What a crazy week we've had. Sunday night I woke up to the sounds of thunder, flashes of lightning and pouring rain. Yesterday morning, I get up at 5 a.m. and I'm driving around thinking we must have missed the snow. There wasn't much going on and we had been down-graded from a winter storm warning to an advisory. Things can change quick. It started snowing harder and we ended up with another snow day. We had snow and wind yesterday and now this morning we are under a wind chill advisory. Hopefully, we can have two normal days this week.
You may have heard or seen in the news the discussion the legislature is having on something called allowable growth for schools. You may have heard the Iowa senate approved a bill setting allowable growth at 4% for the coming year. With all the discussion, I thought I would share a few things about allowable growth from a local perspective.
First, "What is allowable growth?" Allowable growth is the increase in the basic funding we receive to operate our school. Part of this funding comes from the state and part of the funding comes from local property taxes. In the bill that was approved by the senate, the state would fund nearly all of the increase so very little if any of the increase would come from local property taxes.
Second, "What is allowable growth used for?" A school, just like your home or business, has expenses. Things like heat, fuel, electricity, supplies, textbooks, insurance, and salaries. Rarely do any of these things go down and in most years they go up. The allowable growth rate is an amount to help offset these increases that occur. Some people believe that schools can just raise taxes when they want to in order to meet these needs. That is simply not true. There are certainly some areas where we have some control of our tax rates, but the majority is based on a formula established by the state.
If you want to know more about the formula and how it works, please contact me directly and I can email some additional information, or I would be happy to meet with anyone to discuss it as well. Here's some numbers you can think about. If allowable growth is set at 2% our district will have less money next year then this year. $55,431 less to be exact. This is due to our declining enrollment. If it is set at 4%, the district will receive an additional $19,049 for next year. That means if all other expenses stayed the same and we receive 2% allowable growth, we still need to find a way to cut $55,431 from our budget for next year. If we get 4%, then any increase in expenses above $19,049 will have to be offset by reductions in other places. As mentioned above, we cannot raise taxes to make up these differences, we will have to reduce something to make up the difference. Neither number is great, but you can see it does amount to a $74,480 difference for our district.
One interesting point. In a district with declining enrollment, the lower the allowable growth rate is set, the higher the impact will be on the local property tax rates. In other words, if 0% allowable growth is set, local taxes will go up more then if it was set at 2, 3, or 4%. It's hard to understand, but on a statewide basis if allowable growth is set at 0%, local property taxes will increase 50 million dollars across the state. If it's set at 4% local property taxes will increase 42.4 million dollars across the state. With the current plan proposed by the senate, local property taxes will increase by 3.4 million dollars. I know this is hard to understand and Iowa School finance can be challenging, but this is the reality of the current formula that we have. In New Hampton, using rough numbers, I believe we are talking a difference of approximately 20 cents per thousand if allowable growth is set at 0% instead of 4%. In other words, if allowable growth is set at 0% the school portion of local property taxes would be set at roughly 20 cents higher then if allowable growth was set at 4%.
From the school's perspective, we work hard to manage costs and provide the best education possible for our students. They are worth it and I will work hard to make sure they receive it. From a property tax perspective, 4% allowable growth will result in a lower local property tax rate compared to 0% allowable growth. Whether you are concerned about helping the district do the best it can or if you are concerned about property taxes, the 4% rate makes the most sense.
Thanks for bearing with me on this extra long post. I know it can be confusing, but please contact me or stop in if you need additional information or have any questions. As I repeatedly state in my community meetings "This is the New Hampton Community School District." It's not mine or the board's district, it belongs to the community. My goal is to make sure the entire community has a handle on what's going on. Have a great week.
