Perham voters to decide on levy
Support for the increased tax levy came from a somewhat unexpected direction, as the auditor testified before the Perham School Board Oct. 21.
"I can't stress enough the importance of passing the levy," said Roy Lundee, Brady, Martz, & Associates, the school's auditing firm. "Cutting costs won't solve the problem."
The message wasn't profound, or even new. School officials have been delivering the financial crisis sermon for the past several years.
But coming from a numbers man-backed by a 60 page audit report-the school's financial threat seemed particularly ominous. That he is also an objective "third party" with no direct connection to the Perham schools added credence to the presentation.
"You're going to hear a different perspective than you've heard before about the school's finances and the importance of the levy," said Lundee, an accountant.
From a school board member's viewpoint, it's unfortunate that about 1,500 voters weren't on hand to hear the bean-counter's report. That is about the number of votes it will take on Nov. 3 to approve the proposed $395 per pupil increased tax levy.
A similar levy question was soundly defeated one year ago. In 2008, the school board asked for $695, for up to ten years. In the subsequent year, another $800,000 was slashed from the budget, and the 2009 question asks for the $395 for only three years.
Whether the compromise was enough to change minds and votes will be known some time late at night Nov. 3 or early morning Nov. 4.
Perham will be one of 57 districts across the state on election day that will be asking for more local operating revenue.
"This clearly shows that funding from the state of Minnesota is not enough to meet the needs of school districts," said Lundee.
"Even if the Perham levy passed, it would be the lowest levy of any of the schools we audit," said Lundee. His firm audits more than 50 districts, mostly in the northwest part of the state.
Further, said Lundee, Perham's proposed $395 per pupil is only a "short term fix. For the future of the kids, you're going to need to look at more funding going forward."
The statewide average for increased operating levies is about $850 per student. One northwestern Minnesota district levies an additional $2,000 per pupil.
Following are some observations from the school auditor and superintendent, as the days count down to the Nov. 3 levy referendum.
Perham school cuts
In the course of five years, $3 million has been slashed from the school's operating budget. If the levy increase fails at the polls Nov. 3, another $1 million will be cut over the next two years in order to stay out of statutory operating debt, according to Perham Superintendent Tamara Uselman.
Spending freeze at Perham school
Thanks to a combination of nearly $1 million in cuts in 2008-2009 and a virtual freeze on spending, school expenses came in $252,132 under budget. Total expenses dropped from $13.65 million in 2008 to $12.82 million in 2009. "The good news," said Superintendent Uselman, "is that we kept the wolf away from the door--for this year."
State funding for education
A zero percent increase is anticipated from the state from 2010 to 2011. "The glass is half empty for school funding from the state," commented auditor Lundee.
There were 46 fewer students in the Perham schools from 2008 to 2009. Projections call for a decline of 200 over the next five years. This would reduce Perham enrollment to about 1,200. At about $7,000 of state funding per pupil, Perham school's operating revenue will decline by another $1.4 million. "We can't cut fast enough to keep up with the decline in enrollment," said Uselman.
Inadequate reserve funds
The auditor recommends reserve funds of $2.2 million, but as it stands now, Perham school has only about $450,000. Because of shifts and delays in state aid payments next year, the school will be forced into short-term borrowing of potentially more than $2 million. "We won't have enough cash to pay the bills," said Uselman, which is why a higher reserve fund is recommended. The interest costs for short term borrowing are estimated at $50,000 to $60,000. That's about the cost of two staff positions, noted Uselman.
One light at the end of the tunnel is the school's building debt, which will be retired in 2014. With the debt retired, taxpayers will be released of some $300,000 in annual loan payments. The problem: The elimination of building debt doesn't mean more money for education.
From a school official's viewpoint, a desireable scenario would be that the voters approve the levy Nov. 3. This would buy a couple years of time, before the school begins to slip into statutory operating debt. Then, with the building debt on the verge of ending, it may be more palatable to the taxpayers to vote approval for additional operating revenue. If the levy referendum is approved, it is only for three years-which will hopefully provide enough operating revenue until the building debt is retired, at which time the school would again approach the voters with another levy referendum.
Through rose-colored glasses, the perfect scenario would be a two-year burst in enrollment. More students means more guaranteed per pupil funding. At the same time, the legislature would approve an increase in state aid-including more financial support for special education, which was one of only two expense categories that increased in Perham over the past two years, by 4.9 percent.
Of course, to obtain more state aid for education-that would necessitate a robust turn-around of the economy, because the state is facing a $7 billion deficit.
Wishful thinking, of course. Minnesota schools will be lucky if the state can even meet present financial aid levels.
So, that leaves local school funding up to the generosity of local voter-taxpayers.
Which is what at least four other area schools are seeking:
The school is asking for an increase from the present $500 per student to $750.
After failing last year, the Pelican school board is returning to the voters with another request for $1,100 per student-but the length of the increased levy will be five years, rather than the ten requested at the last election.
School officials are asking voters to support increasing the cap on the district's operational levy from $1,750 to $1,990 per student.
West Central Area
The Barret-based school is asking voters to approve an increase from the existing $950 per student to $1,250-for ten years.
The request this year is for an additional $395-for only three years.
In 2008, a levy referendum for $695 per pupil, with a ten year term, was soundly defeated by Perham voters 1,054 to 1,911.
In 2009, the request is smaller; the time span is shorter; but the financial stakes are even bigger.
"With no new funding, declining enrollment, and zero increase in state aid, we'll have more hard times on the horizon," said Uselman.