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Forum News Service, Published August 10 2013

Grand Forks Public School's property tax rate could be raised by 28.6 percent

GRAND FORKS – A growing student enrollment and a faulty detail in a state aid distribution formula are the driving forces behind a proposed 28.6 percent increase to Grand Forks Public Schools’ property tax rate, according to district officials.

The increase comes after a property tax relief measure was approved by the state Legislature this year.

Superintendent Larry Nybladh said the district’s preference is not to raise taxes but the move is necessary to keep up with expanding enrollment.

“New growth is not being paid for,” he said. “Last year, we had about 230 new students and didn’t receive a dime of state money for them.”

The state aid formula relies on the prior year’s enrollment numbers when determining the amount of funding given to schools.

Increases and decreases in enrollment can be missed and, in Grand Forks’ case, can leave the district covering costs that the state should be footing, according to Nybladh.

An increase in employees, decreased federal funding and deficit spending last year also have complicated this year’s budget. The 2012-13 fiscal year ended with a $6 million deficit.

“We’re playing catch-up this year,” Nybladh said of the upcoming fiscal year.

Should the school board approve the tax increase, the district would be in the red $350,800 for the 2013-14 school year, according to recent budget projections.

School board President Vicki Ericson is asking residents to look at the bigger picture regarding the school district’s future.

“This is just one year,” she said. “Next year could be an entirely different picture.”

Increase or decrease?

The district is seeking to remedy the situation with a property tax increase.

The tax increase combined with state property tax relief would make the estimated general fund levy 95 mills.

The general fund is the main operational fund for the district. A mill is equal to a 10th of a cent and is used to determine property taxes.

The increase would allow the district to raise about $16.3 million in revenue from local taxes, according to budget documents.

It’s a decrease from the 123 mills and the $20.3 million the district levied for the general fund last school year, according to Vicky Schwartz, the district’s business manager.

But not everyone sees it that way.

Sen. Ray Holmberg, R-Grand Forks, said the school district is taking money that belongs in taxpayer pockets. He estimates that each property owner should have received $400 in relief on the school district portion of their tax bill.

According to a district letter sent out to property owners, the owner of the city’s average taxable home of $169,795 would see a decrease of $208.91 from their 2012 bill.

“The school district is reaching into taxpayers’ pockets, taking $200 and calling it tax relief,” Holmberg said.

Instead, he said the district should be paying deficits by reducing the amount of cash it has on hand since the state is picking up a larger portion of the tab.

Missed opportunity

The school district’s main budget problem could have been solved with the passage of a bill earlier this year, according to Nybladh.

HB 1237 would have allowed state aid to be calculated with a district’s prior year enrollment or its current fall enrollment, whichever value is greater. This is how aid was calculated for schools before a 2009 bill changed the process to its current form.

“Prior to 2009, the school districts had the money to pay for growth,” Nybladh said.

The 2013 bill, which would have provided $20 million to cover districts’ growth, failed 53-40 in February.

“The state Legislature could have done more for Grand Forks,” Sen. Mac Schneider, D-Grand Forks, said of the bill’s failure.

The Legislature did vote to increase state aid for schools through a mill buydown and increased student payments through HB 1013.

Rep. Mark Sanford, R-Grand Forks, one of the bill’s sponsors and the predecessor to Nybladh as superintendent, did not return phone calls requesting comment.

The state issued a 50-mill buydown and put a 60-mill levy cap on school districts. Grand Forks is an unlimited mill district and is not affected by the caps. However, its unlimited authority is set to sunset in 2015. A general election vote will determine the district’s levy cap.

All districts also have the option to raise their post-buydown levies another 10 mills for instruction purposes and 12 mills for miscellaneous purposes.

Grand Forks is doing just that, which brings the general fund levy to 95 mills.

As for increases in funding per student, the district will receive $8,810 this upcoming school year instead of the $3,980 it was given in past years.

Shifting a larger portion of the funding burden to student enrollment becomes problematic when students aren’t accounted for, according to Nybladh.

The 234 students missed last year cost the district more than $900,000. This year, those students would cost about $2 million.

Other factors

While the district is growing, it is not expanding at a rate fast enough to earn it extra financial assistance from the state.

Rapid-growing schools have a growth rate of 4 percent or more. Grand Forks is sitting at about 3 percent, Nybladh said.

Projections have the district’s enrollment growth continuing until at least the 2016-17 school year.

Growing enrollment also requires the district to hire more staff.

Fourteen full-time staff members were brought on last school year, and officials expect to hire more this year to keep up with growth. Salary costs rose by $4.3 million during the 2012-13 school year and are projected to increase by $3.7 million this fiscal year.

Salaries and benefits make up about 85 percent of the district’s expenditures, according to Schwartz.

What is not driving the proposed tax increase is the district’s plan to build a new elementary school, according to Nybladh.

Funding for that project will be taken from the district’s building fund. The projected cost of the school is $15 million.

“It is needed,” Nybladh said. “We’re continuing to grow. Our neighborhood schools are reaching capacity.”

That need is the reason the district will not be transferring building funds to cover other debts, he added.

More than 300 kids are expected to fill the school’s classrooms when it opens in the fall of 2015.

Public comment

Residents will be able to comment on the tax increase at a public hearing scheduled for Monday. The school board and district administrators will be present at the meeting.

“We’ll listen to all of the facts, but we really can’t go backward with our education system,” Ericson said. “We’ve told the administration that we can’t afford to keep deficit spending.”

Without the increase, she said parents could expect larger class sizes and reduced school services, violating standards she said she believes the community has for its educators and its education system.

“If we want to continue to do well, we need to commit to educating our students.” she said. “If you want that passion, you’ll see it on this school board.”