Summit County School Board ponders ballot issues
Summit County, CO, Colorado
SUMMIT COUNTY – It’s safe to say Summit School District would rather stay out of the ballot box altogether this fall. However, economic and political factors outside the district’s control have, officials say, threatened their ability to provide a quality education to local students.
As a result, Summit voters may see two school funding measures on this November’s ballot: The first, a mill levy override, would serve to offset waning tax revenues. The second would safeguard against the impacts of a statewide ballot proposal – Amendment 61 – that would seriously complicate the district’s finances.
Proposed mill levy override
The school district has already been testing the waters for the mill levy override. And though the school board has yet to formally commit to placing a question on the ballot, board members appeared to be leaning heavily in that direction at a meeting Tuesday.
As proposed, the measure would generate about $2.1 million per year for local schools, if passed. Annual property taxes on a $400,000 home would be about $40 higher were the measure to pass.
The economic conditions dealing a blow to the schools’ revenue stream may also have voters holding more tightly to their wallets. In a recent phone survey of 303 likely voters, 55 percent said they would support a proposed mill levy. After they heard more about the measure, support rose to 58 percent – just within the realm generally considered to make a campaign viable.
Preparing for Amendment 61
Just this week, school district leadership floated the idea of a second ballot measure, which would ask voters for the OK to take on a certain kind of debt.
This second local ballot measure would be in response to proposed Amendment 61, which will appear on the statewide ballot in November. Broadly speaking, Amendment 61 would prohibit the state government from ever borrowing money; local governments (including school districts) could borrow money, but only with voter approval.
This makes things complicated for school districts, many of which borrow money from the state, interest free, for periods of a couple months at a time to solve cash-flow issues.
(If your eyes haven’t already glazed over, congratulations. Unfortunately, we’re just getting started.)
The school district’s fiscal year begins on July 1 and ends on June 30, to coincide with the academic calendar. That way, when officials develop an annual budget (and determine appropriate staff levels and program expenses), they do so by planning for an entire school year – not the calendar year, which encompasses parts of two school years.
Beginning the fiscal year on July 1 is good timing for educational purposes, but not such good timing for the school’s revenue stream. Property owners pay their property taxes in February, March and April. The district receives those funds in March, April and May. In other words, the school district receives the majority of its annual revenues nine months into its fiscal year.
This chronological mismatch of revenues and expenditures leaves school districts shy on cash (for paychecks, supplies and other operating expenses) from about December through March.
To address this, the state government has a service called the State of Colorado Cash Flow Loan Program. It lends the money, interest free, to school districts, which then pay it back when they receive their property tax revenue.
“We have sufficient money to operate within our budget; it’s just that it all comes in April,” said Summit superintendent Millie Hamner.
This year, through the cash-flow loan program, Summit Schools drew about $2 million in January and February and repaid the state in March. The district plans to participate in the program for the fourth time in 2011.
If Amendment 61 were to pass, the state would be prohibited from borrowing the money it uses to offer that no-interest loan program. The state program would go away.
Summit School District (and other districts that depend largely on local property taxes) would instead have to issue “tax participation notes” (similar to bonds) to meet its short-term cash need in the winter.
But Amendment 61 wouldn’t allow that either, since the notes are a form of debt. The district would have to put a question on the ballot every November to ask for voter permission to issue the notes each year. Incidentally, the district (and thereby, taxpayers) would have to pay interest on the tax participation notes, a cost not borne under the state loan program. Furthermore, the district (and thereby, the taxpayers) would have to pay all the closing costs associated with the notes. Such fees don’t exist in the state program. Alternately, the school district could ask voters for one-time approval of a bond measure for a large sum, say $10 million, that it could dip into and then replace each year.
Natalie Menten, a spokeswoman from the yes-on-61 campaign, said the benefits of tighter restrictions on government debt are worth the extra burden on school districts.
“Nothing in Amendment 61 stops a school district from asking voters if they can take on debt,” Menten said. “Although, we should not be borrowing to cover day to day.”
Menten advocated that school districts find other sources of revenue, such as the sale of unused property. Summit assistant superintendent Karen Strakbein said the district has no land to sell that it’s not already using or planning to use in the future.
“We do hope, though, school districts will save money by borrowing less and saving on interest costs which can then be used for services. We should live within our means, and no pass on debts for our children to repay,” Menten said.
Such reasoning doesn’t make sense to local school district officials, though, who say the amendment’s greatest impact will be on zero-interest loans whose terms last little more than two months.
Preparing for passage
The provisions of Amendment 61 would take effect on January 1, 2011. Therefore, if it passes, the district must have measures in place to handle its cash-flow issues in a new financial landscape. That means the district officials are strongly considering asking for voter approval on a bond measure or the tax participation notes.
“We’ve got to be on the ballot to be prepared,” Assistent Superintendent Karen Strakbein said. “We need to keep our operations going. If 61 doesn’t pass, it doesn’t apply.”
Strakbein said she’s concerned the complexities involved will require some serious study by voters, especially since Amendment 61 will have multiple effects on multiple entities – not just school districts.
“I do think it’s going to be difficult for voters to understand the ramifications. They are going to have to spend some significant time studying the components of these questions,” she said.
SDN reporter Julie Sutor can be reached at (970) 668-4630 or firstname.lastname@example.org.