The Lakeland Union High School Board of Education approved a resolution authorizing the district to go to a referendum election on the question of authorizing the district’s budget to exceed its revenue limit by $3.45 million for a recurring operational referendum.
Throughout the course of the discussion, the ad hoc referendum committee addressed various points of concern, from addressing the district’s need to go to referendum, supporting the referendum amount proposed, and what a referendum means for tax payers.
Why $3.45 million?
The ad hoc committee was established in March of this year to review the capital needs of the district to be presented in the form of a referendum in February 2020.
“During the first few months of the committee, what they did was they reviewed our capital needs in terms of projects that need to be done,” committee and board member Barry Seidel said.
Seidel explained business and finance manager Greg Kopp had worked with the referendum consultant on the five-year cash projection which was eventually worked into a five-year financial forecast.
According to Seidel, the committee also discussed other aspects of the district’s financial needs, including accounting for increasing special education costs for the district and charter school, potential changes in curriculum and programs that would incur the need for additional staffing.
“We wanted to keep this referendum defined around operational costs, not around capital additions,” Seidel said.
Since the committee wanted to keep the referendum defined around operational costs versus capital additions, Seidel clarified there was no money in the proposed referendum which wasn’t for maintenance or work that needed to be done for resources that have worn out.
Seidel also indicated one of the reasons the committee decided to pursue a recurring operational referendum rather than an occurring, or one-time, referendum, was that the district “would always” have operational and maintenance costs that would never truly “disappear.”
Another goal of the referendum, Seidel said, was the potential for the referendum to leave the district in a strong financial position over the next five years to prevent the school from having to return to referendum in the near future.
“A gauge that was used as a good financial position was to keep our fund balance at around $8 million,”?Seidel said. “So any and all of those expenses, and going through the financial projection, that’s where we came up with the $3.45 million.”
During his explanation of the five-year forecast, Kopp reiterated how the committee had come to the $3.45 million referendum amount, citing changes and increases in staffing, programs, and special education needs among capital improvements.
“The other thing we did, in the year 2021-22, we also added what we believed we were gonna need to do from a capital standpoint based on our five-year capital plan,” Kopp said.
According to Kopp, he had been informed by building and grounds director Mike Marasch that the capital plan would constantly be updated and adjusted.
Kopp said that, in the 2020-2021 school year, total capital projects had been estimated at $1.7 million, with “just under” one million for the following year, while “significantly less” was alloted for other years based on what the school wanted to do.
Those numbers in those given years would generate “significant” increase in costs and a deficit, Kopp explained.
Considering the state revenue limit calculation, which, according to Kopp, hasn’t given the school an increase for inflation “for a long period of time, and the fluctuating levy over the past six years, Kopp pointed out there had actually been a “reduction in the revenue limit and in our tax levy.”
“And that represents 75% of our total revenue, and that’s what kind of has created the situation and this problem,” Kopp said. “And during that period of time, we did decrease expenses and salary benefits for two of those periods during that time, just to make up for the lack of revenue.”
The five-year forecast reflected the addition of the referendum into the total levy starting in the 2021 fiscal year, as well as an ending fund balance of approximately $8 million by the end of the 2024 fiscal year.
“So, we’re asking for this $3.45 million, for until we say we don’t need it anymore? Or every year?” board member Gary Smith asked.
Board member Shari Nimsgern said it was in her understanding what the district was bringing in, in terms of revenue, would not be able to sustain the school’s operations, and that the referendum would be to maintain what the district had.
Smith asked if there was a reason to keep the fund balance at $8 million.
“We picked that number because we thought that would be a good, healthy position to leave the district in, rather than have it be at a minimum again and have to go asking five years again for another referendum,” Seidel stated.
Smith asked if the population estimation coming into the Lakeland over the next few years had been taken into account.
Nimsgern said the charter school was also taken into account.
“The point is, those students are all still Lakeland Union High School students,” Seidel said. “We still have the responsibility of educating them, we still have the responsibility of paying for anything that’s in the IEPs, and those costs and requirements are not going to go down either.”
Previously, the committee had considered proposing an approximate $2.8 million for the referendum, but had increased the amount to consider rising costs in special education and staffing.
Seidel said asking for that increase over the next five years wasn’t “unreasonable.”
“The other thing to keep in mind is that, as I said in the past, and in going forward, the revenue calculation sheet does not account for any inflation. At all,” Seidel said. “As surrounding costs go up, all of our costs are gonna go up, and we want to have a way to pay for those increases, we’ll have to make cuts to balance our budget.”
Kopp also addressed a misconception about enrollment and student costs.
“People have this misconception that if your enrollment’s gone down, you don’t have to go because you should be able to decrease your expenses, but based on how the revenue limit calculation works, the amount we can levy goes down as well,” Kopp stated, explaining that revenues would go down at a faster rate than expenses with declining enrollment.
Mill rates and taxpayer implications
Seidel brought up another figure he felt would be of concern to the taxpayers, namely mill rates and what their effects are.
Currently, the district’s mill rate is $1.82, which is expected to drop to $1.81 next year before rising to $2.33 with the referendum.
The five-year forecast included a chart calculating the projected costs for taxpayers based on increasing home values.
According to the forecast, a $200,000 home currently pays approximately $364, but would increase by $100 after the referendum.
“If you extend those out monthly, you’re looking at $15 to $30 a month,” Seidel said.
Though these costs would increase after the referendum is implemented, Seidel said the mill rate for the same amount of money would drop and start to level out in the following years.
According to Kopp, the committee had spent time in meetings considering the mill rates of other districts in the state, particularly other union high schools.
“Even with this increase, our mill rate is still half (the mill rate) of those other districts. It’s still a very low mill rate compared to everybody else’s,” Kopp said.
In addition to coming up with a number, Seidel said the committee had also put together a timeline, started working on talking points to present to the public, as well as intent to host four public meetings prior to the referendum date in February 2020.
“One goal that we’ve had, wanted to have, was to have a balanced budget,” board member Barb Peck said.
Seidel agreed, adding this budget would potentially provide a surplus during some of the years to “add back” fund balance.
“My hope would be that we would not do this, and therefore just run with deficits and have this to cover the deficits,” Peck said. “We still need to tighten our belts.”
District administrator Rob Way added he was uncomfortable with deficit spending, and wanted avoid adding positions unless there was an increase in revenue sources.
Nimsgern said the committee had tried to be proactive in looking at and studying how to maintain and exceed being able to offer students quality education.
Kopp said those expenses were built in, and regardless of whether the district tried to operate “as is,” special education need would still have to be considered.
“Without any increase to our revenue limit calculation or levy, over the next five years, we’re going to have to look at eliminating some programs or services, because if we don’t there’s going to be significant deficits,” Kopp said.
According to Kopp, these deficits would be in the “million dollar” range, assuming the revenue calculation limit remained similar to what it had been in recent years.
“You talked about not bringing additional programs because you did not want to run in a deficit,” Smith said. “Now, you’re asking for money and then you’re going to go in and add some more programs?”
“It’s more about being able to fund what we have currently,” Seidel said, stating the amount could be broken down into “rough thirds.”
According to Seidel, roughly a third was for special education costs with another third for facilities, with the remaining third for other operational costs.
“Now, we don’t have new programming built in, but we have increases in our current programming built in because we don’t see it shrinking in terms of dollars that it costs us per year,” he said.
Whether programs would be added, altered, or cut altogether, was up to the board, Seidel said, but the point was the district would have the capital to do it rather than borrowing money or cutting another program to finance it.
Lakeland Union High School would not be one of the only school districts to have done so in recent years.
“One of the consultants made a comment that, since Act 10, 85% of school districts in the state have gone to a referendum,” Kopp said, stating some districts in the area have gone multiple times.
“Basically, the funding formula, the revenue limit per student, doesn’t work for rural Wisconsin, our transportation costs. It’s not a question of if, it’s when,” Way said.
Way said several of the districts that have gone to referendum had done so to “keep up and maintain” what they had.
“The taxpayers aren’t the only revenue source that we’re seeking. We’re seeking every revenue source that’s available to us. If the grants work out to be grants that are worthwhile,” Seidel said.
Smith asked if the committee had considered the questions that would be asked at the four planned public hearings.
“We can’t dance around and give them this long explanation. They just want to know a simple answer. And I hope we’re prepared to do that, because obviously it’s going to be the public who’s going to either approve or disapprove,” Smith said.
Smith continued, saying he had some concerns about the amount and the recurring referendum.
“It’s our responsibility to make sure, fiscally, this district is healthy. If it does absolutely require that we do a referendum, OK, but it’s something that, once we take that step, we can’t step back,” he said.
Strong financial district
Seidel said the committee would create talking points that would convey the information as clearly and concisely as possible to ensure the message is transparent and the public gets the information it needs.
With the referendum, Kopp said the district would be able to maintain its financial strength and the district would be able to do things that benefitted the community.
“In order for us to maintain and retain the quality staff that we have, like Greg said, there are others that will leave the community because those services are not provided for what they need for their families,” Nimsgern added.
Seidel said the district was looking at, “in real rough numbers” a 28-30% increase in the budget, and that the last time the district had been to referendum was around 1997.
“Without taking into account any other variable costs, it’s a reasonable amount,” Seidel said, stating the committee had repeatedly looked into the numbers, but had come back to the $3.45 million figure.
“There was no denying where we were headed if we did not do it,” Nimsgern said.
The board first passed the resolution authorizing the district budget to exceed its revenue limit by $3.45 million with six members voting in favor. Following the vote, the board approved the resolution for a referendum election on the resolution to authorize the district to exceed its revenue limit by the proposed amount for recurring purposes.
Three board members, Sarah Kemp, Pam Carroll, and board president Ed Schaub were not in attendance.
Kayla Houp may be reached via email at [email protected]