Citing an inability to meet the Vermillion School District's financial needs under tax limitation measures that will kick in soon, the Vermillion School Board unanimously passed a resolution Monday that would extend the current opt-out of the state's property tax freeze for another five years.
The opt-out is for the same amount that district voters approved in March 2005 – $800,000 annually for a five year period beginning this year on property taxes that are payable in 2011.
"We've looked over different figures and projections, and it appears to me, that without continuing the opt-out, we most certainly have to cut at least a $1 million from our general fund budget, probably within two years," School Board President Mark Bottolfson said. "We'd be looking to (cut) $500,000 real fast, and at least another $500,000 the following year."
Bottolfson noted that continuing the property tax freeze opt-out at its current level for another five years would strictly maintain the quality of education presently being offered by the school district.
"We've shown some credibility over the last five years with our opt-out," he said. "We've met most of the promises that we stated – we only used the money as it was necessary – we all know that for two of the five years we reduced the amount from $800,000 to $500,000, and that saved our taxpayers $600,000 over the past five years.
"We've said all along that we'd use it (the funds provided by the opt-out) to maintain programs and keep class sizes the same that they've been in the past, and I think that we've done that," Bottolfson said.
The school district has taken steps, he said, to reduce costs during the five years of the present opt-out.
"We've reduced administration by 1.5 FTE (full-time equivalent)," he said. "We no longer have a director of instruction … the buildings and grounds coordinator position has been eliminated, and time and time again, the idea of establishing a foundation has been brought up. It's up and running, it's in its infant stages, it could use some funding, but it has been established."
Over the last 10 years, the school district's general fund budget has increased by approximately 3 percent annually.
"The reason to renew this is to try to maintain the same quality of education and opportunities for the children coming up in the next five years as the children in the past five years have had," Bottolfson said. "Things are still going to be very tight – we're going to have to the budget constantly."
Without an opt-out, and assuming a 1 percent increase in funding under the property tax freeze, it is estimated that more than the current general fund balance of approximately $1.4 million projected to remain at the end of this school year will be gone by the end of the 2011-12 school year, and, in fact, the school district's general fund would be drowning in red ink in the amount of approximately $96,000.That deficit in the general fund would build year after year without the opt-out, plunging to an estimated $4.1 million in the 2015-2016 school year.
Attempts to tighten the reins on spending, and underspend the general fund by $200,000 each year, would not stop a deficit from building. The school district projects that under that scenario, the general fund will be in the red by the 2012-2013 school year, and will be at a negative-$2.7 million in 2015-2016.
Under the same scenario with the $800,000 opt-out continuing over the next five years, the general fund maintains a positive balance until the 2015-16 school year. The freeze would end halfway through that calendar year, providing $400,000 rather than $800,000. It is projected that, with the opt-out, the general fund will be in the red approximately $111,000 in 2015-16.
"I don't see how we can operate anywhere close to what we have in the past without going ahead and continuing this opt-out for $800,000," Bottolfson said.
School board member Dave Stammer, who was elected to office after the opt-out was approved in March 2005, said one of the reasons he decided to seek a position on the school board was to see that the promises that were made by the board before the opt-out was approved were being kept.
"I truly believe that they were upheld by us reducing (the opt-out) for $300,000 for two years," he said. "It was a promise that was made to the public, and that was definitely upheld."
One of the reasons that the school board has been able to continually underspend its general fund budget, Bottolfson said, it the thrifty practices of the administration and teachers.
"They are continually looking at ways to save," he said.
Superintendent Mark Froke noted that the Vermillion School District and dozens of others throughout the state have been put into a position of seeking an opt-out of the property tax limitation because of inadequate funding for education from Pierre.
"Last year, we received an increase of barely $5,000, and it is projected that we will receive a 0 percent increase in state aid, according to the governor's recommendation."
Voters can refer the board's decision to a public vote. To challenge to the board action, citizens must file petitions signed by at least five percent of the registered voters in the school district with the school business office within 20 days.