Kids First Monadnock!

How will the 2008 school budget will affect you?

Would you like to support the schools but worry about the tax impact? Have you read the recent letter to the editor claiming that taxes are going up 27.22% and that school spending is out of control? If so, read on. This could be the most important document you read before the election.

The information below lays out exactly how much the school district proposes to spend on its operating budget and other warrant articles, how much money will need to be raised from taxes, and how that breaks down for your town.

It also explains how some of the percentage increases you see out there can be misleading and why factors outside of the school’s control have added to the bottom line costs for taxpayers this year. Bottom line: If everything passes, the school’s spending will only increase by 6% this year. That includes the operating budget, teacher and staff contracts - the works.

Armed with a better understanding of what money must be raised and where it goes, you should be in a good position to make a decision. Passing a budget is an important first step toward maintaining our Middle/High School’s accreditation.

Q: How much is the proposed increase in the MRSD operating budget?
The proposed MRSD operating budget for 2008 is $31,852.333. It represents an increase of 2.96% - less than the rate of inflation for last year. The actual amount of the increase is $909,470.

Q: How much will spending increase if all warrant articles pass?
If all articles on the warrant pass the total increase in spending will come to about 6%.

There are several other warrants that will affect spending. These include the operating budget, the teacher and staff contracts and a warrant article to fund the roof repairs on several buildings. The proposed total of all of the spending on the warrant articles comes to $35,143,639.

Q: How much money must be raised from property taxes to pay for that?
If the operating budget and all warrant articles pass, the amount to be raised from taxes for the 2008/2009 school year will increase by 13.92%.

Q: How can a 6% increase in spending result in a 13.92% increase in the total amount of money that needs to be raised through taxes?
Clearly it’s not excessive school spending. This number is called the total amount to apportion and is equal to total expenses less revenues (grants) and state aid to education. The change is expressed as a percentage: To get it you divide the 2008 amount by the 2007 amount.

Three factors are at work here. Both revenue and state aid are down. The increase also reflects the tax impact of voters’ decision last fall to allow Surry to withdraw from the district. That’s not extra spending but a reapportionment of the costs Surry used to pay. Here is the breakdown:

• The biggest chunk of the increase (more than half) comes from a large, one-time surplus that taxpayers benefitted from in their 2007 tax bill. As a result, tax bills went down dramatically last year. How dramatically? Sullivan’s school tax bill went down 23%. Gilsum’s went down 27%. Surry’s went down 36% (shown in the Tax Rate Impact table below, 2007/2008 column). This year that one-time surplus went away. Most of the surplus was associated with special education, a mostly unfunded mandate over which the district has little control. Unfortunately, the special education aid revenues are unpredictable. Last year revenues exceeded what was expected by $2.1 million. This year funding dropped back to normal levels. And costs went up.
• 1.16% of the increase is required to make up for a reduction in state “adequacy” aid for Monadnock district towns. MRSD taxpayers are getting less back this year from the State of New Hampshire’s statewide property tax.
• 4% of the total increase has nothing to do with this year’s budgets at all. It is the result of the voters’ decision last fall to allow Surry to withdraw from the school district. Surry’s withdrawal does not substantially change the cost of running the school district (the financial benefits of closing the Surry Elementary School were taken a few years ago.) The remaining towns in the district must now pick up Surry’s share of the costs.
• The school budget and warrant articles make up the remainder.

Q: How much will this afffect the tax rate?
The overall tax rate for next year will rise 27.22% over the current year’s numbers. However, this number is a bit misleading. Read on.

Q: If the amount to be raised from taxes is up 13.92%, why would the tax rate go up by 27.22%?
Estimates can be calculated in different ways to imply different things. Last year taxpayers saw a huge decrease in the tax rate due to a one time increase in revenues. This year that support goes away. That makes this year’s budgets look larger.

The 27.22% number is skewed upward by the fact that taxpayers saw a huge one-time reduction in taxes in the 2007/2008 school budget year. If your taxes went down by 23% last year and the surplus goes away in the 2008/2009 school year, you start the year with a 23% increase even for a flat budget. This is what makes this year’s percentages appear much larger.

Here is a simple example of how percentages are skewed. Let’s say that last year’s budget was $100. Then someone gives you a one-time rebate (surplus) of $25. The total budget drops to $75.

In the next year, your budget costs return to normal. The budget increases by $25. If you look at the normal budget ($25 divided by the original $100 budget), the increase was 25%. But if you use the actual budget amount after the rebate as the basis the increase is a whopping 66% ($125 - $75 = $50 increase. $50/$75 you actually paid last year = 66%).

In this way, looking at the percentage increase of the 2008 tax rate over the 2007 numbers exaggerates the overall impact.

A more accurate way to look at the percentage increases would be to look at the average increase over the past two years. (See the two year average column in the table below).

(Note: Roxbury’s percentage increase appears larger because it received a credit over the past two years to compensate for a previous overassessment. Those credits do not carry forward this year, making Roxbury’s increase appear proportionally larger.)

Q: Why do the tax rate changes vary so much between towns?
To determine what each town will pay one must calculate the estimated tax rate for each town. To know that you need to know how much of the total amount the district needs to be raised from taxes will be billed to your town (called apportionment).

It’s not an even split: Your town’s apportionment is based 50% on the number of students your town sends (called average daily membership, or ADM) and 50% on property valuations. Even small amounts in the ADM and valuation numbers can vastly change the tax rates for every town. The differences in tax rate change from one town to another can be substantial, as the wide variation in percentage increases/decreases for a given year show. These increases are often blamed on “out of control” spending but have nothing to do with spending. They have to do with how costs are apportioned between the towns.

Small changes in ADM or valuations can result in large changes in how costs are apportioned. Both the ADM and valuation numbers are set by the state. The school district has the preliminary valuation numbers but is still waiting for the ADM numbers to come in. The final assessed values as of April 1st will come from the state some time after that date. Therefore, the numbers below use ADM and valuation numbers that are a best estimates by the district, as are any other projections you might see from other sources.

Q: So what is the total bottom line impact?

Let’s look at Fitzwilliam as an example. In the chart above you’ll see that the district projects that Fitzwilliam’s tax rate for 2008 will increase by 26.3%. That comes to $3.19 per $1,000 in valuation over what residents paid in the current, 2007 school year (when the one-time surplus reduced taxes). That’s an increase of $638 on a house valued at $200,000, assuming that everything passes.

But don’t forget that Fitzwilliam taxpayers saw their tax rate decrease by 16.34% in the current year. The two-year average increase is 5.66%, or just 2.83% per year. If you factor out the tax impact of the Surry withdrawal (4%), which is not part of this budget cycle but something voters approved last year, the increase related to school revenues and budgets increased 1.66%, or an average of .83% a year for the last two years.

Here is how those numbers translate into real dollar tax increases for each year. 2007 is the current tax year (2007/2008). The 2008 tax year coming up (2008/2009 school year), when the surplus disappeared.

Again, the total increase in tax rates does not reflect a large increase in spending by the district. These numbers reflect a moderate increase in expenditures, a large decrease in revenues, decreased state aid, and a 4% increase due to the Surry withdrawal. The huge surplus last year makes the increase look larger. Because the surplus was a one-time event, the increase over two years provides a more reasonable view of the trend over time.

Are taxes going go to up? Yes. But in the big picture, the overall increase isn’t as large as voters may have been lead to believe. And it’s certainly not due to runaway spending.

Given the scope of the issues that need to be addressed at the schools, the fact that the school has suffered five years of default budgets and two years of not funding a teacher or staff contract, is a 2.96% operating budget increase and a 6% overall increase in spending for all warrant articles - including teacher and staff contracts - too much to ask?

Make your decision at the polls on March 11.