School districts will ‘see red’ without an increase in state aid

School districts will 'see red' without an increase in state aid by M. Jill Karolevitz The Vermillion School District, along with others in South Dakota, will be seeing red � that is the red ink of budget shortfalls � within the next couple of years if the state legislature fails to increase state aid to schools.

That's the message given to Sen. Joe Reedy, Rep. Judy Clark and Rep. B.J. Nesselhuf Nov. 5 as Superintendent Robert Mayer gave a special presentation to them at the Vermillion High School library.

"I wanted to show you before you go to this next legislative session what it's going to be like at the Vermillion School District in the next couple of years," he said.

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 teacher 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 in a June 23, 2000 Plain Talk article. "We will not get significant increases in state aid until those reserves are spent. But we all hope the state is there with its share of funding when the need is there."

"We were told 'you won't get anymore money if you sit there with a large fund balance,' so we followed the state's recommendation and spent it to increase teacher salaries," Mayer said Monday night. "Now that we have, there's still no more money from the state and our fund balance will soon be gone."

Mayer explained that fund balances have been kept by school districts for cash flow.

"We receive our biggest income in May-June and November-December, the larger tax months," he said. "But when that large amount of money doesn't come in during the other months, we need a fund balance to cash flow rather than borrowing money. It's also needed for emergencies, such as our rash problem last year."

This year's budget figure for the general fund is $6,983,695 � representing 80 percent of the total school district budget.

"There are several funds within our budget," Mayer said. "But it's the general fund that causes the most problems."

Eighty-four percent of the general fund's revenue is generated from property taxes � which cannot be raised � and state aid.

Salaries comprise 80 percent of the general fund expenditures, Mayer explained. Utilities, supplies and transportation are also paid out of the general fund.

Within the general fund budget for this year, revenues have been projected at $6,089,927. Subtracting that figure from the projected expenditures leaves an $893,768 shortfall. That money must be spent from the fund balance, Mayer said.

Mayer continued to explain that the net increase in state aid since the 1998-99 school year has been only 1.5 percent, compared to an average of nearly 25 percent in increases in expenditures over the same period. This includes: salaries, up 23 percent; utilities, up 32 percent; transportation, up 5.5 percent, and health and dental insurance, up 33 percent.

He pointed out that although state aid per student has gone up since 1998-99 (from $3,540.91 to $3,802.30 based on the state funding formula) the district's average daily membership has declined, resulting in a revenue loss of $375,000 in state aid/property tax calculations.

"How can we get more money?" Mayer asked. "Well, we can get more kids or rely on the state legislature.

"We lost $375,000 because we lost 80 students in a four-year period," he continued. "Theoretically we should be able to reduce the budget accordingly because with the loss of those kids, we lost the cost of educating them. But that loss of students is spread over 13 grades. We can't just drop a teacher or a program in one grade or another because the student loss is district-wide."

In order to accommodate the budget shortfall, the Vermillion School District is using a combination of reducing expenditures and spending its fund balance.

"We cannot control our revenue, but we can control our expenditures," Mayer said. "That's what this school board has been talking about for the last two years. But the fund balance isn't going to last forever, so more drastic cuts will have to be made soon."

Projecting the continued use of the fund balance, calculating a 3 percent increase in revenue and expenditures, Mayer said the school district's fund balance will end up $335,400 in the red by the end of the 2002-03 school year.

"If the legislature doesn't take some kind of action, we will be this much in the hole," he said.

Mayer added that building projects at the schools have nothing to do with the problem.

"If we hadn't have built one square foot in this district, we would still be faced with this problem because it's an entirely different fund," he said.

Budget cuts have already been made for this school year, including: the elimination of two library aide positions, a study hall/transportation aide position, paid early bird classes, some elementary aide time, and a foreign language position at the middle school; reducing a middle school assistant principal position to half-time; reducing a VHS physical education teacher to part-time; reducing supply accounts by 10 percent; reducing administrative travel to the national convention by 50 percent; reducing central office clerical to part-time, reducing district contribution to Native American coordinator position, reducing vocal music instruction at VMS to part-time, saving money in retirement, reducing the unemployment fund and reducing the board of education advertising budget.

"We cut approximately $200,000 and lived through it," Mayer said. "But next year will be far more serious."

School board president Tom Craig noted that the state has used excess funds from declining enrollment for technology, not salaries or increasing state aid.

"But we got 171 computers from the state that we didn't need," he said. "Plus it cost $20,000 to program those computers."

He added that the $85,000 worth of technology would have been better spent if the state would have allowed it for expenditures or even hiring more teachers.

"Local school districts know what's best for them," Craig said. "Pierre does not. The state is interested in improving education in South Dakota but it is not backing us up with funding. The state government is putting school districts across the state in a financial bind"

By February or March, the school board will begin studying what cuts will have to come next, Mayer said.

"We will be looking at cutting personnel," Craig said. "We always try to keep the student/teacher ratio in mind, but that will be affected. We'll also be talking about cutting programs, which will affect the choices our students have. In the long run, it will have a negative impact on the education of our students in the Vermillion School District.

"We are aware of the problem, but we cannot solve it," Craig said directly to the legislators in attendance. "That's why we asked you to come tonight, so we could tell you about the budget challenges we are facing."

Craig called for a revision of the state's revenue generating plan.

"It's not a local problem, it's a state problem � a revenue problem," he said. "The state needs to look at a more progressive approach to generating income."

On that note, Mayer presented his own idea of a four-year funding program to the legislators. It includes increasing the state sales tax by one cent and dedicating it to education, using declining enrollment money in the state aid formula rather than using it for technology, increasing the state aid formula by 3 percent, using the investment from the sale of the cement plant for the school funding formula and eliminating the small school factor (small schools receive more money per student than larger schools do from the state) for use in the formula.

Mayer will present the budget information to the school district staff next week. He is also available to give the presentation to community groups if they desire to learn more about school budgeting challenges.

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