“We’re stuck between a rock and a hard place.”

Osceola school board member Pete Kammerud’s comment during a discussion of two budget options for the 2021-2022 year crystalized the position the board found itself in when a perfect storm of sorts came to bear.

With four days until state law required a budget to be submitted, the board debated the merits of leaving $1.2 million in tax revenue on the table versus keeping a promise to taxpayers to keep the total tax levy at $8,864,614 for two years. The promise was made before a spending referendum passed in 2020.

In July, the board learned they were facing a decrease of $1.3 million in state aid, with no additional resources from the revenue limit.

The board voted 4-1, with Lanette Johnson casting the lone no vote, to approve a budget where several funds are spent down to minimize the effects of the loss of revenue.

District Business Manager Lynette Edwards gave a presentation of two budget options. A second option was developed after discussions with the Department of Public Instruction (DPI) earlier in the week.

Edwards went through the DPI’s revenue limit worksheet, line by line, to explain the district’s positions. The certified aid from the state is set at $8,934,441 for 21-22. This year, the district received $10,276,193. 

With the district’s promise to keep the tax levy at $8,864,614, the amount that is set aside for the general fund – also known as fund 10 — is found after the non-referendum debt fund (fund 38), debt service fund (fund 39) and community fund (fund 10) are calculated.

The net mil rate is set at 7.81 for the 2021-22 school year. It was 8.4 for the 2020-21 school year.

Property values in the district, certified October 1, rose by 7.6%.

Edwards, knowing the position the district was in, had calls on Monday and Tuesday with staff at DPI to see what could be done within the constraints set by the board (keeping the tax levy at $8,864,614) to minimize the impact of declining enrollment.

Board members received the two budget options the day of the meeting, after Edwards’ discussions with DPI.

The budget that the board approved will move funds from the Elementary and Secondary School Emergency Relief (ESSER) fund to the 2022-23 school year, spend down balances in the community and debt service funds. The budget is balanced.

A discussion was held about the long-term issues facing the district and how this year’s budget will impact future budgets. Staying at a total tax levy of $8,864,614, the district will leave $1.2 million “on the table” as an unlevied amount this year.

“If we go to referendum to try to balance our books, people are going to say, ‘you left a million on the table,’ so, we’re between a rock and a hard place,” Kammerud said. “We made a bad promise. We didn’t know at the time it was a bad promise. You said seven percent, in the two years it’s probably been 12 percent (that) valuations have gone up since we said that. So, we made a promise, I guess we keep our promise.”

“Utilizing fund balance makes sense for our situation, given that there weren’t any increases in the revenue limit from the state this year, otherwise we would have per pupil revenue as well this year, but we don’t have that available,” Superintendent Mark Luebker said. “Positives as well that we could communicate are that we would be able to utilize some of our ESSER funds to reduce that deficit for the 22-23 school year and also understand we are building that trust with our community regarding what we said we would do.”

“I don’t want it to seem like we are doing a 180, because it came out of those discussions with DPI where we were asking about the ramifications of being under the levy, we were really diving into the revenue worksheet,” Edwards said.

She explained the district would levy $65,000 less in fund 80. “Currently, we are projected to close the audited year with a $98,000 balance in fund 80, so that could essentially bring us down to next to nothing by not levying what we normally do,” Edwards said.

She explained fund 80 has been slowly growing a balance. “A lot of that has to do with Kids Club. It was actually generated some good revenue and kind of carrying all of the other programs in fund 80,” Edwards said.

“The other piece would be to levy less for our debt payment because we also have a fund balance in fund 39. “So in this scenario we would levy $380,000 less in fund 39, use that fund balance.”

“When we were having discussions about our next capital project, potentially addressing the needs of the elementary school,” Edwards said. “When we were building those scenarios for tax impact for certain million-dollar projects for the elementary school, we were building in that surplus to make a payment at the same time we were taking on more debt. It was to coordinate the use of those funds with new debt to kind of lessen the impact if you will on any new debt. That was the purpose of keeping a balance in fund 39. This would eliminate that opportunity.”

“(This option) gives us an additional $485,000 to levy in fund 10,” Edwards said. “It doesn’t eliminate our under levy, but it reduces it to about $800,000. Same impact on next year, because now when they build the base, they are going to reduce by $1.4 million and you still end up at the same number.”

“Why do we do that? A piece of this, the previous option had a surplus in 21-22 because we were including all the ESSER funds as if we were going to use and claim them and receive them as revenue in 21-22,” Edwards explained. “So what we could is push them off to 22-23, that way we would project less of deficit for 22-23. Instead of taking all that revenue in one year, or most of it in one year, fill that in with additional fund 10 money we shifted from fund 80 and fund 39. In the scenario, we shift those ESSER funds to 22-23. The discussions we have been having the projected deficit for next year is $2 million. It would decrease that projection to $1.4 million for next year. All of our budget data has been sent to Baird to build a projection model for next year. We will begin projections after that. It’s a lot.”

Brian Meyer struggled with the lack of time to make the decision. “I understand why we promised what we promised. It was pretty simple — we’re not going to raise the taxes on your property value. What we didn’t see in the forecast model was the huge decrease in state aid that would accompany that and under levy cost into the future,” he said. “After seeing this here tonight, I feel like we haven’t explored the options and we don’t have the time to find the right solution. How do we do this right? How do we make a compromise on a promise in one night, see the information and make a decision on it?”

“I don’t have any intention of going against my word,” Brooke Kulzer said. “That I will publicly say on record, I’m intending on keeping my word, but that’s my personal word. I can’t speak for the other four here on stage.”

Meyer asked about the impact of returning some of the unspent $10 million referendum money. Edwards said the district could simply repay the note sooner with unspent funds.

“If we can make a concession in one area to not shoot ourselves in the foot in another area, I think a lot of people would be OK with that,” Meyer said. “But you can’t ask for more and take more and not give anything in return. I don’t know what the options are – that’s a whole other discussion. The next piece (of the $10 million in facility upgrades) is a secure entrance at the middle school, which seems really, really important. I don’t want to shortchange the opportunity to make my middle schoolers coming through that building in the next five years safe. Maybe all the options aren’t all here. That’s where I struggle with this. We’re making a decision tonight, based on information that we got today that’s going affect us for years to come,” Meyer said.

“We have been talking about the $8,864,614 for almost two years,” Edwards said. “Won’t change until we get out of the 21-22, If that is changing tonight, I will absolutely look into what timelines we have left and prepare other options and start talking about a special meeting.”

“I don’t think that’s something we change tonight,” Meyer said.

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