2010 and 2010-2011. Projections are that revenue limit growth will continue to decline in the near future.

As a result of the decline in the allowable revenue growth, the school board must annually determine areas of reduction, as there are insufficient funds to maintain current operations.

 That reality has resulted in the school board:

  • reducing staffing at all levels to coincide with declining enrollment
  • restructuring costs for employee health insurance
  • studying the benefits of instituting an HRA program with employees
  • renegotiating the District’s contract for transportation
  • refinancing debt at more favorable rates
  • eliminating costs associated with short term borrowing
  • allocating fund balance to address significant capital maintenance needs
  • freezing all district budget centers

Once the revenue limit is established, the legislative budget process determines how much of the revenue will be provided from state sources and how much must then come from the local tax levy.

The important factors that affect a district’s revenue limit are student enrollment and the amount of the allowable increase per student.  A review of the 5-yr revenue limit history shows that the new revenue allowable for the District in 2009 and 2010 has decreased substantially. 

Two factors have caused the reduction:  declining enrollment and the legislative decision to change the per pupil dollar amount of new revenue.   When new revenue is reduced, this has a direct affect on limiting spending.  This table shows the decrease in new revenue per pupil resulting from the change.

As mentioned earlier, the allowable growth in revenue for the District has been significantly limited for each of the last two years. The only thing that can change the revenue limit growth to the advantage of the district is the unlikely increase in new revenue per pupil and/or an increase in student enrollment.  State sources are advising school districts to budget for a zero-dollar increase.  This will make it challenging to continue current programs and operations.

Declining enrollment also affects the district’s ability to increase revenue and spending.  Our revenue per student is approximately $10,000.  As student numbers decline, a reduction in revenue follows.  The allowable revenue resulting from this formula cannot be exceeded without a referendum approved by the electorate.

State aid vs. local tax levy

In addition to restricting the allowable growth in revenue, the state has significantly reduced the amount of aid it provides toward this revenue limit. The District’s main revenue source (94%) is either aid or local taxes.  Before a tax levy can be determined, the District must receive certification of the amount of equalization aid to be received from the state.  The factors affecting the amount of state aid are membership (enrollment), shared costs, and the amount of property value per pupil.  As the state’s contribution decreases, the local burden to support the revenue limit increases. The data below demonstrates the shift over time in the percent of revenue coming from state aid and local tax sources. The impact of the local tax levy on the individual taxpayer can be mitigated with an increase in the tax base over which the levy is distributed. This can be realized through additional residential, commercial and retail development and a growing equalized property value. Unfortunately, the equalized property value in our district actually declined in 2010 by 4.56%. The result is an increase in the mil rate since the levy must be collected from a static or declining tax base.

 

Fiscal Year Beginning State Aid Certified % Change
2010 $14,760,813 -11.21%
2009 $16,623,568 -6.62%
2008 $17,802,546 +2.52
2007 $17,365,579 +1.30
2006 $17,142,781 +1.71

 The decrease in state support created a shift in funding resulting in an increase in the local property tax levy.  This graph shows how this shift has gradually occurred over the last few years. 

The local tax levy is shared by nine municipalities.  The value of each municipality’s property in the school district determines its share of the levy.  Currently, the Village of DeForest and the Town of Windsor are the largest municipalities served by the district.

A school board’s choice and community value

The state school funding formula and state statute anticipates that the state will support 2/3 of the cost of public education and the local taxes will support the remainder. In reality, the state is not providing 2/3 and, in fact, is providing a lower percentage each year. The local burden may continue to grow. Indeed, the legislature assumes that local school boards and communities will not under fund their schools.

If a local school board under levies, two things occur. First, the district operates a diminished program – below what the state determines it can and should operate. Second the district runs the risk of never recovering the lost revenue limit potential they gave up. The state may lower future revenue capacity for the district on the assumption the district chose not to run that level of school programming now or in the future.

Our school board determined that both of those possibilities were detrimental to the short and long term health of the district and the larger community. Specifically, as this community seeks to grow and enhance its quality of life and attract people and business, it will not be well served by a school board that under funds its schools and operates a diminished program relative to surrounding communities.

In addition, this community of stakeholders spoke very clearly in both large scale community engagement processes (Framework for Our Future Conferences) that they wanted the district to provide a high quality and comprehensive educational program. The board acted in a way they believe honored that value now and into the future.

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