Board members, legislators mull over upcoming legislative session

Sen. David Johnson

Spencer school board members have received predictions, as well as advance warnings, from three area legislators in regard to what challenges the district's coffers and local taxpayers' wallets may expect in response to Iowa's budget shortfall and across-the-board cuts ordered by the governor. During a nighttime work session held this week, Sen. David Johnson, Reps. Royd Chambers and Mike May told the locally-elected representatives that the upcoming legislative session will probably be a "compressed situation" that will be "all about budget and very little about policy."

The discussion, which also included Spencer Superintendent Greg Ebeling via teleconference, covered the wide-ranging topics of raiding specific pools of money in order to balance the budget, keeping student achievement at the forefront, consolidating districts across Iowa and allowing schools more flexibility in financing their operations.

Rep. Mike May

"Nothing will be done during this session about school reform. We know that," Johnson forecast. "It's going to be an 80-day session rather than a 100-day session, and things are going to move very rapidly. There will be a lot of status quo decisions. Perhaps we can make some inroads there, but the best that we can get out of this is to actually have some serious discussions about school aid reform."

As the board members and superintendent requested more flexibility in handling the mandates being passed onto districts for implementation, they also urged more leniency with how management levy and Physical Plant and Equipment Levy (PPEL) funds are spent.

Rep. Royd Chambers

"Some flexibility there would certainly free up some things. But, I do have concerns about some of our areas getting too flexible," Ebeling said. "I know there have been some things floated out there about our management levy. Currently the management levy is one of the areas in which we pay for district property insurance, workers' compensation, liability and those types of insurances, as well as early retirement programs. But, there are some ideas about us paying for health care out of the management (levy fund). While that would free up a lot of money out of our general fund, health care is a negotiated thing in the district right now. And, opening that up too wide could allow for some real problems. Some of those funds could really spiral out of control, and therefore, the property tax rate (could, too)."

May, a Spirit Lake Republican, suggested school districts be granted more flexibility for at least a couple of years.

"And then maybe sunset that and look at it more seriously in a couple of years," he said.

The state senator from Ocheyedan indicated he and colleagues are currently working on proposals with sunset clauses attached to provide local districts "the flexibility to make some decisions to get us over the next couple years."

"But that's still, I believe, a long-term situation. One where you won't have to raid local property taxes. But, we're not ready to talk about that yet because we're still working out the details," Johnson told the Spencer delegation.

"We do know that one of the recommendations coming from the governor's office is that he wants to do just a 10 percent across-the-board cut -- which leaves schools more than $200 million in the hole right now and probably more than $500 million next fiscal year. So, one of the issues that's going to be talked about is if it's going to be a top-down approach to the property tax issue or are we going to allow some flexibility on that? ... I prefer the bottom-up approach," Johnson said.

When board member Bob Whittenburg asked the three legislators what they believed the likely scenarios would be this session in regard to filling the anticipated $500 million gap in the state's budget next fiscal year, the Republican state senator answered, "The majority party is already talking about reducing the (state aid) per-pupil allocation by $300 a student." Spencer's superintendent replied, saying this move would throw more districts onto the 101 percent budget guarantee rolls, otherwise known as local property taxes.

The state money to fund the 2 percent allowable growth rate tentatively built in for Iowa districts for the 2011-12 school year is also not there, May advised.

"It's going to be proposed that you cut your spending authority as well as (receive less) allowable growth," Chambers said.

"Nobody knows how this will get done," May added. "There's about $140 million in (federal) stimulus money left. We'll use that again for the 2011 budget. There's (state) cash reserve money -- up to as much as $350 million. Some of that will be used for the 2011 budget. So, we're halfway there. But, that's just 2011. The long-range forecast, for me, is not good. It's not a good scenario for this economy recovering fully."

The Spirit Lake representative also alerted board members to suggestions made about targeting Iowa's pool of SILO tax fund revenues. Legislators and the teachers' union alike were mentioned as potential "snitchers."

"I'm not speaking for David and Royd, but I do know what they're thinking, and we'll do everything we can to keep that from happening and keep that money intact and used for the purpose in which it was intended," May assured.

"The fact of the matter is this fund is not really protected. I'm concerned about it," Johnson added. "Perhaps we're going to be able to hang on this year, but I believe the entire state budget situation is really a two- or three-year process to try to work our way through."

Ebeling then alluded to the fact that district representatives across the state have already been informed that they will be required to spend down large cash reserves.

"I have no doubt that one of the proposals will be to mandate spending down reserves before you access property taxes," Chambers said. "Even with that, you take those districts (that have 300-400 percent of their yearly budgets in the bank) and force them to pay down their reserves, and then you come up with a 2011 budget that will be at least a 10 percent reduction in funding. I still think there's going to be another across-the-board cut in the 2010 budget. ... When districts are looking at a 20-25 percent cut between this year and next fiscal year, even the schools with large undesignated funds are going to be out of money."

"There are a lot of districts, Spencer included, that don't have a large cash reserve. We have (spending) authority, but we don't have a large cash reserve," Ebeling told the three legislators. "So, when the state doesn't send us $890,000 because of the 10 percent across-the-board cut, that's $890,000 less in cash that we have. ... Therefore, the challenge for us at the end of this fiscal year is we will literally have no cash in the bank. ... The reality is a lot of local property taxpayers (throughout Iowa) are going to feel the effect of that because that cash has to come from somewhere."

Johnson said the same thing applies to the state's budget.

"The nonpartisan fiscal analysts are saying that we are facing a $1 billion or more shortfall in fiscal year 2011. Yet, the governor's office continues to say, 'No, in their analysis it's only $400 million.' That tells me and a lot of other legislators that the governor's office is saying, 'We're going to take everything we can out of the (state's) cash reserve and emergency fund in order to get us through another year,'" Johnson said. "In other words, kick the can down the road again.

"The reason we have a cash reserve at the state level is to help fund local governments. We've been through this before, and I do not want to revisit the 80s when school districts were being forced to borrow money and being forced to not pay staff and cover their expenses. I just don't want to see that again. But, the same thing is happening at the state level. So, we've got to come to some agreement as to what the role of the cash reserve is. And, I think it's important for our school districts to have that."

As the discussion among the two parties approached the topic of what could be jettisoned and what may be kept this legislative session, teacher compensation dollars, which flow directly to teachers and in turn have helped raise Iowa's ranking for teacher pay among states, and the state's funding of 4-year-old preschool programs were mentioned.

"I don't think that they'll be done away with altogether, but I do think that there are just going to have to be sacrifices (across the state's educational system and) across the board," Johnson said.

"I think the AEAs will be on the table before teacher quality and preschool," Chambers added.

As Spencer's superintendent and school board members concluded their meeting with the three area legislators, they were told by Johnson to keep in touch during the upcoming session.

"We need to hear from you," he said.