New law will bite at small school budgets by M. Jill Karolevitz A one-time law dealing with the distribution of state aid to education has school districts around the state taking a long, hard look at their budgets.
HB 1258, passed this legislative session, says if school districts have fund balances over 20 percent of their general fund expenses, the interest paid on that amount over 20 percent is subtracted from state aid and paid into a pool. From there, the funds will be distributed to school districts throughout the state, according to their student numbers. The pool also includes $1.5 million provided by the state.
�In a lot of ways, this isn�t the worst piece of legislation passed,� said Vermillion Superintendent Robert Mayer. �It is an increase in funding for us. But it will hurt a lot of small schools, especially those with declining enrollments. The money they�ve saved for a rainy day will be lost because it forces them to spend their fund balances or give some back to the state.�
Rep. Judy Clark of Vermillion voted against HB 1258.
"This business about fund balance reserves is way
overblown,� she said. �I think this is an issue that will solve itself. But for some legislators, the reserves are a big deal.
�And then there�s the fact that this is just for one year,� Clark continued. �I think it�s short-sighted to have a solution that is so short-term. But if this takes the issue of fund balance reserves off the table, it will allow us to move on to another solution next year.�
Mayer was disappointed that the bill was passed at the 11th hour of the legislative session.
�You don�t get the best legislation at 1:30 in the morning,� he said. �And it was never debated, there was no argument for or against it. It was pushed through by the leadership of the Republican party.�
Schools have been under pressure from the state to spend down their fund balances, Mayer said. But he�s concerned with the 20 percent cap on those balances.
�Twenty percent seems to be the magic number in Pierre,� he said. �Twenty-five percent would be better because it takes at least 20 percent to cash flow a school district, with the extra five percent for a rainy day.�
The local school district, however, can adequately handle the 20 percent cap, Mayer added.
�If we can maintain 20 percent, we will be fine,� he said. �We won�t have any emergency money, but we will be able to cash flow.�
Although HB 1258 will provide more funding on a one-time basis for the Vermillion School District, Mayer said the legislation, coupled with a 3 percent increase in state aid, is not adequate.
�If the state doesn�t provide more money, schools will be forced to make cuts,� he said. �State aid should be increased beyond three percent, because budget increases do not stop at three percent. Teachers are harder to find and keep because of low pay, so we have to pay them more. We are also looking at increases in health insurance, and energy costs � natural gas, fuel and gasoline � have gone up. We cannot generate an increase in revenue because we can�t raise property taxes � and we don�t want to do that. So the state has to raise state aid to adequately meet our needs.�