Forest Lake Area Schools Public Hearing for Taxes Payable in 2020 DECEMBER 5, 2019 PRESENTED BY: LARRY MARTINI, DIRECTOR OF BUSINESS SERVICES
Minnesota State Law Requires: A Public Meeting… …and Presentation of: • Between November 24 th & December • Current year budget 30 th • Prior year actual revenue & • After 6:00 PM expenditures • May be part of regularly scheduled • Proposed property tax levy meeting including % increase • May adopt final levy at same meeting • Specific purposes & reasons taxes • Must allow for public comments are being increased
• Background Information on School Funding Hearing • District’s Budget • District’s Proposed Tax Levy for Taxes Payable in Agenda 2020 ____________ • Public Comments
MN Legislature Must Set Funding for Minnesota Public Schools Minnesota Constitution ARTICLE XIII MISCELLANEOUS SUBJECTS Section 1 “ UNIFORM SYSTEM OF PUBLIC SCHOOLS. The stability of a republican form of government depending mainly upon the intelligence of the people, it is the duty of the legislature to establish a general and uniform system of public schools. The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state.”
As a result… Funding is Highly Regulated State Sets: • Formulas which determine revenue; most revenue based on specified amounts per pupil • Tax policy for local schools • Maximum authorized property tax levy (districts can levy less but not more than amount authorized by state, unless approved by voters) State also authorizes school board to submit referendums for operating and capital needs to voters for approval
Challenge: State Set Basic General Education Formula Lags Inflation Since 2002-03, state General Education Revenue formula has not kept pace with inflation For Fiscal Year 2019-20, Legislature approved an increase of 2% or $126 per year, and for Fiscal Year 2020-21 an increase of 2% or $129 was approved Per-pupil allowance for Fiscal Year 2020-21 of $6,567 would need to increase by another $639 (9.7%) to have kept pace with inflation since 2002-03
Basic General Education Formula Lags Inflation General Education Formula Allowance, 2003-2021 Adjusted for Pupil Weight Change and Inflation (CPI) $7,500 $7,206 $7,075 $6,919 $7,000 $6,619 $6,455 $6,500 $6,567 $6,311 $6,438 $6,312 $6,030 $6,000 $6,067 $5,855 $5,831 $5,569 $5,638 $5,500 $5,530 $5,530 $5,228 $5,368 * Had the allowance increased by the rate of inflation each year since 2003 the 2021 allowance per ADM would be $7,206 $4,966 $5,000 * The difference between the FY 21 formula allowance per ADM and $4,966 $4,966 the inflation adjusted formula allowance is $639 or 9.7% $4,500 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Formula Allowance Adjusted for Pupil Weight Change Adjusted for Pupil Weight Change and Inflation (CPI) Source: MDE August 2019 Inflation Estimates
Underfunding MDE reports the FY 2018 cost of providing Translating into a of Special special education statewide average programs was funding shortfall of underfunded by $822 $5,705 per special Education million, or an average education student of 40% underfunded __________ Underfunding of Primary options to special education costs bridge special requires a transfer from education funding gap regular program are to cut regular resources to support an program budgets or underfunded program increase referendum mandated by state and revenue, most districts federal law have done both
Result: Growing Dependence on Referendum Revenue • In 1992-93, 65% of districts had operating referendum revenue averaging $332 per pupil • For 2020-21, all Minnesota districts have referendum revenue and/or local optional revenue levy authority averaging $1,475 per pupil Referendum revenue including Local Optional Revenue (LOR) provides 13.2% of General o Fund operating revenue Of this amount, $751 is a voter approved operating referendum, and $724 is Local o Optional Revenue (LOR)
Change in Tax Levy Does not Determine Change in Budget 1 2 3 4 Tax levy is based on Some increases in tax Expenditure budget is An increase in school levies are revenue limited by state-set taxes does not always many state- neutral, offset by revenue formulas, correlate to an equal determined formulas reductions in state aid voter-approved levies, increase in budget plus voter approved and fund balance referendums
School District Levy Cycle Differs from City/County Levy Cycle City/County: Schools: • Budget Year same as calendar year • Budget year begins July 1st and coincides with school year • 2020 taxes provide revenue for • 2020 taxes provide revenue for 2020 calendar year budget 2020-21 school fiscal year • Budget will be adopted in June 2020
All school district budgets are divided Budget into separate funds, based on Information purposes of revenue, as required by law __________ Our District’s Funds: Because approval of school district budget lags • General certification of tax levy by six • Food Service months, state requires only current year budget • Community Service information and prior year actual financial results be • Building Construction presented at this hearing. • Debt Service The Fiscal 20-21 budget will be set in June 2020. • OPEB Debt Service
Proposed Districtwide Budgets for 2019-2020 Forest Lake Area Schools - SUMMARY OF ALL FUNDS - General Fund Food Service Community Ed Construction Debt Service OPEB Debt Total All Funds Fund Balance 6-30-2019 $ 2,137,470 $ 292,943 $ 901,095 $ 12,050,000 $ 8,721,900 $ 234,000 $ 32,887,288 Revenue $77,458,000 $3,661,195 $4,828,339 $50,000 $8,600,000 $410,000 $95,007,534 Expenditures $76,490,500 $3,594,967 $4,828,339 $12,100,000 $8,900,000 $535,000 $106,448,806 Fund Balance 6-30-2020 $ 3,104,970 $ 359,171 $ 901,095 $ - $ 8,421,900 $ 109,000 $ 21,446,016
Forest Lake Area Schools General Fund Revenue 2019-20 Budget $77,458,000 Other Local Property Tax Federal $2,700,000 $1,650,000 Levies 3.5% $16,900,000 2.1% 21.8% State $56,208,000 72.6%
Forest Lake Area Schools General Fund Expenditures by Object 2019-20 Budget $76,490,500 Capital Expenditures Other $3,919,950 Supplies & Materials $246,000 5.1% $2,139,400 0.3% 2.8% Purchased Services $8,517,000 11.1% Employee Benefits $17,235,800 22.5% Salaries and Wages $44,432,350 58.1%
Payable • Determination of levy 2020 • Comparison of 2019 to 2020 levies • Specific reasons for changes in tax levy Property • Impact on taxpayers Tax Levy __________
Property Tax Background Every owner of taxable property pays property taxes to various “taxing jurisdictions” (county, city/township, school district, special districts) in which property is located Each taxing jurisdiction sets own tax levy, often based on limits in state law County sends bills, collects taxes from property owners, and distributes funds back to other taxing jurisdictions
Parcel Specific Notice: This is a sample of the notice mailed to every property owner between November 11-24 with information on the impact of the Proposed 2020 levy on their property. Contents: • Proposed property tax compared to last year • By voter approved and other • By taxing jurisdiction • Contains time and place of public meeting
School District Property Taxes Each school district may levy taxes in over 40 different categories “Levy limits” (maximum levy amounts) for each category are set by State law o Voter approval o Minnesota Department of Education (MDE) calculates detailed levy limits for each district
Property Tax Background School District Property Taxes • Key steps in process are summarized on next slide • Any of these steps may affect the taxes on a parcel of property, but district has control over only 1 of the 7 steps
Schedule of Events in Approval of District’s 2019 (Payable 2020) Tax Levy September 8: Mid- MDE prepared November: September 19: December 5: Following and distributed County mailed School Board Public hearing hearing, School first draft of “Proposed approved on proposed Board will levy limit Property Tax proposed levy levy at regular certify final levy report setting Statements” to amounts meeting amounts maximum all property authorized levy owners
Overview of Proposed Levy Payable in 2020 Total 2020 proposed property tax levy is an increase from 2019 of $916,283 (3.4%) State law requires that we explain reasons for major increases in levy Some decreases in specific levies will also be explained
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