The State’s Search for Sources of Income
Currently two bills, SB 505 and HB 2728, are being worked in the state legislature. The reason that these two bills have been introduced is, simply put; the state does not have enough revenues to account for their approved state budgets. The whys as to how this has come about citizens should already know. What you do not know is the content of these two bills and the impact on USD 417.
Both SB 505 and HB 2728 seek to reduce state aide to public schools in an effort to cause schools to spend cash reserves. In the case of SB 505, the language is such that ALL reserves would be included in the formula for how much the state will access from school district reserves. In HB 2728, there are some funds that are excluded from the calculation, i.e. capital outlay, bond & interest, gift & donations, and federal funds. While it is open to debate at this time if funds like our food service fund, which includes federal dollars, can be included, both houses in the legislature have included this fund in their calculations. Both of these bills start with the premise of accessing reserve balances as of the start of the 2014-15 school year.
Let me share with you the concerns that I have (we should all have) regarding these bills.
- As USD 417 was preparing our 2015-16 annual budget, we made a commitment to access a minimum of $117,000 of our contingency reserve funds. We did this for two reasons. First, USD 417 lost state aide for both our capital outlay and local option budget (LOB) funds due to cuts made by the state in the spring of 2015. Second, we know many of our families are already living month to month and can use these tax dollars for their families. Rather than increasing property taxes on local residents by almost 4 mills (side note: we did increase the overall mill levy by 1 mill), we chose to use our reserves for this school year.
We made this decision to in hope that the state would start to work on a new finance measure during this legislative session.Rather than up property taxes now, we thought it prudent to save local taxpayers this mill increase until we see what the state’s new school finance formula would look like.Of course our worst concern was realized, as the state has not done one thing to address this issue this legislative session.It is an election year after all. - USD 417 has been designing our budget over the course of the past couple years in an effort to prepare for a worse case scenario in regards to the city lake tax case. As I have stated before, projecting through fiscal year 2016, the district’s liability projects to be approximately $529,000 (this does not include the liability from this tax case for the district’s general fund) for our local option budget, capital outlay, and bond & interest funds. The district has a plan to address this issue without having to raise local taxes but this plan involves savings in our capital outlay fund that we have accrued in the past two years as well as use of other aspects of our reserve funds. This plan will be rendered almost useless if either SB 505 or HB 2728 become law in their current form.
- On a side note, do not let anyone tell you that the city lake tax issue will not hurt this school district. This is just simply false information. While it is true that under the current method of state funding for schools, our liability to repay taxes for our general fund will be covered by the state, USD 417 is will still be responsible for repaying taxes for these years for our local option, capital outlay, and bond & interest funds.
I have been writing legislators about our concerns with these two bills, sharing how this will impact USD 417. The impact will be felt not only on our school district but also our property owners when the district has to increase mill rates to cover for the state’s accessing of our reserves. The state’s problems will now become our district’s problem when we no longer have the funds to cover for the city lake property tax dispute despite the fact that we have been making plans on how to handle this without having to burden our district taxpayers.
I ask that you please contact legislators regarding these two bills, particularly legislative members of the Senate Ways and Means and the House Appropriations committee and ask that they not touch school district reserve funds.
P.S. If you haven’t been keeping up with events in Topeka, there is a real irony-taking place on this issue of having reserve funds. The KS House of Representatives Appropriations Committee is now considering a measure that would establish a state “rainy day fund”. In other words, they are considering the establishment of a cash reserve fund to help the state deal with economic problems that arise unexpectedly.