One of the comments I have recently heard in conversation about the District’s opt out is that we could wait at least another year before we are in the position where we really “need” to opt out. The fact is that we can’t wait – unless we are comfortable with reducing the programming and services that we offer to students in our school. The reasons are complex, and revolve around the structure of our General Fund Reserve and also the nature of how property taxes are collected.
First, let’s talk about the General Fund (GF) and its reserve. In schools, most of the money for the general fund is provided through the Per Student Allocation (PSA). Much of that money comes through local property taxes, and depending on how much revenue is generated locally, the State of SD provides the remainder to fulfill the funding need based on the number of students we educate in the school. Property taxes are collected twice per year, and our school receives those large payments in the months of November and May. During those months between tax payments, expenses do not go down for schools. We need to have the GF reserve at approximately 18% in order to pay our bills, or to “make cash flow,” without borrowing money. The chart below gives you an idea of when we see the peaks and valleys in our General Fund as the local tax revenues are collected.
Second, The Fiscal Year for school and the tax year do not line up very well. The tax year starts January 1. Each of us make two property tax payments, one in the spring and one in the fall, based on the taxable valuation of the property in the previous year. The Fiscal Year for schools starts July 1. Money collected in the first year of the opt out is for the first half of the tax year, but it is the second half of the school year. This results in only half of the opt out value being collected the first school year the opt out is in place. In our case, that means that the first year of the opt out, the district will collect $250,000 (spring 2017). In our situation, we expect that our fund balance will be 24% at the end of this school year. There is still some room to maintain programs while deficit spending if we are able to collect the $250,000 for the first half of the first year of the opt out – meaning that next year’s budget would require us to spend down the reserve to that 18% level that still allows us to pay our bills on time, and we would also use the first half of the taxes collected in 2017. The following year, our reserve would be at the necessary 18% to pay the bills between tax collections, but we would also need to rely on both payments from the opt out in order to maintain services and programming in the 2017-2018 school year.
The time is now.
Failure of this opt out means we would have to cut staff to balance the revenues and expenditures in our budget. In schools, programs and services means staff. These same staff provide students with academic, social and co-curricular opportunities. Reductions in staff may lead to fewer students in our school. Fewer students means a continuing loss of revenue.
Our biggest fear is that this may result in a cycle that leads to more and more cuts. If, as a community, we want to maintain our present levels of services and programming for our students, we simply cannot afford to wait.
Many ask “what can the school do to help our community grow?” The answer is that we can maintain our programming at a level where our school is a viable option for students and families when they consider Garretson as a community in which to live. There are definite benefits to living in this community and attending our school.