Operating Levy Q & A
Why do school districts face ongoing deficits? Like most Minnesota school districts, Duluth has had to address budget deficits for well over a decade. Increases to per-pupil funding from the state have not kept pace with increases in the cost of living while some key expenses are rising significantly, like health care coverage and energy costs. If nothing changes, deficits are projected for at least another five to six years and possibly beyond that.
--Rising Costs: Some key expenses for the district are rising significantly. These include health care coverage, liability and property insurance, fuel and energy costs.
--State Funding: State funding for schools is based largely on a per-pupil formula. The current state budget doesn't cut the basic per-pupil formula, but doesn't increase it to compensate for rising costs, either.
--Funding Shifts vs. Actual Funding Increases: Several years ago Minnesota increased state aid to school districts - while simultaneously reducing local property taxes that go to school districts. While the state could truthfully say it had increased spending on education, the net result was a "wash" for districts. The state simply paid a greater share of the overall cost, while local property taxpayers paid a smaller share. Now Minnesota is reversing that trend. As property values rise, the state is reducing state aid and expecting school districts to make up the funding through increases in local property taxes. It would be truthful to say that schools are getting more funding from property taxes but because of the corresponding reductions in state aid, the overall result is another "wash" for districts.
--Unfunded Mandates: The state and federal governments often require school districts to do something but don't provide the funds with which to do it. This is an example of an "unfunded mandate." An example is No Child Left Behind, which is funded at half the rate required to provide the services, and Special Education, which is funded at 75% of the actual cost of services. The impact on the school district is an annual budget gap that must be paid from the district's general fund.
--Declining Enrollment: Declining enrollment also impacts the budget because state funding is calculated in large part based on numbers of students. In 2006 former state demographer Dr. Hazel Reinhardt did an in-depth demographic study of the district and projected enrollment to continue to decline for the next five years from about 10,000 students to somewhere between 9,000 and 9,300 students. According to the demographic study, the major reason Duluth sees declining enrollment is not because students are going somewhere else, but because there are fewer young adults to have children. The current generation, Generation X, is 60% smaller than previous generations. K-12 enrollment has declined in recent years on a local, state and national level because of this trend.
What will happen if taxpayers approve the operating levy? Students will benefit from a successful levy referendum because fewer cuts will be needed to balance the budget. That means the ability to maintain more of what we have - in other words, cut fewer teachers, raise class sizes by a lower number, and maintain current programs.
What will happen if the levy referendum does not succeed? Students would be negatively impacted because the district will need to make bigger cuts to balance the budget. That could mean laying off more teachers, raising class sizes by a larger number, and cutting programs like all day kindergarten completely. All budget cuts have an impact on our classrooms, staff, schools and communities. Our district, like many in Minnesota, is facing a bleak budget picture that could lead to budget reductions of $7.7 million for the 2009-10 school year and more than that into the future. The district already cut $6.2 million for the upcoming school year, including an increase in class sizes for the first time in five years.
other districts also asking for levy
referendums? Yes, most of them.
According to the Minnesota Department of
Education 306 out of 340 school
districts will have an operating levy in
the district receiving more money
through local property taxes than it
How does the school district, along with outside entities, ensure sound money management? Our district is committed to sound fiscal management. Our goal is to maintain a balanced and stable budget while offering a quality education for all of our students. We follow sound financial practices that include, but are not limited to:
--Multi-year financial forecasting: this allows the district to anticipate potential budgetary stress, plan in advance, and take corrective action.
--Monthly financial reporting and monitoring: these reports monitor revenue and expenditures, and analyze programs, staffing levels, cash management and performance indicators. This helps leadership identify areas that pose a possible risk to our financial performance.
--Balancing budgetsvs. "letting deficits ride": Instead of allowing deficits, our district reduces expenses each year in order to balance the budget.
--Internal auditing: This assists management with monitoring the design and proper functioning of internal control policies and procedures. This improves our overall control and helps us achieve greater fiscal accountability.
--External auditing: Our district is audited each year by an independent audit firm.
--Open processes: Budget planning is a public process involving participation by members of the community, parents, teachers, staff, and even students. Media outlets follow the budget process, and budget information is public data. Board members are elected to represent the public in the planning process as well.
In February 2008, we received notice that the district's bond rating had gone up. The district already had a relatively strong bond rating of A3; Moody's Investor Services raised the rating to A2. Bond ratings are an indicator of the financial strength and management of an organization, and characterize the risk of holding a bond for that organization. These ratings, or risk assessments, in part determine the interest that an issuer must pay to attract purchasers to the bonds. A better bond rating means an organization like the school district can borrow money at a less expensive rate.What's the difference between an operating levy and a bond levy? The quick answer is that operating levies are for learning and bonds levies are for building.
--Operating levies are funds used to run and operate schools. They've become very important in recent years as districts find it necessary to pass operating levies to fund core programs like math, science and reading, and basic expenses. Years ago, operating levies were for "extras," special projects or desirable programs.
--Bond levies are funds used for new construction or additions to school buildings. These funds cannot be used to run schools or lower class sizes by hiring more teachers.
School districts use a combination of operating levies and bond levies to provide quality educational programs and building spaces for their students and the community.
What will the ballot language say? Click here to access a sample of the ballot language...
Can you cut district administration? Over the past several years we've reduced positions and expenses in district level administration. For example, this year alone we reduced district administration by the equivalent of 11 full time positions and reduced administrative expense by over $1 million.
Can schools just tighten their belts like the rest of us? Operating schools effectively with the limited resources provded is important. Over the past six years we've cut more than $21 million from our operating budget. Unlike family budgets, many of the items in a school district budget are required by law, such as school lunch programs and transportation. Also required by law is No Child Left Behind, which is funded at half the rate required to provide services, and Special Education, which is funded at 75% of the cost of services. The impact on the school district is an annual budget gap that must be paid from the district's general fund.
If enrollment is declining, why do we need an operating levy? Because it's nearly impossible to reduce fixed costs in proportion to the revenue lost through declining enrollment. The district has reduced costs associated with declining enrollment when possible; for example, decreasing the number of employees in proportion to the decreased enrollment.
Why is enrollment declining? The number of school-aged children who live in the district is shrinking, as it is for about 80% of school districts across the state. Duluth Public Schools continues to attract and enroll 3 out of 4 students (77%).
What about people who don't have kids in school? How do they benefit from an operating levy? A survey by the National Realtors Association found that many buyers cite schools as an important factor when buying a home. Families with young children want to send their children to good schools and are often willing to pay more to buy a home in a strong school system. When quality schools aren't available in their communities some families move elsewhere - negatively impacting local property values. Strong schools produce well-educated children who go on to provide a lasting, positive contribution to society. Businesses often look to the school system before locating in an area to ensure they will be able to recruit quality employees. There is a link between quality of schools and a community's quality of life. Strong schools and activity programs can mean less crime and reduced welfare and social service costs. School district services extend beyond grades K-12 in providing early childhood, adult education, and recreation programs to all members of the community. Quality local schools are an asset to the entire community, not just parents of school-age children.
How are children who attend private, parochial, or charter schools affected by an operating levy? The state requires Duluth Public Schools to provide many services to local private, parochial, and charter schools, including transportation, special education and nursing services. If the levy is not renewed, those students will be impacted.
What proof do we have that past taxpayer investments are paying off? Our students outperformed the state in 2008 MCAII reading test scores. Students saw gains in test scores between this year and last year. In the MCAII math test, students in grades 3, 4, 5 and 11 outperformed the state. Also:
--Ten schools achieved scores in the top 25% statewide for reading, with six achieving in the top 10%.
--Seven schools achieved scores in the top 25% statewide for math, with five achieving in the top 10%.
--Three schools scored in the top 20 statewide for MCAII tests.
--Our overall attendance, graduation and participation rates were all well above state standards: Attendance rate 96.2%; Graduation rate for Central, Denfeld & East 93.2%, Graduation rate for all schools, including alternatives 87.17%; Participation rate 99.08%.
--For the 11th year in a row, Duluth Public Schools outperformed state and national averages on the ACT Assessment, a national college entrance exam. Minnesota had the highest average score in the nation on the ACTs in 2008.
--3 MESPA Award Winning Schools, 2 National Blue Ribbon School Awards for Academic Excellence, 1 MAEF School Spotlight Award for Academic Excellence, #1 School for Academic Excellence - Minnesota Business Partnership.
--Students who win local, state and national awards in and out of the classroom. Staff who win local, state and national awards for excellence.
Student test scores are above average, our kids are doing well. Why do we need more money for education? We want to maintain quality education for students. Duluth, like most Minnesota school districts, has found it necessary to cut general fund expenditures each year for over a decade in order to balance the budget. We've worked hard to keep those cuts away from the classroom. At this point there isn't much left to cut that doesn't involve the classroom, and this year class sizes increased by 1 student and teachers were laid off. A levy alone won't solve Minnesota's school funding challenge in the long term. An operating levy will simply reduce the impact of cost reductions on the classroom.
Could you use the fund balance to address deficits? Maintaining a fund balance is prudent financial management. Duluth's excellent bond rating is based on the district's ability to control spending and maintain a fund balance. This allows the district to borrow money at very favorable rates, thus saving money in interest payments. If they district were to spend the fund balance rather than cut expenses, it would be a short-term solution only. In following years, deficits would be even larger because cuts had not been made to bring expenditures in line with revenues.