District is in the grips of a catch-22; Costs continue to increase, limited revenues may force cuts

District is in the grips of a catch-22; Costs continue to increase, limited revenues may force cuts by M. Jill Karolevitz Providing the best education possible for students, while striving to pay its teaching staff the best wages possible � both with an ever-limited income � has the Vermillion School District in a catch-22 situation which may result in district-wide program cuts over the next several years.

The school district has four operating funds � general, capital outlay, special education and pension � plus its construction fund. The problem lies in the general fund � 78 percent of the total budget � according to Superintendent Robert Mayer.

For 2000-01, the budgeted figure for expenditures was $6,956,230. Spending from this fund includes salaries (80 percent), utilities, books, supplies and transportation. Budgeted revenues, from property taxes, state aid, county and federal sources and other miscellaneous income, was projected at $6,180,057. Quick work with a calculator shows there is a shortfall � $776,173. In reality, because the budget figures were projected last summer, the school board expects the shortfall will be closer to $500,000.

Still, �that shortfall must come from the fund balance,� Mayer said. But over a period of several years, without any way of raising revenues, many school districts in South Dakota, which are facing similar problems, will be using up their fund balances.

Several factors which limit a school district�s income come into play.

Due to the 1996 state law, property taxes cannot be increased in the general fund. School districts throughout the state that have not opted out of the tax freeze, are tightening their belts in preparation for years to come.

�We used to be able to raise taxes,� Mayer said. �But we can�t do that anymore. That�s a key in this dilemma. We cannot access more revenue.�

Coupled with that is the state aid formula, based on student numbers, which fluctuate from year to year. The calculation is always based on the previous year. Revenue increases come from higher enrollments, and when the state Legislature increases the per-student allocation. Now at $3,666 per student, the increases in this per-student allocation have been 1.8 percent and 1.7 percent over the last two years.

On the other side of the coin, for each student lost, the district loses that $3,666 in revenue � and the Vermillion School District has not been immune to declining enrollment. In most cases, however, expenditures cannot be reduced by the amount of money lost because the number of students lost is spread over 13 grades.

�The state has to increase its per-student allotment, or we need more kids in order to get more money,� Mayer said.

Finally, last year�s mandate by the state that school districts spend down their reserves, also comes into the picture.

During the 2000 South Dakota legislative session, Governor Bill Janklow criticized school district officials, saying they have hoarded the money the state

gives them instead of using it to boost teachers� salaries. He was unsuccessful in capping the amount school districts could hold in their budget reserves, but continued to be adamant that they get the reserves down.

�We felt significant pressure from the Janklow administration to spend the reserves, so we�re doing what other schools are doing,� Mayer said last summer, when the school board approved a two-year, district-wide pay raise agreement, using money from Vermillion School District�s general fund reserves.

According to Mayer, teacher salaries in Vermillion rank 16th in the state.

�The school board and administrative staff believe their most important function is to hire the best teachers and keep them,� Mayer said. �Attracting good new teachers and keeping the ones we have is impossible without providing salary increases.

�The state recognizes the problems with teacher salaries, but it�s not willing to put forth any funds to deal with it,� he added.

Salaries for the classified support staff have also been increased to keep the school competitive with other Vermillion employers, namely The University of South Dakota, Polaris and Gateway.

Despite the district�s best intentions, the money for salary increases must come from its reserves, which won�t last forever, Mayer reiterated. He added that funds from other areas of the budget cannot be transferred into the general fund to help out. Construction funds cannot be used to assist the general fund in annual operating expenses, either.

The school district is also seeing some significant cost increases in health insurance, natural gas and gasoline, none of which the district can control.

There will also be increased costs in maintenance due to the new high school addition. New programs � all-day kindergarten, a K-9 alternative school, funding for the Southeast High alternative school and the addition of a part-time French teacher at Vermillion High School � add to the district�s expenditures.

The bottom line is that the Vermillion School District � as with other districts throughout South Dakota � will either have to cut its expenses, or tap into its savings account, according to Mayer.

�But someday, that will run dry,� he said. �We will have to make some significant cuts each year, but we�re not sure how much, because we�re at the mercy of the state.�

Potential cuts would be across the board, Mayer said, from staffing to academic and extracurricular programs. They would take place over a period of two years, beginning with the 2001-02 school year. The amount is contingent upon what South Dakota lawmakers do this year regarding state aid legislation.

�It�s important to talk to your legislators,� said Nick Merrigan, vice president of the Vermillion School Board. �We�re between a rock and a hard place. We�re always a year behind in knowing what the funding from Pierre is going to be, and to forecast this � like everything else � you have to give it your best guess. Looking out over three years, the fund balance could be gone. Our only hope is Pierre, or cut programs. It�s a Catch 22 situation.�

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