Tuesday, February 21, 2017

A Penny Still Buys a Lot

On March 10th the school district will receive bids for phase one of our elementary school renovation project. Located in what we refer to as the 'East Wing', we will be doing work in the kindergarten classrooms and fine arts area. The project will also include the auxiliary gymnasium and kitchen, and there are plans in this phase to make our competition gym handicap accessible by installing a ramp and ADA restroom in the vicinity of our elementary art and music room. Specifically speaking, we will be installing new windows, air conditioning, ceilings and LED lighting fixtures. We will also be replacing all the temperature controls for our heating system. All told, our estimation for this phase of the project is between $550,000 and $600,000. 

You should take note that this is phase one, which obviously indicates future phases. Indeed, the board has earmarked roughly $500,000 a year for the next several years to completely renovate and modernize our elementary attendance center. At the same time we are doing this, we'll be replacing school buses, putting new roofs on our buildings, purchasing appliances for our kitchen, and acquiring new desks and furniture for our classrooms. Speaking of which, we have identified roughly $30,000 in furniture expenses for the 2017-2018 school year; a big portion of which will be used to replace lockers in the middle school. 

I haven't even mentioned the unknown expenses yet, those that typically rear their head at the worst possible time. So far this year, those emergencies that pop up have encumbered an expense of just over $20,000. Luckily, all of these things are budgeted for, even that unplanned emergency. In case you are wondering, through the month of February we have invested $720,093.94 in capital expenditures during this fiscal year, with the majority of them falling over the previous summer.

There are two revenue sources that make up our capital projects fund; the Physical Plant and Equipment Levy (PPEL) and Secure an Advanced Vision for Education (SAVE). For the sake of clarity, the SAVE fund is the one cent sales tax. Between these two revenue streams we receive between $800,000 and $850,000 annually, with the SAVE fund providing the lions share of these resources. As you can see from the table above, since 2009, Hudson has received $4,946,078 in sales tax revenue.

Without the SAVE fund we wouldn't be able to do many of the facility upgrades and renovations that we have planned. With our PPEL fund only, we would likely be able to manage the upkeep of our transportation fleet and cover the costs associated with computer hardware replacement. Anything beyond that would be quite a stretch. That is why we advocate for the extension of the SAVE statewide penny which is scheduled to sunset in 2029.

Arguably some may suggest that there should be no rush in the renewal since there is currently still 12 years remaining. Yet the fact is, many school districts bond against future revenue in the form of 'anticipated revenue bonds'. Currently, school districts have limited bonding capacity since this window is so short and beginning to close. Now, in our case the board has been committed to a 'pay as we go' philosophy, one that quite frankly has served us well. But for our planning purposes it is important to always be forward thinking. Once we finish our elementary renovation project, our sites will turn to the high school. After all, that building is now approaching 20 years old! Our current facility plan, by the way, projects out to the 2020-2021 school year. I can promise you that in 2021 and beyond (2029 for example), we are not magically going to have all of our building needs addressed. 

Luckily House File 230 has been introduced, which extends SAVE to January 1, 2050, giving schools a 20 year extension on this valuable resource. Absent the SAVE fund, school districts would be forced to either delay facility upgrades or rely on General Obligation bonds, which require a 60% super majority to pass and usually come along with a property tax increase. The Board of Directors has identified the preservation and extension of the statewide penny as one of it's legislative priorities. 

I often hear positive comments from our citizens about the numerous projects or improvements we have made to our facilities. Indeed it fills us all with pride to have great facilities for our students and visitors to our district. To keep our facilities up to date and modern we need your help. Please contact your legislators and tell them to support House File 230! You can find your legislator here

Wednesday, February 15, 2017

How the Budget Guarantee Impacts Property Tax

Reader's note: This article originally appeared on April 1st, 2015 as a way to explain the relationship between low supplemental state aid and a mechanism known as the budget guarantee. It has been updated here as a companion to last week's article, 'Supplemental State Aid: The Die Has Been Cast' to illustrate the correlation between low supplemental state aid and how it negatively effects property tax. I share this updated version because as was the case in 2015, Hudson Schools will be impacted by the budget guarantee. As was my invitation in 2015, if you are reading a hard copy edition of this article in the Hudson Herald, I would invite you to please access it online at www.superintendentvoss.blogspot.com. This will enable you to view the animated slides and deepen your understanding of the budget guarantee.

The budget guarantee is a mechanism in the Iowa school finance foundation formula that is designed to soften the blow of declining enrollment in schools. In school parlance, we refer to this as the 101% guarantee. As a practical matter, this means when supplemental state aid doesn't keep up with a decrease in enrollment, the school district is guaranteed an increase of at least 1% over the prior year's Regular Program District Cost without that guarantee. Let me explain further.

Regular Program District Cost is calculated by multiplying the number of certified students by the District Cost Per Pupil. In fiscal year 2017, we had 679 students on our certified enrollment count. Multiplying 679 X $6,766 tells us that the Regular Program District Cost for our current fiscal year is $4,595,467.

Because the legislature set supplemental state aid last week, we know the cost per pupil is set to rise by 1.11%. Therefore the cost per pupil next fiscal year in Hudson increases $73 to $6,839. But now, we have a certified enrollment number of 666. Multiplying 666 X $6,839 tells us that our Regular Program District Cost for the fiscal year that begins on July 1, 2017 (Fiscal Year 2018) is now $4,554,774.

Because our Regular Program District Cost for the new fiscal year is less than it was the prior fiscal year, we are on the budget guarantee. (click right arrow above)

The reason we call this the 101% guarantee is because of the math that is used to calculate the new figure. To get to this new number, we multiple the Regular Program District Cost from the previous fiscal year by 1.01: $4,595,467 X 1.01. This provides us with a new number that is know as the Regular Program District Cost with budget Guarantee or $4,641,423 (click right arrow above)

Now then, the question becomes how does this number impact property taxes? Well, if you look at the row above [where the arrow is pointed] titled 'Budget Guarantee', you will notice the number $86,648. (click right arrow above). The budget guarantee is funded solely through property taxes. We arrive at this number by subtracting the Regular Program District Cost without budget guarantee from the Regular Program District Cost with the budget guarantee: $4,641,423-$4,554,774=$86,648.

Last week you probably recall me stating that our actual budget growth for next year is expected to be around $45,390.73, or a .57% increase. We arrive at this number by simply subtracting last year's Regular Program District Cost with budget guarantee from this year's Regular Program District Cost with budget guarantee: $4,641,423-$4,595,467=$45,955.(click the right arrow above) Notice that we are currently not on the budget guarantee. Each year that a school district is on the budget guarantee, it is always calculated from the Regular Program District Cost without the budget guarantee from the prior fiscal year. As a result over time, school districts experience an erosion of funding as enrollment decreases.

You may also recall last week I shared that as supplemental state aid increases, tax rates decrease. This is because as supplemental state aid is added to the mix, the amount of property tax reliance falls. As you click the right arrow above, notice on the next slide that as the amount of state supplemental aid is increased, the budget guarantee amount decreases. As a result of that, the property tax decreases. It is not until the Supplemental State Aid is 4% the district is no longer on the budget guarantee, and thus citizens are subject to a greater property tax burden.