Lawrence school board members last week learned they have another difficult budget decision to make — just months after they cut expenditures by $4.6 million.
This time, the heated discussion will involve a potential property tax increase, as administrators say the district will suffer from an expected slight decline in property valuation. During a budget preview session last week, administrators discussed the possibility of a 5.3-mill increase if valuation in the district went down 1 percent.
“Our property valuations have shown a slight decline, and that is a political reality that we need to accept,” said Rich Minder, who became the board president on Thursday.
But critics said a property tax increase would be ill-timed because the economy continues to sputter.
“The fiscal responsibility is not there,” said Scott Henderson, a Lawrence resident and retired Hallmark Cards manager.
“They need to have a voice of the people who are paying the taxes.”
Board members still have options before they next discuss the budget July 19. Here are some more details about the district’s mill levy situation.
How much would a 5.3-mill increase cost a property taxpayer?
A mill is $1 in property tax for every $1,000 in assessed valuation. If board members passed a 5.3-mill property tax increase with a 1 percent decline in property valuation in the district, it would increase a $200,000 home’s property taxes by $122 a year — to $1,408.
What is the proposal board members face? What are the main factors driving a potential property tax increase?
In addition to aid from the state, school districts collect local property taxes for expenses.
To make up for a 1 percent decline in property valuation, board members already are considering:
• Increasing the local option budget levy by 2.3 mills.
• A 0.9 of a mill increase in bond and interest levy to pay off the 2005 bond issue.
• A 2-mill increase — if they choose — for other capital and building projects in the district.
In addition to these main increases, there are some other small levies also under consideration.
Local option budget
Lawrence school patrons have given the board the authority to collect from taxpayers 31 percent of what the district receives from the state. This extra tax — called the local option budget, or LOB — allows districts to supplement state aid. Generally these funds cover operating expenses, including salaries.
Administrators calculate the amount of money flowing into the general fund will grow for 2010-2011, mostly because of projected enrollment increases at the Lawrence Virtual School and among students who receive free- and reduced-price lunches. The district receives more money for at-risk students.
So to fund the LOB at 31 percent will require a higher mill levy.
And another mill-levy increase would be needed to offset reductions in property valuations.
The 5.3-mill increase the board will consider also generates $1.1 million to make up for additional losses in state revenue.
“We’re getting double-whammied, obviously, with the drop in valuation and then with the decrease in state aid,” Superintendent Rick Doll said.
Bond and interest
Kathy Johnson, the district’s division director of finance, said lower property values would also hurt the district in this area. The district has a higher required payment next year on the principal for the 2005 bond issue. The payments were scheduled years in advance with the anticipation of valuation increases.
The bond issue funded improvements at secondary schools and construction of the new Broken Arrow School, and the district has used some of the money for the new high school athletic facilities.
Separate from a bond issue, money for capital or building projects — including most of the athletic facilities improvements — comes from this levy. Board members have the most flexibility here. It’s possible the board will try to find savings in this area of the budget.
“That’s the most pronounced decision they have to make,” Doll said.
Administrators say some of the district’s buildings, particularly elementary schools, have repair needs. But some board members said with a task force studying the elementary schools this year, the district likely won’t look at increasing this levy to fund major projects next year.
Could the board make further cuts?
Board members in March cut $4.6 million in expenditures because the state will be sending it less money. The recession forced the state to cut its base state aid for each student from $4,218 to $4,012.
Board members do have options. For example, they don’t have to fund the LOB at the full 31 percent. If they reduce that by 1 percent, Johnson said, it would mean a reduction in expenses of $720,722.
Critics, like Henderson, said a property tax increase would be irresponsible, especially for people living on fixed incomes.
But the idea of further cuts hasn’t gained much traction at district headquarters. Minder, who believes education is an economic development issue, said board members need to have more discussions about the mill levy.
“I am a champion of the investments that our community can make in human capital,” said Minder, the new board president. “Our current budget crisis is a context in which we have to make that investment. We can’t just simply sacrifice our future economic well-being because of our current crisis. We just can’t do that.”