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TAXPAYERS RESEARCH COUNCIL Y OUR T AX A DVOCATE S INCE 1937
N EWS AND N OTES
March 15, 2012
S IOUX C ITY S CHOOL B UDGET
This past Monday, the Sioux City School Board narrowed down options in the Fiscal Year 2013 budget. Three members of the school board favor a levy rate at $17.11 per thousand of assessed value, which is the current levy rate this fiscal year. Three other members of the school boards favor a levy rate of $16.77 per thousand of assessed value. The remaining board member is still undecided between the two options. A closer examination of what these levy rates mean and some of the budget challenges the school board faces should encourage the public to voice their concern on the school’s budget and to the state legislature in regards to issues which ties the school board’s hands. Reserves Thank You for Your Membership! Charlie Zook Motors Semak Partnership Photography by Meyer
Doug Slechta A few years ago the state issued a 10% cut in state aid during the middle of the fiscal year. This left school districts across the state scrambling to find ways to cover budgeted expenses. The Sioux City School District made some cuts, but relied heavily on reserves to cover the $6.7 million midyear shortfall. The use of reserve funds brought the school district’s financial solvency ratio from 9% to 5.8%. The school board’s policy is to have a financial solvency ratio of 10%. The next fiscal year, after the 10% cut, the school board proposed raising taxes and directing the money to replenish the reserves over a three year period of time. The proposal was to increase taxes by about $1.5 million each year to reach the school board’s goal of a 10% solvency ratio. The Taxpayers Research Council supported this tax increase to ensure the school district remained fiscally solvent. The proposed Fiscal Year 2013 budget should be the final year the school district would require $1.5 million into reserves to achieve the goal of replenishing reserves. In theory, this accomplishment would allow the school board to lower the tax askings by $1.5 million in Fiscal Year 2014; however, the $1.5 million which should be going into reserves in Fiscal Year 2013 will not occur. The school board gave consensus to build the Fiscal Year 2013 Budget with only adding $500,000. This means $1 million is now being siphoned off to fund other expenditures instead of filling reserves or reducing the property tax askings. Retirement and Health Insurance Plans One budget issue, which the school board has no control over, is the Iowa Public Employees’ Retirement System (IPERS). This defined benefit state retirement system is requiring the school district’s compensation percentage to increase from 8.07% to 8.67%. This change will require the school district to increase their IPERS expenditures by about $500,000. The school district’s health insurance plan is setup as a defined contribution as opposed to a defined benefit which is the current retirement plan. The defined contribution plan allows for money to be deposited into individual accounts allowing the employees to select from the different health insurance plans the district offers. The school district uses self insured health care plans and allows the employees and the school district to work together to set the premiums, co-pays and more in each of the healthcare plans. As healthcare costs continue to increase at a higher rate than the amount of money deposited into the individual accounts, employees are required to cover the difference. This “skin in the game” system allows for the school district employees to be more accountable for their overall health. The defined contribution system for health insurance should also be used to run our other local government bodies health and retirement systems. Other local governments can implement the change to a defined contribution health insurance system without any change to state laws. The change can occur during contract negotiations. Changing our local government retirement systems is a much more complicated process. The state legislature is the only governing body which can allow for defined contribution retirement plan to materialize.
Additional Budget Issues One major piece of the budget puzzle is still unknown. Contract negotiations with all the school district’s employee groups are currently taking place. The school district states for every 1% increase in wages and benefits will increase the school district expenditures by about $1 million. The school district has a tentative estimate built into the budget, but until settlements are reached the actual costs will not be known. During the Fiscal Year 2011 budget the school district received $2.6 million in a Federal Education Jobs Grant. At the time, the district decided to split the funding over two years and hire 19 teachers and 18 support staff positions. The Taxpayers Research Council was concerned the federal grant funded positions would stay on the payroll when the federal grant ended, increasing the tax burden of local tax dollars. The federal grant money is now gone in the Fiscal Year 2013 budget and the school district administration has proposed ending many of these positions. The budget scenario which includes keeping the tax levy of $17.11 and adding $500,000 into reserves shows a potential reduction of 40.5 positions. The amount of positions cut is higher than the number of positions hired from the federal grant; however, it is not clear whether all the positions created from the federal grant are all being eliminated or if other positions are being reduced instead. Another important piece of information is even with the federal grant funding ending, under both budget scenarios the school districts expenditures for Fiscal Year 2013 will still be higher than Fiscal Year 2012. Two Budget and Tax Scenarios The first budget scenario is to keep the levy rate the same at $17.11 per thousand of assessed value. In Fiscal Year 2012, the school district used $84,315 as the average assessed value of a home in Sioux City. The state’s rollback factor of 48.53% makes this average home have a taxable value of $40,918. This creates the estimated school tax of $700. In Fiscal Year 2013 the school district used $85,158 as the average assessed value of a home in Sioux City due to overall increases in assessed value set by the Sioux City Assessor’s Office. The state increased the rollback which is the percentage of taxable value to 50.75%. The assessment and rollback changes increases the average Sioux City home’s taxable value to $43,218. This means by leaving the levy rate the same the average home will now pay an estimated tax of $739. Many of the school board members who favor keeping the tax rate the same argue the increase is only about $3.25 a month on the average home. While $3.25 does not seem like much, this is only examining the tax issue at 10 feet. The 100 foot view shows the school’s tax askings is really $61.58 a month or about $739.45 a year. The 1000 foot view shows the school, city and county’s tax askings would be $146.04 a month. This translates to about $1752.48 a year which is higher than the tax askings of $1698.09 for the average home of $84,315 in Fiscal Year 2012. Keeping the school levy rate the same in Fiscal Year 2013 would mean commercial property would have the same tax askings as Fiscal Year 2012, but only if their assessed values did not increase. The city of Sioux City and Woodbury County have reduced their tax levies for Fiscal Year 2013. The reduction still means an increase in tax askings on a residential home, but the increase would have been higher if they would have left the tax levies the same as fiscal Year 2012. The second budget scenario, which half the school board supports, reduces the tax levy to $16.77. This reduction means the average home will now pay about $2.08 more a month or about $25 more a year. The total annual tax askings from the school district would be $725. The total property tax askings for the average residence from the school, city and county would be about $1737.79 in Fiscal Year 2013. Reducing the school levy rate to $16.77 allows commercial property to see a decrease in their tax askings, but only if their assessed value did not increase to the point of offsetting the reductions. The second budget scenario may not be ideal for some, but it’s better than holding the tax levy at $17.11. A third option, which is not on the table anymore for the budget discussion is reducing the levy enough so the average homeowner receives no increase in the school districts property tax askings. The amount of money levied by all of our local governments is a substantial amount. Yet, the number of citizens informing the elected officials of their opinions is very minute. Please contact the local school board with your opinion on the levy rate you prefer, before you open your tax bill. Also, contact the state legislature about changes to state law which currently tie the hands of our schools board.
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