- Budget and Referendum Overview
- Frequently Asked Questions
- Notice of Special Election
- Annual Tax Impact Table
School District Budget Update and Operating Levy Information
Superintendent Edward J. Harris
Since 2010, the Chatfield School District has experienced a negative budget cycle about every 5 years causing budget reductions and requests for the community to provide additional school funding by approving increases in operating levies. This is common for schools our size who do not experience consistent enrollment growth. A negative budget cycle is when annual costs begin to exceed annual revenues creating a deficit spending situation that needs correction. Left unchecked, progressive deficit spending can turn a manageable situation into a financial crisis in a few short years. These negative budget cycles are due primarily to two things.
Our K-12 enrollment has been relatively flat over the past decade. Had there been a gentle, consistent rise in enrollment over that time as predicted, the negative budget cycles would have been reduced or eliminated as enrollment is the primary determinant of revenue.
State education funding increases fall short of covering our annual baseline/inflationary expenses. This is often referred to across Minnesota as the school funding “gap”. This has been the case since former Governor Jesse Ventura modified the state funding formula for public schools. Because of this, schools in Minnesota have had to increasingly rely on local operating levies and cutbacks to balance budgets.
In 2010, we made budget cuts and spent down fund balance reserve accounts to cover revenue shortfalls due to a negative budget cycle. The community then voted to increase our operating levy in 2011. This restored stability to the budget until 2015 when another operating levy increase was passed by the community after budget cuts and further spending of reserves the preceding spring. In 2015, enrollment projections indicated that we should experience a modest, but consistent enrollment increase in the coming years. As such, the additional revenue from the successful 2015 referendum was projected to keep the district financially stable for the next 5-7 years.
However, since 2015 our enrollment has not increased as expected. It has remained relatively flat with the 2018-2019 student count nearly 30 less than the preceding year. Thirty fewer students equates to nearly $250,000 in lost revenue every year if enrollment doesn’t bounce back. Meanwhile, baseline/inflationary costs continue to increase every year by 2-3%. So, instead of the 2015 operating levy being able to keep revenues ahead of expenses for the next 5-7 years, it will only have been sufficient for 3-4 years due to zero enrollment growth.
At the end of the 2017-2018 school year, we ended up $100,000 in the red (budget shortfall). The shortfall at the end of the 2018-2019 school year was $400,000. So, over the course of 2 years we will have spent $500,000 out of fund balance reserve accounts to cover shortfalls.
Costs have significantly overtaken revenues due to negative enrollment trending. We must make a strong effort to curtail expenses to lessen and eventually reverse the “gap”. Doing nothing or not enough now will only make the problem worse each year until the fund balance is depleted to the point where we would need to resort to short term borrowing to pay monthly bills. If districts run their fund balance into the red, the Department of Education steps in with harsh corrective plans. While this is a worst-case scenario, there are school districts every year that end up in that situation.
Last spring, the school board acknowledged the need to slow down the growth of expenses to parallel the reduced revenues as well as reevaluate the operating levy that is currently in place. I met with teacher leaders and principals to share the information given to the school board which included over 30 scenarios involving budget reduction amounts and operating levy possibilities. It became obvious quite quickly that there were no realistic solutions providing a balanced budget over time that relied solely on cutting the budget or just increasing the operating levy. It will need to be a combination of both.
After evaluating what might be realistic in terms of cuts and what we could possibly ask voters for at some point in the future, the District determined that at least $350,000 to $425,000 in cuts needed to be made for the 2019-2020 school year. For a district our size, this is a significant amount.
The following is a list of reductions totaling $403,073 that were made last spring for the 2019-2020 school year.
Elementary Classroom Teachers (2 positions)
Elementary Behavior Intervention Specialist (1 position)
Elementary Paraprofessional (1 position)
Elementary Custodial Staff (.5 position)
K-12 Music Teacher (.25 position)
High School Social Studies Teacher (1 position)
High School English Teacher (1 position)
High School Paraprofessionals (2 positions)
Technology Integration Specialist (.5 position)
District Office Staff (.37 position)
Teacher Training Budget (reduced by ⅓)
School Store Transaction Fee (passed on to users)
Our current operating levy expires in 2022 which means that there are 3 occasions for the community to decide to renew and/or increase it (Nov 2019, 2020, or 2021). This past spring, the school board considered going to the taxpayers as early as this coming November. However, before they made that decision, they wanted input from the community so a survey was put out in June. The survey was designed to gauge how much support there is (or isn’t) for an increase in the operating levy to avoid further cuts. The survey included information on why we need what we are asking for as well as what we have done so far to address the issues. Lastly, it asked about the community’s willingness to increase the current operating levy by at least $375 per student. The School Board reviewed the survey results in July which revealed the following prevailing community opinions.
1. Make further budget reductions.
2. Ask for an increase in the operating levy but at an amount less than $375 per student.
After considering the community survey results above, the District took the following actions...
1. Further Budget Reductions ($100,000): Over the course of the summer, the school district was able to cut the budget further through a combination of a) cost effective staff replacement and b) staff non-replacement. These cost saving measures amounted to roughly $100,000. This is in addition to the $403,073 that was cut in the spring.
2. Ask For An Increase In the Operating Levy: At a special meeting in August, the School Board voted to put an operating levy referendum on the ballot for the upcoming special election on November 5th which was scheduled to fill a vacant school board seat. In an effort to respect the results of the survey, the School Board decided to put two operating levy questions on the ballot to give voters some choices while staying beneath the $375 per student increase that the survey asked about. Here are the questions...
1. Increase the current operating levy by $275 per student for the next 5 years.
2. Increase the current operating levy by an additional $75 per student for the next 5 years.
Specifically, voters will be asked to revoke the current operating levy of $476 and replace it with $751 per student (question #1). Secondly, voters will be asked to approve an additional $75 per student (question #2) beyond $751. In order for question 2 to pass, question 1 must pass.
Finally, we are very appreciative of the support over the years and are very proud of the opportunities that we are able to provide for our students. Our kids and staff benefit every day from the generosity of our community. We realize that the timing of this request for additional revenue may not be the best for taxpayers given the recent commitments to update the high school and city pool. As such, we have made efforts to reduce expenses so that the operating levy request can be as minimal as possible.
Please vote on November 5! If you have questions, please call my office at 507-867-7110 or send me an email at firstname.lastname@example.org
Edward J. Harris
Frequently Asked Questions
Q1: Why are there two questions on the ballot?
A1: This was done to give voters an option as to how they might respond to the District’s request for additional funds.
Q2: What happens if both questions fail?
A2: The District will need to consider increasing fees and making staff/program cuts for the 2020-2021 school year ($100,000 - $150,000). This may further impact class sizes/choices, the availability of programs, and activity fees.
Q3: What happens if question 1 passes and question 2 fails?
A3: To a lesser degree, the District will need to consider increasing fees and making staff/program cuts for the 2020-2021 school year ($50,000 - $100,000). This may further impact class sizes/choices, the availability of programs, and activity fees.
Q4: What happens if question 1 and 2 both pass?
A4: Staff/program cuts and fee increases for 2020-2021 will be averted. The District will then strive to maintain financial stability for the next 5 years.
Q5: What is the tax impact of the proposed operating levy increase?
A5: If question #1 passes ($275 per student increase), owners of residential homesteads, apartments, and commercial-industrial property would see a $67 per year increase in their school taxes for every $100,000 of estimated market value.
A5: If question #1 and #2 pass ($275 and $75 per student increase), owners of residential homesteads, apartments, and commercial-industrial property would see a $85 per year increase in their school taxes for every $100,000 of estimated market value.
Q6: What will the impact on agriculture land owners be if the community supports the referendum?
A6: Agricultural property owners will pay taxes on the proposed referendum based only on the value of the house, garage, and one acre. The tax impact on the house, garage, and one acre per $100,000 of estimated market value is the same as what is listed in A5 (see above).
SPECIAL NOTE: The Ag 2 School Tax Credit has been scheduled to increase over the next 3 years from 40% to 70%. So, regardless of the outcome of the operating levy referendum election, ag property owners will see a consistent decrease in school taxes over the course of the next 3 years compared to what they are paying now on their ag land. For more information, call Superintendent Ed Harris at 507-867-7110.
Q7: Is the District having budget trouble because of the high school construction project?
A7: No. That project did not go over budget. In other words, our general fund concerns are not the result of an over-budget high school building project. If the construction project had never happened, we would still be in the same situation.
Q8: What has the District done to address the budget concerns before coming to the voters?
A8: Over the past 2 years, $500,000 has been spent from reserves to cover year-end budget deficits. In addition, $500,000 has been cut from the budget since this past spring.
Q9: What has been the impact of the cuts made so far?
A9: K-12 student support staff/services, high school class sizes/offerings in English and Math, district technology support, office staff support, staff training budgets, increased user fees.
Q10: Why can't you keep using reserves to cover annual budget shortfalls?
A10: Reserve accounts are used to cover monthly cash flow needs and do not regenerate in a deficit spending situation. If they are spent down much further we may need to short-term borrow to pay monthly bills. That is not a desirable situation.
Q11: What about activities?
A11: Further budget cuts may involve activities. In general, we have tried to avoid eliminating programs if we can downsize and/or economize first. Despite being very visible, activities are relatively inexpensive to run and thus not very impactful as budget cuts. Obviously we would not do this, but to illustrate the previous point, cutting all 7-12 fall and winter sports (football, volleyball, cross country, wrestling, boys basketball, girls basketball, dance) would only generate $125,000 in savings.
Q12: How can the Board ask for $275 in November when they asked about a $375 increase in the summer survey?
A12: Our summer savings of $100,000 was not a reality when the survey went to the printers early in the summer. The additional savings realized later made it possible to reduce the amount requested to $275/$75.
Q13: Will the District be hosting any public information meetings about the referendum?
A13: Yes. October 16 and October 23 at 6:00 pm in the High School Forum Room.
Q14: Where and when is the vote?
A14: Chatfield City Hall on Tuesday, November 5. The polls are open from 7:00 am to 8:00 pm.
The table below indicates what the total tax impacts are for question 1 and 2 for the year (annually). For example, if the estimated market value of your property is $150,000, your tax increase will be $100 per year if question 1 passes. If question 1 and 2 pass, the tax impact would then be $127 annually.
REMINDER FOR AG PROPERTY OWNERS: Your tax impact is based on the estimated value of your house, garage, and 1 acre of land.