Student Opportunity Gaps

Levies: Steps to Take This Summer

By July 4, 2013 No Comments

By Fred Nolan, MREA Executive Director

On May 30, Vernae Hasbargen, a lobbyist with MREA, wrote “The legislature’s game is over and now the ball is in our court.” Here’s a look at what that means and the steps school boards and superintendents should take this summer due to the legislative changes.

To close the 5th -95th funding gap and provide property tax relief, (see article by Sam Walseth on School Board Levy Authority) the 2013 legislature provided school boards the authority to levy up to $300 per Adjusted Pupil Unit (APU) on Referendum Market Value (RMV) in addition to the funds generate by state aid formulas for the school district.  In addition Location Equity Index (LEI) was added as a new General Education Revenue for districts over 2,000 students.

According to Tom Melcher, “76 districts are estimated to be eligible for new referendum revenue, 73 of them non-metro” for the 2014-15 school year.  This includes the 54 districts with less than $300 per pupil levy authority.  For all other Minnesota school districts, this is not new revenue.

Summer Steps

For all school boards, the decision regarding the $300 board authorized levy must occur in September when boards adopt the preliminary Pay ’14 levy.  This decision can be revisited in December when boards adopt the final pay ’14 levy certification to lower the proposed levies, but not increase them

In July and August, MREA recommends boards and superintendents take the following steps:

  1. Have your financial advisor firm run for your district the tax impact of the new 3 Tiers of RMV property tax equalization to see the impact of the new 1st Tier $880,000 factor on the first $300 of RMV levy authority.  For a list of financial advisors see MREA Associate Member Page
  2. Attend one of MSBA’s four upcoming Board Approved Levy Seminars with Dr. Tom Melcher, or view the video stream MSBA will have available from the seminars.
  3. Schedule a board workshop for late July or early August (open meeting, published agenda, no board action allowed) to discuss the effects of this new authority on your district, the options and scenarios available to your district, and their pros and cons.
  4. Districts with more than 2,000 students must make a decision regarding the Location Equity Index General Education Revenue no later than August 31.

Considerations

For the 54 school districts with less than $300 referendum authority (53 of which are in rural Minnesota), a list of considerations should include the following:

  1. What restorations of previous budget cuts or new program opportunities can you provide the students of your community with the additional levy authority?
  2. In dollars per year, how does this tax burden on a typical homeowner rank relative to other property taxes from the school, county, city or townships?
  3. What will the effect of this decision be on future tax referendums in your district whether for school facilities (bond referendums) or operating referendums?
  4. What will the communications plan be to inform your community of your board decision and the reasons for the decision?

For the school districts with greater than $300 referendum authority, a list of considerations should include the following:

  1. Does your current voter approved referendum authority exceed five years from 2013?  The board’s authority is only for five years.  Unless you are within five years of a renewal election, you gain nothing with board action.
  2. If you are within five years of renewal,
    1. What will the effect of this decision be on future tax referendums in your district whether for school facilities (bond referendums) or operating referendums?
    2. What are the odds the voters will renew your referendum authority?
    3. Boards need to have this conversation every year within the five year window of renewal.
    4. Districts which passed a resolution prior to June 30 indicating they were considering a referendum in 2013, or those whose need to renew a referendum need to integrate those conversations with this $300 board authority discussion in planning for a November 2013 election.

LEI Twist

For school districts with over 2,000 students outside the seven county metropolitan region, a decision on the $212 Location Equity Index (LEI) needs to occur by August 31.  MDE will incorporate this decision into districts’ preliminary levy certification. Districts eligible for LEI are also eligible for the $300 referendum authority.  These two authorities are “stacked” on top on one another.

  1. Eligible districts need to carefully evaluate the interaction of LEI on tax rates and revenues both from LEI and affected revenue streams such as Equity Revenue.  LEI cannot be evaluated in isolation from other moving parts in the educational funding formulas and equalization factors.
  2. Eligible districts wishing to participate in the LEI need to do nothing.  No board action means that the district is in LEI.  The operating referendum authority will be reduced by $212 or be zero as of this action.  The $212 per pupil is equalized at $510,000 RMV per pupil.
  3. Eligible districts wishing not to participate in LEI must do so by a board vote taken prior to September 1 of the fiscal year before the fiscal year for which the decision not to participate becomes effective. The board resolution must state which fiscal years the district will not participate. A copy of the board resolution to not participate must be submitted to the commissioner(from June 13 Tom Melcher memo to Superintendents and Business Managers)
  4. Many of the same considerations raised concerning the $300 per APU Board levy authority on RMV need to discussed by the board regarding the LEI as well.

Quick Links

Summary of 2013 Referendum Revenue

Preliminary District Run on $300 and LEI

LEI Memo on Implementation from MDE

Next Post