"But if it is believed that these elementary schools will be better managed by...any other general authority of the government, than by the parents within each ward [district], it is a belief against all experience." --Thomas Jefferson

Saturday, May 28, 2011

School Finance from USBA Convention Jan. 2011

When I gave my husband a draft of this post to proof-read, he said he felt like Marlin in  "Finding Nemo" when the little turtle, Squirt, is explaining the proper exiting procedure from the EAC.  He said, "I know you are telling me something really important, I just don't understand a word you're saying."  So, I will give you the Reader's Digest Version, and then the full Geek/Accountant-type version.  Hopefully, one of them will appeal to you. 

School Finance: Reader's Digest Version
Every year by June 22, the board must approve a budget, essentially allocating different money into different categories (think envelopes).  After the budget is set, the district has flexibility in spending the money within each category, according to the policies and procedures the board has already outlined.  Starting on June 1, the proposed budget is available from the Business Administrator to anyone who wants to see it.  ASD has past budgets on the website, in case you are really interested.

The district receives money from 3 sources: local taxes (including property taxes), state taxes (100% of your income tax goes to public education), and federal taxes.  Each of these taxing sources comes with some strings and/or limitations.  The state provides a set amount per student, called the WPU (weighted pupil unit).  In addition, if there are certain programs the legislature wants to fund, certain amounts are allowed for those programs.  Of course, if you wanted to use that money for something else, you can't.  The Feds, of course, have their own set of strings.  ASD gets about 7% of its budget from the Feds.

Every year, the County sets a specific tax rate for the district, called the Certified Tax Rate.  If the district wants to increase that rate, there will be a public hearing for that purpose in August or September.  Of course, since the fiscal year started back in July, the public hearing is more of a formality than anything else.  The board can, at any time in the year, amend the budget in an open board meeting.  But, unless something major occurs, that probably won't happen. 

On your property tax notice, you will see 2 line items for Alpine School District: Basic and Other.  The Basic rate is set by the state.  The Other is a combination of all the taxes (leeways, bonds, etc) set by the local school board.  Bear in mind, that property taxes can only go to pay for capital items.  All operational costs come from the state via WPU and specific programs/items or from the Feds (with their specific programs).

I would appreciate your looking at the budget and giving me feedback. I will see if there is a link on the district's website and will post it here after June 1st.

School Finance: Accountant's Version
Schools get revenue from local, state, and federal sources.

Local funds come in the form of property taxes and other fees.  There are 2 line items on your property tax statement: Basic and Other. 

Other Property: Other property taxes are leeway, capital, transportation, debt service, tort, and recreation.  All primary residential property is taxed at 55%.  For example, if your home is worth $200K, whatever the property tax rate is you pay taxes on only 55% or $110K.  Commercial property is taxed at 100% of the property value.  The school board sets the tax rate.  If the tax rate goes above the Certified Tax Rate the county sets, you must have a truth in taxation hearing.  It isn't as logical as it sounds either.  Here is an example:

Say in 2010 your property is worth $1000 and the certified tax rate is 10%, so you pay $100 in taxes.  In 2011, your property value increases 5% to $1050.  10% of that would be $105.  Since $105 is more than the $100 you paid in 2010, the board would need to hold a truth in taxation hearing.  Even though the tax rate remained the same, the amount of taxes received increases.  Hence, the hearing.  In order to avoid a hearing, the tax rate would need to be adjusted in 2011 to 9.5%, so that 9.5% of $1050 = $100.  All new buildings and new growth are exempt from the truth in taxation hearing, and the taxes are county- or district-wide, so it is possible for your individual property taxes to go up without a hearing.  However, it means that somewhere else, someone is paying less for their property taxes, and it all balances out across the district.  Just by way of information, in 1980, the average property tax rate in Utah was 0.004534.  In 2009-10, it was 0.001433.  So, the rates have gone down, but values and growth have increased. 

There are other local revenues that come from investment income, inter-district billings (e.g. some of our kids go to Provo and some Provo kids go to ASD, so we pay each other for those kids), school lunch fees, and community education programs.

Basic Property: The basic property tax rate is the only local tax that is NOT set by the local school board, but by the state legislature.  This basic amount is currently 10% of the property value that is able to be taxed (e.g. 55% on a primary residence). This is the other line item on your property tax statement that says Alpine School District: Basic.

State Funds:
WPU: The weighted-pupil unit is an amount set by the legislature for each student that attends class for 180 days (membership or enrollment).  This year, the WPU is $2577.  The WPU is given to districts/schools based on the difference between last year's membership and this year's membership as of Oct. 1.  For example, if on Oct. 1, 2010 there are 5% more kids in ASD than there were from Aug. 2009- May. 2010, then there will be a 5% increase in WPU funds.  (I think.) 

Other State Funds:  The state tries to equalize the amount spent, per student, across the state in some fashion.  Here is my attempt at explaining this.  Let's say we have two districts (A and B), each with 5000 students.  District A has property tax values of $100 million.  District B has property tax values of $40 million.  Each district will receive $12.885 million in WPU funds ($2577 x 5000 students).  They will also get 10% of the property values in the form of the Basic school levy.  District A will receive $10 million, and District B will receive $4 million.  Because of the $6 million deficit for District B, the state will kick in $6 million more in state funds to District B, than to District A from their pool of state income taxes, etc. 

Additionally, the state gives extra funds for the following:
Professional staff (more higher degrees)
Special Ed
Career Tech Ed
Class Size Reduction (one time money)
*WPU Flexible (SS, Medicare, and Retirement)

*The WPU Flexible is for SS, Medicare, and Retirement for staff.  It used to be that the state reimbursed the districts for all of the amount they spent on these items.  After that, they reimbursed a percentage of these amounts.  Now, there is just a line item in the budget, called WPU Flexible; it is a fixed amount.  The board can use whatever amount is in here to pay for SS, Medicare, and Retirement, but these amounts have to be paid by law. 

Federal funds:
Federal funds are given, based on different programs.  These are:
Title I: Poverty, Mobility, ESL
Title 2: Quality Teaching
Special Ed
School Lunch (free or reduced lunches)
ARRA (Obama's Stimulus)

The biggest issue with federal funds is that the money must not supplant existing funds and there needs to be MOE (Maintenance of Effort).  For example, if you spent $1000 on special ed last year, you can't reduce the amount this year and still get federal funds--regardless of the reason.  You also can't take the $1000 of special ed monies that you were going to use, spend it somewhere else, and finance special ed with ONLY the federal funds.  Federal funds must be used IN ADDITION to state and local funds.

85-90% of general fund expenses are salaries and benefits.  Currently, 18% of salary goes to retirement, 7.65% SS/Medicare, and 30% Health Insurance.

Other expenses are: professional services like nursing, utilities, textbooks/library books, instructional supplies and equipment.


Think of accounting funds as budget envelopes.  A board sets certain amounts for each envelope (fund).  Within that fund, the district has some discretion, but moving money between funds is not usually allowed.

In general the funds are:
General (operational costs)
Capital (things that last for 1 year or more: furniture, buildings, computers, etc)
Debt Service
Lunch Service

The board must have the budget set by June 22 of each year, but the public attends a hearing in Aug or Sept. if the tax rate (see above) is greater than the certified tax rate from the previous year.  The difficulty is the budget is already set and started on before the public is involved in the hearings.  It would make more sense for the public to get involved in the budget process during April, May and June of each year.  The superintendent is ultimately responsible for the budget, and you CANNOT (by law) budget a surplus.

Annual audits are done by independent third parties.  They look at whether you are following your district policies, how you are allocating revenues, state compliance issues, federal law or grant compliance,  and payments, especially to the board, superintendent, and business administrator.  They do not tend to audit how the money is spent other than on a general level of following policies.

At the end of this class, we were given a quiz.  The first person who finished with 100% got a box of M&M's.  They were yummy! (smile)

Thursday, May 19, 2011

The Bond Dilemma and Board Meeting 5/17/11

As you probably know, Alpine School District will, most likely, be asking you to approve a $210M bond in November.  Before you continue reading, I hope you will take the time to watch the online bond presentation, if you didn't attend one of the meetings.  This way, I know you will have all the basic information and assumptions: the whys, the hows, and the how much.   The bond is divided into growth, renovations/additions, seismic retrofitting, and additional projects.  The additional projects will probably take a back seat to everything else. 

New Lehi High

The biggest change from the original draft proposal is a new high school for Lehi at the "Micron property" that the district already owns.  The estimated cost is $56M, but construction won't begin until 2014 at the earliest.  In that period of time, Lehi High will grow to almost 2500 students.  Part of the reason for the delay is the overall cost.  The bonds will be issued in phases to take advantage of the amount of current debt being paid off every year.  We attempt to keep our debt pretty much level; so as we pay off some debt, we don't go into so much more debt that it spikes both the debt ratio and the taxes.

Seismic Issues

In 2006, Reaveley Engineering did a very in-depth study of seismic issues in the district.  From that report, the district has been going down a path of seismic retrofitting.  The 2006 study didn't include some additional items that the district has included like high, unreinforced chimneys (all of which have been replaced).  Also, at the time of the study, there were projects already in process, and they were simply completed.  This is why some projects of a lower priority were done prior to others.  Also, our experience with having corrected some of the seismic issues is that the overall $54M price tag was way too low.  For example, Reaveley estimated the cost to fix Orem HS at $8M.  When we had actual bids from two different firms, they said the amount was closer to $16M.  It was the $16M price tag that encouraged the district to tear Orem down and rebuild a new school on the same site.  Before the final bond decision in August, the board should have additional information on the most "problematic" areas with better estimates from the companies that would actually be hired to do the retrofitting.  My personal thought is we are responsible to correct seismic (and any other obvious safety issues) in our schools before worrying about additional things like multi-purpose rooms, weight rooms, or the space center.  One of my colleagues clarified that having too many kids in a weight room can pose a safety risk as well.  Additionally, the difficulty with seismic issues is they are so dependent on so many unknowns.  I applaud the district for commissioning this study five years ago, and for embarking on a long journey to correct these issues across the district.  If there were a way to correct all the major seismic issues throughout the district on this bond, I'd be happy to do that.

Renovations and Additions

Some of the renovations and additions patrons discussed during the bond meetings were additional classrooms, weight rooms, PE rooms, tennis courts, etc.  An interesting comment at one meeting about how great Lone Peak's weight room isand how other schools in the district couldn't compete with them.  Then, at another meeting, people commented how Lone Peak's weight room needed improvements.  As one person put it, the process is really like a moving jigsaw puzzle.  We need to keep in mind that with limited resources, everyone can't have everything all at once.  And by the time one area is improved, another is going to need it.

Eagle Mountain Junior High

Another bond project is building a new junior high in the Eagle Mountain area.  Westlake High will be growing to 4000 students by about 2016 if they continue to house 9th - 12th grades.  The plan is to open a new junior high in Eagle Mountain by Fall 2013, taking students from Vista Heights and bringing the 9th grade back there from Westlake.  The district is hoping to secure property this summer and have the architechtural work and builders all set to begin work by Feb. 2012.  Before the property is purchased, the terms of the purchase will be made public, and the board will approve the purchase in an open board meeting. 

Other Thoughts on the Bond

As someone who is very concerned with additional debt, I would love to find a way to pay off our existing debt and finance these new buildings and improvements with cash.  And if it couldn't be done with this bond (because of the immediate needs), maybe we could put something in place to start down the road of pay-as-you-go for the next set of projects in five years.  However, it seems that most people are fine with the way things are.  About every 5 years, the district will go out for another bond, and build new schools, as well as renovate older schools.  The debt level will remain roughly the same, and the bonds will be aggressively financed for 15 years or less.  In order to do something other than "the way it's always been done", the changes would need to be very dramatic, very "outside the box".  Those ideas could be: modifications to the school year/calendar/attendance time, more online/distance learning classes, additional credits allowed for private lessons (e.g. music credits for private music lessons), a change in scope of the state core and graduation requirements, building smaller schools with less amenities, etc.  One of the concerns about building smaller, less fancy schools is they are also to double as community centers.  If one community gets all the bells and whistles, the other communities are concerned that they helped fund bells and whistles for someone else but didn't get any at their own schools. 

Another consideration, that has been absent in these discussions, is the impact of the Vineyard URA.  As I write, the URA is still going forward.  SB70 was passed this last legislative session, and it changes the vote on something like Vineyard from a 2/3 majority to a simple majority.  In effect, the school districts will be required to go along with every URA without a chance at stopping them.  Since the districts, on average, make up about 65-70% of the tax revenue collected from an area, there is no reason for any other taxing entity (city, county, etc) to not vote to support URA's.  The districts will make up the majority of the tax deferral, and the local community will benefit.  The schools and taxpayers throughout the district will be taken along for the ride by financing the bulk of these developments.  So, having said that, the URA, absent something dramatic to stop it, will impact you whether or not there is a bond.  Your property taxes will be increased, and it will look as if the district increased them.  So, when we talk about the property taxes going up $12 the first year and as much as $36 the fourth or fifth year, that is just the impact of the bond.  Vineyard will impact you the full $36 or more starting this first year. 

In short, I am very uncomfortable with debt, and incurring more is doubly difficult for me.  The district currently has $389M in debt, being paid off at the rate of $30M+ in principal and $15M in interest every year.  If there were a good way of eliminating our debt and applying that $15M in interest toward future projects, that is how I'd like to see things done.  However, as is, the debt is phased in, and its level is maintained.  If we must have debt, I think we are doing a good job at maintaining fiscal discipline on that front.  Additionally, we are obligated to the families in our district to provide a good, safe learning environment for the kids in our schools.  To delay addressing current growth and safety concerns just exacerbates the problem.  The current method is to bond every five years to fund the seismic/safety retrofitting, as well as new schools for population growth.  It is not my preferred method of operation, but until there is a better alternative, this is the system we have.

Friday, May 13, 2011

May 17, 2011 Board Meeting Agenda

Please go to the district website to download the documentation for the meeting here. The meeting will be at the district office.  All are welcome to attend both sessions.

4:00 P.M.
The purpose of the study session will be to (1) review assignments and protocol for the upcoming high school graduations and protocol for board members, (2) review feedback from the bond meetings, and (3) discuss other current issues. Read more info on the bond, including the seismic information here.

6:00 P.M.

1. Budget Report
2. Personnel Reports “
3. Alpine Foundation Report “
4. Student Releases - KA, BA, CA, BB, GB, CB “
SS, KV, WW, TW, CW, LY “
5. Student Expulsion – ND “
6. Student Reinstatements – MB, DG
7. Investment Report
8. Property Items A. Resolution #2011-007 - Purchase of Old Cedar Fort School
B. Resolution #2011-008 - MATC Lease and Easement Agreement
1. Resolution 2011-003 – Dissolution of ATEC Fund
2. Resolution 2011-004 – Investment Changes “
3. Resolution 2011-005 – Fund Balance “
4. Resolution 2011-006 – Approval of Architect Firms “
1. Parameters Resolution for Refinancing Bonds
1. 2013-2014 School Calendar
1. Membership Report

*Time set aside for community comments is not a time to discuss specific personnel issues. Personnel issues are not appropriate discussion items for an open-meeting environment. If you have a personnel concern, we ask that you contact a member of the administration or put your concern in writing and address it to the Board of Education.