By Patrick Tepoorten

The North Branch school district held its Truth in Taxation hearing on Nov. 29. Unlike other units of government though, which have yet to set their 2006 budgets, the districtís hearing is essentially an overview of their already approved 2005-06 budget, which was set in stone some months ago for a fiscal year that runs from July to June.

Of the $36 million in total revenues that comprise the 05-06 budget, $5.79 million are the product of the local levy. That levy represents 15 percent of the districtís total annual budget. 72 percent of the remaining revenues come in the form of state aids and tax credits, with 5 percent from the federal government and 8 percent from other sources.

Total expenditures for the district have dropped from almost $79 million to just over $41 million, in large part due to a 74 percent decrease in construction expenditures related to the Sunrise River school.

Despite that, and $2.1 million in downward adjustments the district made to the 05-06 budget last spring, the General Fund is operating at a deficit of approximately $965,000 for the 05-06 budget when construction and debt (covered through existing fund balances) are removed. The district is covering that deficit through the use of the General Fund fund balance, a move which was also approved by the board last spring.

District Director of Personnel and Finance Randi Johnson provided a brief overview of the 06-07 proposed levy at the hearing as well, which will be considered for certification by the school board on Thursday of this week. That levy totals $5.86 million and is a 1.19 percent increase over last yearís levy.

GROWTH AND THE BUDGET

One thing that has been happening gradually over the years is, as property values increase within the district, state aid is reduced as a portion of overall revenues. Johnson gave debt service as an example. ìWe were getting debt service state aid forever. This is the first year that we arenít getting that anymore,î she said.

Debt service is far from the only area in which North Branchís growth will affect state participation. State support in the areas of reemployment insurance, health and safety, capital lease, and basic community education have been zeroed out as a result of growth in the district. Johnson cautions though, that the decrease in state aid in these areas should not necessarily be construed as an direct increase to an individual tax bill.

The reduction in state aid has taken place gradually over time. ìEven though the local levy funding may go up,î she explained on Monday, ìthe impact on individual properties goes down. Growth allows us to spread the levy across a larger tax base.î

In fact, the tax rate of the school district has dropped about 14 percent in the last year. Still, even with growth and a larger tax base factored in, it may not compute to lower individual property tax bills dedicated to the school district. ìIf your (school) taxes increase, it means that your property value is increasing at a rate faster than the tax rate is dropping,î said Johnson.

The bottom line for taxpayers is that, while they may be paying less per dollar of property value, properties that continue to increase significantly in value will see increases in their share of the levy.

Local growth can come in various forms. New construction is what most people associate with growth, but an increased tax base can also be achieved through increases in the assessed values of property within the district. In 2005, growth in the school district actually tapered off at roughly 14 percent, down from the 17 to 19 percent of previous years.

Despite the drop in the districtís tax rate over the last year, the district remains one of the higher taxing districts in the area at 34.37. Only the Rush City school district, at 40.469, is higher.

WHERE DOES THE MONEY GO?

The General Fund, including transportation, and operating and non-operating capital, totals roughly 80 percent of the districtís total expenditures for fiscal year 05-06. The next single largest expenditure is debt redemption at 12 percent.

Of General Fund spending, 68 percent of the total is earmarked for instruction and pupil support, which includes teachers salaries and benefits. 11.6 percent of the General Fund is dedicated to building operation and maintenance, and another six percent is dedicated to district and building administration. Just over 5 percent is for transportation and 4.4 of the remaining is for district support services.

Teachers make up 49 percent of district staffing, with nine-month support staff accounting for another 20 percent, and bus drivers another 12 percent. Administration, 12-month staff, and custodial staff round out the remaining 19 percent.

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