Wednesday, August 31, 2011

Revenue Purpose Statement-What it is and Why It's Important

Most of the time when we have discussions about school finance and the status of our financial condition at Hudson, I am specifically talking about the general fund.  This is the largest fund that makes up our budget, the one that bears the cost of operations for our school district including salaries for staff, electricity, and other instructional supplies.  This is the fund that we are typically most concerned about when we talk about such things as financial solvency ratio and unspent balance. 
The Greenhouse project was funded through a combination
of PPEL and LOSST funds.  The total cost of this project
was in the neighborhood of $53,829.50.
In addition, there are other funds that we use in tandem with the general fund that are incredibly important to our bottom line.  Each fund has a separate purpose and only certain expenditures can be attributed to that particular fund.  For example, the nutrition fund can only be used for expenses related to the hot lunch program, while the management fund can only be used to pay for such things as property/casualty insurance or benefits for our early retirees.  The health fund is pretty self explanatory; we use that to pay health insurance premiums and claims, while the dental fund serves a comparable purpose.

We also have two funds that are designated specifically for physical plant purposes such as the repair, replacement, or upgrade of our facilities.  Those would be the PPEL Fund (Physical Plant and Equipment Levy) and the LOSST Fund (Local Option Sales and Service Tax).  While repairs and upgrades can also be paid out of the general fund, our guiding philosophy is to pay for as many of our repairs and upgrades as possible out of our building funds in an effort to protect the financial stability and solvency of the general fund.  When we are preparing to initiate various projects, it is important during the planning phase to determine which fund is most appropriate.  Part of that consideration has to be what is currently allowable under state law.  Provided the sum of the repair project or upgrade exceeds $500, we can use these funds for repairs to the buildings and grounds, furnishing buildings and providing equipment for classrooms, or they can be used to fund improvements and building projects in our school district.  Without these funds and the revenue they generate, the cost of repairs and improvements would be borne out of the general fund.  I think everyone is aware of the challenges we are facing in our general fund, and the fact that our general fund simply could not support these building projects. 
This may not look like much, but it was the best I could
come up with for a photo!  Phase One of our elementary
school electrical upgrade was completed this summer.  The
total cost of this project (excluding engineering and
architectural fees) was approximately $87,000.  The
school was also the recipient of a $25,000 Harkin Grant
to help defray the costs of this project.

The PPEL fund is supported through local property taxes at a rate of $1.67.  This rate is calculated through the combination of a board approved levy (.33), and a voter approved levy ($1.34).  In our current fiscal year, we expect to collect approximately $277,624 in our PPEL fund.  The voter approved levy is scheduled for voter re-authorization in 2014.  The LOSST fund is supported through collection of the 1 cent sales and service tax.  During this fiscal year, we expect to collect approximately $535,690.22 in sales tax revenue.  In all, we expect revenue in our building funds (PPEL and LOSST) to exceed $810,000. 

When we specifically talk about the 1 cent money, the voters of the Hudson Community School District have the opportunity to decide how those funds are going to be spent, which becomes the purpose of today's post.  This is decided through what is commonly referred to as a Revenue Purpose Statement.  The Revenue Purpose Statement is just that, a statement, or letter of intend to the voters of the Hudson Community School District, on how the school district intends to invest the 1 cent penny tax back into the Hudson Community School District.  On September 13th when you cast your vote for school board members, you will have the opportunity to case a vote for the renewal of our Revenue Purpose Statement.  We think it is important for you to know that the current Revenue Purpose Statement doesn't expire until 2019.  Because of that you may be wondering why we are putting a question on the ballot at this time.  Well, there are several reasons for doing this, but the main reason is to align our Revenue Purpose Statement with the most current legal language.  Here are some specifics:
  1. The penny sales tax is now a statewide sales tax and not county by county. 
  2. The statewide sales tax expires in 2029; in Hudson our Revenue Purpose Statement is set to expire in 2019.
  3. The name of the fund is no longer called LOSST; but now is referred to as SAVE (Secure an Advanced Vision for Education fund).
Although it may not look like much, almost $50,000 was
invested in the drainage around the high school over the
summer as we make preparations for paving the high school
parking lot next summer.
PPEL or LOSST funds.  Without this Revenue Purpose Statement, we would not be able to fund these project, or many of the other projects that we have undertaken this past school year. 

Updating computers and other technology hardware is
a never ending venture!  Over the course of this past summer
we invested over $100,000 in computer replacement, including
the addition of a new computer lab in the elementary school.
These funds are pretty important, not only for projects like the ones that have been described in this post, but also when dealing with the unexpected.  I am no longer surprised when a piece of equipment breaks down and we need to get it fixed immediately.  One quick example I can share with you is some ongoing maintenance issues with the cooling tower at the high school.  It doesn't take long to spend $20,000 to $25,000 when a heating pump or cooling tower fails.  While these items can be covered as a general fund expenses, it can have the unintended consequence of significantly eroding the general fund and depleting the unspent balance of a school district.  With repairs like this, it wouldn't take very long at all to put the district into a much more difficult financial position.  This is exactly the kind of contingency that our Revenue Purpose Statement is designed to address.  Not only is it enabling us to plan for future improvements like parking lot upgrades, or paying off bonds for our high school (which has the effect of a lower tax rate); it also enables us to respond to unplanned emergencies, like a boiler going out or a water leak!

As you consider the merits of the proposed Revenue Purpose Statement, you may have questions.  Please feel free to contact my office at any time.  You may also be wondering if the Revenue Purpose Statement is a tax increase.  The answer to that is an unequivocal no!  This question is simply deciding how we will allocate the funds that we will generate through the one cent sales tax.

Please remember to vote on September 13.

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