The Saint Michael-Albertville school district held their annual Truth in Taxation meeting last Monday evening, where they explained their annual budget and reasons for a tax increase of 8.6 percent for the school district’s portion of 2018 local property taxes.
Superintendent Dr. Ann-Marie Foucault led the presentation, where she explained that the formula used to determine the levy is driven by student population. The district receives a set dollar amount per pupil unit for many types of funding, and that number goes up when the student population rises. She noted that levy increases do not always translate to funding increases because they are offset by reductions in state aid, which is a process determined by the state’s funding formula for K-12 education.
The major reasons for next year’s levy increase are an increasing student population and voter approved debt service in the form of the February bond referendum.
The school board could choose to pay for cost increases by dipping into their reserve fund, which is substantial. District policy requires 1.5 months of expenditures in reserve, but the district currently has 2.8-2.9 months of expenditures held in reserve. A third-party audit shows they currently have $16,892,906 in their fund balance, $13,934,239 of which is unassigned to a specific use. That is up $1.2 million over last year’s unassigned fund balance. STMA’s unrestricted fund balance is about 10 percentage points larger than the Minnesota state average.
School board member Hollee Saville stood alone in her suggestion to utilize the fund balance to pay for the $356,932 in levy increases that aren’t related to the voter-approved levies.
“If we had money in reserves it would be nice to take from there, not the general fund because I do not support taking from our classrooms. But to take from our reserves … instead of keep taxing taxpayers on the off chance that in a few years we’re going to run through that entire reserves.”
Board chair Drew Scherber responded that it wasn’t that many years ago when the state legislature gave school districts no funding increases or very minimal to the point where many school districts in Minnesota were forced to borrow money from their local banks to make payroll. He said STMA’s fund balance saved them from having to do that.
Foucault also took issue with the idea of underfunding the levy. For one, she said the tax impact of the levy that isn’t voter approved is minimal, under $20 per year for a $200,000 home. The rest of the increase is tied to voter-approved levies like the 2017 STMA bond.
Also, she explained that several funds are funded jointly between the local levy and state aid, and thus the district would be leaving state money on the table by underfunding the local levy.
For instance, the long-term facilities maintenance fund is funded 2/3 by state aid and 1/3 by local tax levy. Reducing the local tax levy would also reduce the amount the state kicks in for their long term facilities maintenance. Foucault said that money is planned for 10 years in advance for items such as roof repairs, parking lot maintenance and fire panel updates.
She also argued against dipping into the reserve funds to pay for levy increases on a couple other accounts. She said funding at the legislative level is uncertain and they may need the reserves in the future depending on how much the state legislature gives them for inflationary increases. Foucault also said that the recently passed teacher and administrator contracts have created additional financial obligations for salaries and benefits, and said she felt the district would need to dip into reserves for that reason.
“Our salaries and benefits make up the vast majority of our budgets,” Foucault said. “We had budgeted for a smaller amount than what was ratified in those contracts. We have a good possibility this year of going into our fund balance, and next year a lot of those contracts kick in with more dollars in year two … so next year for sure we will be diving into that fund balance.”
The school board voted to approve the levy rate increase of $1,071,605, or 8.6 percent, by a vote of 5-1, with Saville voting nay.
The entire truth in taxation slideshow can be viewed on the school district’s web site here.