Elkhart Lake-Glenbeulah School District – November 6, 2018
Frequently Asked Questions – For Those Interested in Learning More
How many other districts are in the situation of being debt-free?
Being debt-free is a major accomplishment for a school district. The most current information available from the WI Department of Instruction is from June 30, 2017. At that time EL-G had a debt balance of $357,712 (this amount does not reflect the loan payment made in the 2017-18 school year. The remaining loan amount will be paid in full this March—again making us a debt-free district). At that time, there were only 43 districts debt-free districts in the state, and 18 additional districts that had a debt balance less than ELGS. If these 18 districts also pay off their debt, there would be 62 debt-free districts out of 424 districts in WI. In other words, we are in better financial shape as pertains to debt than 85% of the state’s school districts.
Why can’t the district work within the budget that they currently have?
For the past 10+ years, the District has done exactly that, as we have had basically a flat budget for operating revenues available to us under the revenue limit formula (thanks for our past referendums). However, as a District, we are not able to sustain the same quality programs after this final year of our last referendum. The loss of the referendum amount of $725,000 in 2019-20, in addition to a loss of almost $90,000 in declining enrollment aid that same year, means ELGS would need to reduce the District’s budget by approximately $800,000 in 2019-2020 and make additional reductions of $150,000 to $200,000 for each of the following four years. This reduction would be coming from a total operating budget of approximately $6 million. In addition, this budget amount would not allow for loan payments for major projects to happen such as upgrading the culinary arts classroom/labs, auditorium and athletic field without impacting existing programs, personnel, etc. This just is not a feasible option.
Why do we have a need if we have had declining enrollment?
It should be noted that even if the District’s enrollment declines, it does not mean the budget will decline at the same level. Some cost reductions can be tied to declining enrollment: reduced class sections, fewer bus routes, smaller textbook orders, etc. However, personnel costs don’t necessarily decrease at the same rate as enrollment decreases. Often enrollment declines are spread across all grade levels so cuts cannot be made on a one-to-one basis with declining enrollments. Also, many costs are independent of declining enrollment, for example: utilities, maintenance, liability/property insurance, etc.
The enrollment for 2018-2019 was stable. What impact does this have on future budgets? As a District, having a stable enrollment is a positive. Increasing enrollment would even be better under the revenue limit formula and for many other aspects of District. However, the downsize of having our enrollment stabilize is the District will no longer receive a “declining enrollment exemption” that is provided as aid to help Districts adjust to the decrease in revenue which results from fewer students under the revenue limit formula. As a result, this “aid” of approximately $90,000 will not be received by the District in 2019-20.
What will happen if the referendum question does not get approved?
If the District referendum question does not pass, there will be many budget implications for the District. $800,000 is a huge amount to cut from a budget, especially one the size of our district. Simply put, we cannot continue to maintain the same quality of education with much reduced revenue. As the maintenance and operation of the District’s buildings, grounds, equipment, and vehicles must continue, other areas may realize reductions or cancellations. All budget items will be up for consideration: personnel, class sizes, academic and elective programs, extra-curricular areas, transportation, etc.
In addition, this budget amount would not allow for loan payments for major projects to happen such as upgrading the culinary arts classroom/labs, auditorium and athletic field without impacting existing programs, personnel, etc. This just is not a feasible option. These projects would need to be postponed indefinitely or possibly not happen at all.
At this time, we have not spent much time on determining the exact area of possible reductions as we are focusing our energy on moving forward in a positive direction. If the referendum would not pass, our energies would then be channeled into addressing this new challenge of determining the District’s next steps which would include identifying priorities and balancing the budget decisions with these priorities. Though realistically, while this may be possible for a short time period, the District cannot sustain at this level for a long length of time.
The referendum question says it is non-recurring. What does non-recurring mean?
It means that the Board is only asking the voters’ permission to increase the levy beyond the revenue cap for the defined five-year period. This five-year period provides the District the resources needed to maintain existing programs and complete the upgrades to the culinary arts classroom/labs, auditorium and athletic field. However, it does not commit the taxpayer to maintaining this level of financial support beyond the five years without an opportunity to again weigh in to indicate support.
What is meant by operational/maintenance?
Operational expenses would involve those costs which occur in the day-to-day operations of the school, such as transportation, utilities, employee compensation, program costs, technology, etc. Maintenance for the purpose of this referendum would involve, but not be limited to, the three projects identified in the referendum question. If funds allowed, the District would continue to make improvements to our facilities.
To learn more about these projects, click here.
Can’t the district just use their Fund Balance to supplement their revenue?
The Board has “earmarked” approximately $313,000 of Fund Balance to pay the final costs of the HVAC project (replacing the remaining 7 rooftop units at the high school when needed) and $213,000 towards additional technology needs of the District.
The District is currently at a 20.9% Fund Balance in relation to our operating budget, which is in the recommended range of 17-20%. This balance does not include the funds earmarked/restricted for the HVAC and technology projects. The Board could decide to spend more of the Fund Balance in future years, but it is recommended to do so only for one-time expenditures, and not for recurring expenses, as the need will continue even after the money is gone. Maintaining our present level of Fund Balance gives the District some relief as to the amount we need to borrow short-term for cash-flow purposes and also for when/if emergency situations should arise.
What is Fund Balance?
Fund Balance is the accumulated excess revenue limit that hasn’t been expended over the years of District operation. The Fund Balance is important because it determines what we need to borrow yearly for cash flow purposes and serves as our contingency emergency fund if/when needed.
What is the District’s history of debt payments during the last two referendums?
2007 Referendum—Paying off Prior Service Debt Obligation: Borrowed approximately $650,000 in 2008 @ 6% interest. This 10-year loan was paid in 5 years, saving the District substantial interest costs. The District was debt-free.
2012 Referendum—Roof Loan: Borrowed $675,000 @ 2% interest for 5 years. This loan was paid off in 4 years, saving one year of interest. Again the District was debt-free, honoring the promise made when the referendum was passed.
2015 Referendum – HVAC Loan: Borrowed $900,000 @ 3% interest for 5 years. The loan will be paid off this March, one year early. Again one year of interest was saved. At this time, the District will again be debt-free. Funds have also been reserved in Fund Balance to replace the remaining H.S. rooftop units when needed, so the entire project cost will be covered from these referendum funds—as promised.