Frequently Asked Questions #1, General Information and Taxes

Thank you for taking a few minutes to read about the current Opt Out.  Our intent is to provide answers to questions that people in the district may have regarding the district’s finances and programming relevant to the opt out.  This first installment of the “Frequently Asked Questions” revolves around general opt out information and tax levies.  Future installments will include a variety of topics, based in part on questions that we receive through a variety of channels.  If you have questions, please call us at the school or reach out through email – .  We want to answer your questions! 


GF = General Fund: This is one of two major funds that schools use.  The General Fund is how the school district pays most of the “operational” costs incurred as the school district provides education for our students.  Eighty percent of this fund is used for paying salaries and benefits to employees.  It is funded through a combination of state and local money.  The levy for this fund and the formula is determined annually by the SD Legislature.  Different property types are taxed at different levels.  In the 20-21 school year, those levies were: Ag property at $1.443/1,000; Owner-Occupied property at $3.229/1,000 and all other property (commercial and utility) at $6.682/1,000.  Main source of revenue for this fund is determined through a count of the students served in the district on the last Friday in September.    

General Fund Reserve: This is the “cash on hand” in the General Fund.  Any part of the budget that is unspent stays in “the reserve,” which is carried over from year to year.  The reserve is often times reported out as a percentage of the expenditures budgeted for the year.  Because local taxes are collected twice per year, schools see two large spikes in revenues when property taxes are paid.  We need to have approximately 18% in our reserve in order to pay all of our bills between those two revenue spikes due to the local property tax collection.  

CO = Capital Outlay Fund: This is the second major fund that schools use.  The CO fund is used for buildings, large pieces of equipment, technology and infrastructure, and textbooks.  This fund is designed for the purchase of those things that will last for some time.  This is funded through local property taxes.  In 2016, the law was changed to decrease the growth in local Capital Outlay funds, and is now limited to growth of 3%, or the rate of inflation (CPI-W), whichever is less.  The maximum dollar amount  is set by the Board of Education in July each year and then the county auditor determined the levy that will generate those funds, based on total valuation in the district.  The levy is applied equally to all property types.  

  •  What is an “opt out?”

In South Dakota, the taxing authority for local governments (school board, city, county) is spelled out in state law.  There are limits defined in state law that set maximum tax levies for these local governments.  There is  a provision in the law that allows those local governments, with the consent of the people, to “opt out” of the tax limits. In Fiscal year 2021, 65 school districts (43.62%) in the State of SD have an opt out in place.  Sometimes, people think that this is only a “small school” issue.  Several districts in our region have been forced to opt out in order to preserve programs.  The list includes: Harrisburg, Sioux Falls, Tri-Valley, Beresford, and West Central.  Some are large and some are not, and each community has programming that local taxpayers have committed to keeping in their districts.  (Source: SD Dept of Education – Opt Out History).  When a school district opts out of those tax limitations for the General Fund, different property types pay a differential rate that follows the ratio set by the legislature in SD law.  For taxes payable in 2021, that ratio is Ag:OO:Other 1:2.2377:4.4306.  

  • Why do we need to do another opt out?

In 2016, the Board of Education passed a resolution to opt out for a maximum of $500,000 for five years.  In that resolution, the board wanted to ensure that our public’s voice was heard through an election.  At that time, the public voted in favor by a margin of 472 “yes” votes to 360 “no” votes.  At that time, the board committed to the goal of reducing the opt out over time by reducing expenses in a thoughtful manner that would have the least impact on our students.  For the first three years of the original opt out, the Board used the entire $500,000, but in the last two years, reduced that amount to $350,000.  While the district is in a much better financial situation at this time, we still anticipate that we will need the opt out over the next five years in order to ensure that we can maintain programming while our community and school grow.  The Board and administration are committed to only taking as much as necessary to maintain programming in the district, with the goal of reducing the amount needed over time.  

  • What if the district doesn’t need the full amount of the opt out?

After an opt out is passed, state law allows the district, through the annual budget process, to request all, some or none of the opt out amount within the time frame specified in the resolution.  Our board has publicly committed to only taking what is necessary to sustain current programming in opt out taxes.  History over the last five years has shown the district takes that commitment to our community seriously by not taxing for the maximum amount allowed in fiscal years 2020 and 2021.  We remain committed to the principle of only taking additional tax revenue to support our programming until growth allows us to grow our programs with funds provided by the state funding formula.  

  • If we support this new opt out, will my taxes go up again??

The current levies would stay about the same, or would decrease, depending on growth in property valuation in the district.  It could be thought of as a continuation of our present circumstances, with a decrease in the maximum amount that the district can collect. In fiscal year 2021, the opt out was for $350,000.  If the community supports the school to extend the opt out for another five years, the maximum that could be collected in next five years would be $350,000 per year.  At current property valuations, the opt out levy for $350,000 would remain at $0.55/1,000 for ag property, $1.251/1,000 for Owner-Occupied property and $2.589/1,000 for all other property.  

  • How do our school property taxes compare to surrounding districts?

We are aware that how much our community members pay in taxes is important to everyone.  In 2016, our district was in a very difficult financial position.  We know that our community paid taxes that were well above average when compared with surrounding communities at that time (we compared total school tax levies for Baltic, BV, Dell Rapids, Garretson, Sioux Falls, SF – Cherry Lake, Tri-Valley, West Central and Tea Area).  Every year since then, our situation with respect to taxes has improved incrementally.  We compared school levies with a number of area districts to see how we stack up.  In 2017, our taxes were 7% higher than the average for Ag property, 15% higher than the average for Owner-Occupied property and 23% higher than the average for Other property (commercial and utilities).  In 2020, Garretson School District levies were 10% BELOW average for Ag property, 3% below average for Owner-Occupied property and other property levies went from 23% above the average to only 5% above the average.  (source: History of tax levies – City of BrandonMinnehaha County Auditor).  (See data chart here)

  • What has the school done over the last five years to reduce costs?

One of the things that this opt out over the past five years has enabled us to do as a school district is to look very carefully at ways we can reduce our costs without causing harm to our students and our programming.  We have taken a number of smaller steps that together, have resulted in recurring reduction in costs from year to year.  Over the last five years, our General Fund reserve has grown to a level that will allow the district to spend down in a strategic manner over the next couple of years.  One of the ways we have been able to do that is by reducing expenditures in certain areas over time.  Some examples are below:

  • In 2016, the district contracted a service provider for custodial rags, microfiber mops and rugs in the building.  As we looked at the cost for the service, we decided to make the investment in our own washing machine/dryer and purchase our own custodial mops, rags and permanent rugs.  Our custodians now wash these materials, and outside of the initial purchase costs, replacement of worn out mops and rags has been a minimal cost.  Savings to the district is $3,000-$4,000 annually.  
  • In 2017, the food service fund was in the negative by a little over $90,000.  The district worked with Lunch Time Solutions with the goal of breaking even in our food service.  In 2019, we no longer needed to subsidize the food service fund with general fund money.  In 2020, the revenue generated through the food service program was enough to pay for the entire cost of the program.  We expect that to continue in 2021 and beyond.  Savings: approximately $90,000 annually.
  • In 2018, we compared costs associated with refinishing our gym floors with different vendors.  Up until that point, we had spent $9,000 annually in refinishing those wood floors.  After exploring different options, we were able to reduce that cost to around $2,500.  Annual savings to the district of approximately $6,000.
  • In 2019, we went through the Request For Proposal (RFP) process for our copier lease.  At that time, we had a five year lease that was costing us approximately $36,000 per year.  After the RFP process, our costs are now closer to $12,000 per year for copier services.  Savings to the district is approximately $24,000 annually.
  • In 2019, we went through the RFP process for waste services as well.  Through the process, we were able to reduce the cost of those services significantly.  Annual savings to the district is approximately $6,000.
  • In the summer of 2020, we completed a project to replace the old chiller and replace our fluorescent lights with LED lighting.  Costs of the improvement were paid through the Capital Outlay fund, but we expect to see savings of between $15,000 and $20,000 in the General fund through reduced energy costs.   

Maintaining the opt out will allow us to continue reducing costs in a thoughtful, well-planned manner that leads to greater efficiency without negatively impacting our students. 

  • Is this sustainable?  Why do we need to continue this opt out?

A school district of our size needs to maintain a General Fund reserve balance that is high enough to cover the required payroll payments between the two large annual tax disbursements.  Five years ago, the district was dangerously close to not being able to cover those financial obligations due to a low fund balance.  At this point, the Garretson School District is in a much more stable financial position, with a General Fund balance at around $1.2M.  Our plan is to spend that fund balance down over the next two years and then to maintain that fund balance at between $800,000 and $900,000.  This level of reserve will allow us to not only meet those cash flow obligations, but also will allow us to successfully navigate unforeseen circumstances that may come up.  In this year’s budget (FY21), we have budgeted to spend $484,000 out of the General fund reserve, and we expect to see the reserve decrease at the end of the fiscal year.  We know that we will not likely spend that entire $484,000, as we normally underspend our budget by 3-5%.  As the community and our school population grow, our hope is that we will be able to rely less on our reserves and opt out money and be able to sustain or expand our programming based on the number of children our school serves.  

  • Why are we voting again?

School boards are a great example of representative democracy.  This means that the public votes for someone to represent them in the decision making body.  The decision making power of local boards (and city councils and other forms of local government) is spelled out in the laws of the state of South Dakota.  When opting out, the school board may pass the resolution with, or without, an election.  There are some school districts in the state that have moved forward without an election, hoping that the public won’t refer the opt out resolution to a public vote.  Back in 2016, during the first opt out effort, our board made the commitment that this decision needs to be made by the entire community, with everyone’s voice being heard through their vote.  The board remains committed to that principle – that this is one decision in which the entire community should have a chance to voice their opinion, and so passed the resolution with an election to take place on May 11, 2021.

We do believe that the school’s future and the community’s future are tied to one another.  As our community grows, so will our school.  We believe that over time, growth in the community and growth in our student population will converge to allow us to let the opt out expire.  Until that time, we are hopeful that the community will continue to support the school by extending the opt out.  Our board and administration ask for your trust that we will remain true to our word.  

We have many things to be proud of in both our school and our community, and ask for your continued support.