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Paynesville Press - October 24, 2001

Levy may be only alternative to cuts

By Michael Jacobson

The alternative to passing the excess levy on Tuesday, Nov. 6, is clear to school board chairman Pat Flanders and superintendent Howard Caldwell. If the school district can't count on the extra $456,177 in revenue that the levy would provide in the 2002-03 school year, larger budget reductions will need to be made instead.

"During the cut process last winter, I said it 'til I was blue in the face: the fat was cut long ago," said Flanders. "We're cutting meat. Next time it will be bone."

That's why school officials are not calling it an excess levy but an operating levy, because they feel it is needed to continue the school district's fundamental operations.

"It's basically to provide educational programs for our children. That's why we need it," added Caldwell.

"If we do any more budget adjustments or reductions, we're going to be looking at some areas and programs that people won't appreciate," he warned.

While the district could attempt another levy vote later in the school year, in order to get the levy on the 2002 taxes, which would get it into the school district's coffers for the 2002-03 school year, it would have to be approved by the first of the year, said Caldwell. Without it, and with the school facing possible statutory operating debt, the only other option would be to undergo another round of budget reductions.

The district already will need to cut $150,000 from its budget for next year because of declining enrollment, said Caldwell. To recover in further budget reductions even a fraction of the revenue that the levy would produce will have the public arguing to save programs again at another public hearing this winter.

"I don't know if you can identify a specific number, but I fear it," said Flanders of further reductions. "I think it's possible. Very probable."

Tighten the belt
Critics of the school might feel that more budget reductions are an appropriate measure in light of the school district operating on deficit budgets for the past four years. Even with the half-million dollars in budget cuts last winter (which took effect in this school year), the 2001-02 district budget is still projected to be $200,000 in the red.

One way or another, the school district appears like it will have to have a balanced budget next year. And it will have to start rebuilding its dwindling general fund.

School board member Bob See doesn't believe the school district will have to cut another half million dollars from next year's budget, even if the levy referendum fails. "There are places to be cut right now. We can get it done," he said. "I don't think it has to be that much."

See raised cautions about the excess levy in September, before the school board decided to put the proposed $315 per pupil levy to a referendum. "I'm not against the levy," he said last week, "but I think the timing is bad. The economy is slowing down. People are losing their jobs. Who's going to pay these taxes?"

Tax impact
Tax comparison chart The tax impact of the excess levy is a little hard to understand, on account of the massive changes to the Minnesota's property tax structure passed by the state last summer.

Paynesville is voting on a new levy in the first place because the district's existing $315 per pupil excess levy will be rolled into the state's general formula next year.

The state made other significant changes to school funding, notably the assumption of the general education levy that property tax payers contributed to local schools. This will be replaced by state aid.

The state's taking of this portion of school aid has school districts across the state reducing their property tax levies dramatically for the coming year. For Paynesville, the school levy would drop nearly 60 percent without the excess levy. Even with the levy (if it is passed) and the addition of the bond payments for the new school addition, the local school levy would drop nearly 50 percent next year.

That's why Caldwell wonders: "Do we value education enough to sacrifice part of our property tax relief?"

But See - who has chosen not to run for another term on the school board in November after two years on the board - wonders how long the state's tax reform will last. "The state's already saying that they don't have enough money. They're going to raise taxes again. That money is going to go right back (to the state)," he said.

If the levy is passed, not as many taxpayers will be shouldering the burden this time. The state also exempted seasonal property and agriculture land (except for the homestead) from levies like this.

This means that the entire levy will have to come from residential, commercial, and industrial property and ag homesteads. So while the school portion on the property taxes will be down for everyone in 2002, some taxpayers will actually end up paying more for this excess levy than the previous one for the exact same amount.

And while the state will pay for 60 percent of the excess levy in 2002-03 (leaving only 40 percent for local taxpayers), the state's percentage has been reduced from the district's previous levy. The state funded 75 percent of the current excess levy that disappears from the tax rolls next year.

Making cuts sooner
Another criticism of the school making the rounds is the thought that the budget cuts could have been less severe, and the current financial situation less bleak, if something would have been done earlier.

The board should have listened to Caldwell and made cuts sooner, said See. "I still think the superintendent ought to have the authority to get things done immediately," he explained. "The board should set policy to allow him to do his job."

"Since it didn't get done, it just compounds itself," he added.

School finances can go downhill rapidly, Caldwell knows. That's why he's stressed that the impacts of declining enrollment are just starting to be felt. With the largest classes in the district in the high school, to be replaced, most likely, by smaller classes in the elementary school, the impact of declining enrollment might only be starting. "It accumulates every year," said Caldwell, "so if you don't do something one year, it doubles the next, and it triples the next. It compounds."

One of the goals set by the school this year is to establish a policy for making budget reductions to reflect declining enrollment.

Flanders still thinks that hindsight about the wisdom of making cuts earlier is much easier to see after the district cuts a half million dollars from its budget. To make budget cuts while having a million dollar surplus (as the district did as recently as 1997-98) would be so unpopular, he said, that it would have started a riot.

People were upset enough during the cut process last year, he pointed out, when the need for cuts was clearly apparent from the district's dwindling bank account.

Caldwell agreed that it's easier to see now that some cuts should have been made earlier. He also thinks the board had its heart in the right place by trying to provide the best possible education to kids. "Do you want people on the board who are just interested in business issues?" he asked. "Or do you want board members who care about kids?"

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