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Local taxpayers will get their say in this debate in November at an excess levy referendum. Voters will decide if they are willing to cough up tax money to support the Paynesville school system.

The alternative, warns the school administration, is deeper cuts to the district's budget.

The Paynesville Area School Board approved asking the public to vote on a $315 per pupil unit excess levy on Tuesday, Nov. 6. Based on current enrollment levels, the levy would generate $456,177 for District #741 for the 2002-03 school year. (Because it is based on the district's pupil units, the levy would generate less money each year as enrollment continues to decline.)

The board chose to present that levy to district voters instead of two smaller ones ($126 per pupil unit and $223 per pupil unit), which would have meant less taxes but would have generated less for the school.

The money would be collected from 2002 taxes. The new levy would hit some taxpayers harder than the current $315 excess levy does. Residential and commercial property would pay higher taxes for the new excess levy because seasonal property and agricultural acreage have been exempted from education taxes. (See columns 1-3 in the boxed chart for the levy changes.)

Still, all landowners in the district would have lower overall property taxes for education in 2002 (see column 5) because of the state's assumption of the general education levy (see column 4).

School board chairman opened the discussion by pointing at the Legislature for making another excess levy necessary. They rolled Paynesville's existing levy - a $315 levy passed in 1997 that would have lasted another seven years - into the general formula for 2002-03, and they failed to adequately support schools while cutting taxes.

Flanders and others on the board have referred to this as a "shell game," with the state cutting taxes but forcing school districts to pass excess levies to get the funds they need to operate.

Board member Bob See was concerned about adding taxes, which if done by all local governments could wipe out the tax relief. Plus, he was cautious about the state budget in light of the economic downturn. "To me, that means the state is going to have a problem they didn't have when the economy was going good, and they're going to raise taxes," he warned.

In the end, the board - including See - voted unanimously to let the decision be made at a referendum.

"We have to go to the voters and let them decide, not us," said board member Fern Roberg.

Superintendent Howard Caldwell reminded the board that the district's budget for 2001-02 projects a general fund deficit of nearly $300,000. The district has a general fund balance of $120,000 through June 30, but that surplus is all in reserved funds. Caldwell says the nonreserved funds are in deficit by $270,000, which if confirmed by the district's annual audit would put the district in statutory operating debt.

If so, the district would need to come up with a plan to get out of debt. The two ways to do that are to increase revenue or cut costs.

The district did cut $512,000 from its budget for 2001-02. At least another $150,000 in budget cuts will be needed next year to deal with declining enrollment, said Caldwell.

That amount is based on the fact that PAHS will graduate 119 seniors next spring while this year's kindergarten class has only 86 students, a net loss of 33 students. Weighting in the per pupil formula values high school kids the highest, so the loss of each high school student is worth about $5,000 to the school's bottom line. Thirty less students at $5,000 apiece yields $150,000 in cuts.

"That's a given," said Caldwell. "That's something we need to do next year for sure."

The school board has made it a goal this year to develop a budget cutting process to deal with declining enrollment.

Cutting more to get the district's budget balanced and to get the district's general fund out of debt would be painful, many board members felt. "During the cut process last year, I said it 'til I was blue in the face: 'The fat was gone long ago. We're cutting meat. Next time it will be bone," said Flanders. He supported the $315 levy because it offered the best chance to minimize budget cuts for the coming years.

"We need the $315," said board member Maurice Dosdall.

"I agree," said Caldwell. "I think we need the $315. I think it's the only way we can get back on track without devastating our programs."

Cuts are not popular, agreed vice chair Deb Glenz. "(People) are not lining up to tell us what we should cut," she said. "Everybody wants theirs."

Board member Dan Andersen thought the district should stress what the levy will allow the district to retain. The $456,000 for next year is nearly what the school district cut this past winter.

Andersen also proposed raising the levy enough that the district could affort to eliminate all school fund raising. Eliminating fund raising would be another selling point for the levy, he said.

That proposal, while having merit, the board agreed, died when the administration pointed out the extent of fund raising and noted some things would be controversial to fund, especially foreign trips.

The $315 per pupil excess levy would be equalized (partially funded) by the state. For the $315 levy, district projections show the state paying 56 percent of the levy.

Plus, an excess levy is the only way to access equity revenue, which is additional state aid to districts. Carolyn Drude - an executive vice president and financial planner with the district's financial advisor, Ehlers and Associates - said she knew districts that passed a $1 per pupil unit excess levy just to get the $55 per pupil unit in state equity aid. With equity aid, the state's contributions would be 60 percent in the first year of the levy and the local contribution would be 40 percent. The district is not sure, though, how long the state will keep equity revenue in the formula.

If this levy fails, the district could try another vote by mail-in ballot later in the year. Or, if indeed the district is in statutory operating debt, the district could hold another referendum.

To get the money on the 2002 taxes - to the district in 2002-03 school year - an excess levy would need to be approved by the first of the year, according to Caldwell.