May 15, 2013 - Though next year's projections set the Mehlville School District with more than 20 percent in reserves, board members questioned how to tackle forthcoming years that, according to one five-year projection scenario, could see reserves dip below 10 percent.
Chief Financial Officer Noel Knobloch presented the Board of Education with five-year projections last week that account for the implementation of merit pay and possible variations in tax rates, which the board will not set until September. The budget, however, typically is approved in June.
One scenario includes a "complete roll up of the tax rate from what it was last year to what it could be done under the Hancock Amendment," according to Knobloch.
School districts are limited in their tax rates under the Missouri Constitution's Hancock Amendment. If assessed values increase, districts must roll back their tax rate to give relief to taxpayers. In the case of decreased assessments, the school board can "roll up" its tax rates, which would keep the dollar amount of what taxpayers send to the district the same through an increased rate on a lower-value property. Some taxpayers could pay more and some could pay less, depending on their home's new assessed value.
The assessed value of residential property in Mehlville dropped roughly 3.5 percent, according to Knobloch, and to "stay equal" the district would have to roll up last year's rate by 3.5 percent.
"(That) would get us just short of the maximum authorized amount," he told the board May 9. "The maximum authorized amount for this district is $3.75. Rolling it up under the provisions of the Hancock Amendment would allow us to go to $3.74, which is about a 13.5-cent increase over last year."
The commercial property rate, according to Knobloch, would be rolled back because of an increase in assessed valuation.
Board member Ron Fedorchak said he has never supported rolling back the tax rate.
"We want to do the right thing," he said. "We are in deficit spending, and we've all made that conscious decision to spend down those reserves, and the one thing I keep coming back to is those reserves ... Five years ago, we were critical."
Board member Larry Felton said when he was first elected to the board in 2007, district reserves were roughly 8 percent.
When a district's reserves are at that level, Fedorchak said it has "no flexibility."
"We don't have to borrow because we have money in reserve ...," he said. "We're losing that flexibility when we don't take care of the money that the taxpayers give us. If all we did was bury it in the dirt and then give it back, we're not doing our job."
The current reserves were not built, according to Fedorchak, because of growth in the community, but because Knost and his administration made cuts and restructured administration.
"And the message you're sending to Dr. Knost or any future administrator is ... if you cut it, we're going to give it back to the taxpayers so you'll never see it again," Fedorchak said. "So what would that tell a superintendent? Don't cut. Spend that money because if you don't, it's going to go back to the taxpayers."
Though Fedorchak said he likes the district's technology and merit-pay plans, he does not want "to see those things go away because we're not doing our job."
Regarding the reserves, Felton said Mehlville "had the luxury" of being able to afford placing additional police officers in elementary schools after the school shooting in Newtown, Conn., in December.
"That was a privilege to be able to do that," Felton said.
Knobloch also looked at the district rolling up residential property rates one penny less, which would see reserves hit 10.46 percent by 2017. The district would lose roughly $100,000 each year in this scenario, according to Knobloch.
Knobloch said Mehlville is at the maximum on personal property taxes, but that it could roll up commercial rates.
"That's the only column we have any flexibility to get more revenue," he said.
Although, according to Knobloch, Mehlville could see additional revenue if the state gets closer to fully funding the foundation formula. He also provided projections with the impact of a merit-pay plan, which would take effect in 2015, and the 1-cent property-rate reduction. Reserves would dip to 7.73 percent in this case.
"Obviously, the further out you go, those things continue to compound so you would have a much bigger impact the further out you go," Knobloch said.
The CFO calculated projections on the basis of 710 teachers potentially earning $1,000 through merit pay, a step on the salary schedule and benefits, which equates to an additional $870,000 in expenditures.
This alternate budget assumes no additional revenue from local taxes and that the state would increase its funding of the foundation formula roughly 1 percent per year with the possibility of being fully funded by 2018, according to Knobloch.
Board member Elaine Powers said the challenge of looking at the budget is that next year is in "really strong shape." All scenarios show roughly 20 percent in reserves for the 2013-2014 school year.
"We've worked really hard over the last couple of years to put some framework in place. We've asked for five years of this and five years of that ...," she said, "And that's the direction that has come from this board. We have better framework in which to make our decisions, so I just think that we have to make sure we look at that whole framework. We have to look out and not only look at what does next year look like."
Board Vice President Lori Trakas questioned how the new Common Core State Standards — national education standards intended to prepare students for work and college — will impact the budget.
Knost said it will have "minimal" impact on the district's finances.
"We have been in the position where we have had no significant impact from Common Core, nor will we, unless we change our path," he said.
Regardless of the board's decision come June, Knost said he will "live with what the board decides."
"I will show up, do my job as a faithful superintendent to the district and I will always do that ...," he said.
But Knost said if the district continues to support its technology and facilities plans, along with "entertaining some version of the performance pay," the decision at the September tax-rate hearing is "going to be absolutely significant to the bottom line."
Knost said it would never be his recommendation to move away from the facilities or technology plans.
"It's part of the excellence in this district, but those are game-changers in how we operate," Knost said.
Board member Rich Franz said of the district's roughly $102 million budget, about $80 million is for salaries and benefits.
"So for those folks who think, 'Why can't they find some money to cut out of $102 million?' $80 million of that's already tied up," he said.