School district leaders will have to wait to find out exactly how a new Iowa law regarding school funding will affect them.
But one thing is clear: District leaders could end up spending down their cash reserves if they're not allowed to levy more property taxes to increase revenue.
The law, House File 2030, which was originally billed as a way to lighten the load for property owners, limits school districts' ability to increase property taxes. The School Budget Review Committee, which will administer the law, is in the process of developing rules to explain just how that will work. The committee is a nonpartisan panel that deals with school budgeting and accounting.
That rule-making process became murkier this week as comments from legislators, Gov. Chet Culver's office, and school districts and related associations flooded the committee.
This week, the committee adopted emergency rules to govern the law until permanent rules can be adopted, but those are unlikely to remain as is, said Jim Addy, administrator of school support and information for the Iowa Department of Education. The School Budget Review Committee is expected to take into account many of the comments they've fielded, which have been “all over the map,” Addy said.
“Any time there's change, a lot of people are uncomfortable with it,” Addy said.
The law is of great interest as school districts scramble to continue education programs while keeping budgets in line. A statewide 10 percent budget cut earlier this fiscal year left the districts dipping into cash reserves and cutting supplies, programs and staff to stay solvent.
While the new law is still unclear, Addy said, there is an indication of where things are heading.
Originally, the new law was interpreted as requiring some school districts to dip into their cash reserves before increasing property taxes.
That will change slightly, Addy said. Most likely, districts won't be required to spend down their cash reserves. But if a district has a lot of money in savings, it could be prevented from increasing property taxes to raise revenue. That could end up having the same result.
Essentially, if a district has cash reserves equal to 25 percent of its annual budget, it wouldn't be allowed to increase property taxes. If a district has cash reserves equal to 10 percent of its budget, for example, it could generate up to 15 percent of its budget through an increase in property taxes.
The Atlantic Community Schools had an annual budget of about $15 million before state-mandated budget cuts this year. After spending about $400,000 in cash reserves to weather those cuts, the district likely will end the year with about $800,000 in unspent cash, said Superintendent Dan Crozier. That's just over 5 percent of its total budget.
“We have a little,” Crozier said. “We do not have enough.”
That's a common story throughout western Iowa. In Clarinda, the school district had a budget of more than $11 million this year. District officials spent about 15 years building up $1 million in cash reserves, said Superintendent Paul Honnold. If the district had to spend it all to fill in gaps in the budget, those savings would disappear, he said.
“Schools need to be able to have reserves to be able to help in years like this one and ones in the past when they (state officials) have reduced state aid in the middle of the year,” Honnold said. “Without a fairly strong cash balance, we're going to be putting a lot of financial problems on schools.”
The School Budget Review Committee could schedule public hearings on final proposed rules within the next week.
Contact the writer:
444-1310, elizabeth.ahlin@owh.com
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