Testimony on HF 234...Operating Referendum Extension Bill

Testimony of Jerry Von Korff

District 742 Vice-Chair

on Operating Referendum Extension

April 2, 2013

Thank you for affording a hearing to HF 234, the operating referendum extension bill authored by Rep. Jerry Newton.   Passage of this bill is one of the highest priorities of our school board, and it is important as well to school districts across the state.    I’ve served on our school board since 2004, but I’ve been involved as a parent volunteer since the 1980’s.   Since 1994, our district has run seven operating referendum campaigns, each time seeking to maintain just about the same operating referendum support, in the range of 4-6 million, or about $400 to $600 per student.  I have served as volunteer chair of two of these campaigns, and as a board member or candidate, worked on three other of these campaigns. 

Four of those seven campaigns have been successful.   Three of them have failed. (See table 1, below).  Most of our referendums have produced less revenue than our special education deficit.   From 2001-2003, it took our district three tries to pass an operating referendum.  During that time, the district suffered catastrophic losses and cut necessary programs.    We have one of the lowest school tax rates in our region, and the lowest referendum amount of the big four districts in our area, but still, passing an operating referendum is extremely difficult.  

Our operating referendum must be renewed in 2014: otherwise our district will be thrust into a deep downward financial spiral.   Because of our history, we will schedule our first renewal campaign in 2013 to give us two opportunities to pass the referendum, before catastrophe strikes. During this time, we will call on our volunteer community to spend countless hours to campaign, and the volunteers will try to raise a significant war chest to communicate their message.   This creates a tremendous diversion of volunteer resources away from mentoring and other school volunteer activities, and over to the campaign.   This system of repeated referendums in Minnesota is wasteful and ineffective.  

As of 2011, although our school district had one of the highest special education deficits in the state, and one of the highest poverty rates in the state, we ranked only 93d[1] in revenue per student.  Many districts across the state with lesser challenges receive significantly more operating referendum revenue per student.   We need local revenue to meet our responsibilities as trustees of the state’s most important responsibility. 

I wish to make the following critical points:

•  Renewal of Operating Referendum Revenue is Necessary to meet our constitutional responsibility.   For Districts like ours, operating referendums are absolutely necessary revenue sources without which we cannot meet our constitutional responsibility to provide education which the state requires us to deliver.  Since 1986, the percentage of districts requiring operating referenda has risen from 47 to 90 plus percent.   In the last 10 years, the percentage of general revenue supplied by referendum in the Twin Cities has risen from 3% to 14%.   In the suburban metro ring it has risen from 8 to 16%.  In regional centers like St. Cloud it has risen from 3% to 10%.  We understand the temptation to sweep away this problem by trying to make referendums go away.  But under the Governor’s budget, that is not a solution:  it would destroy us financially.  

•  Special Education and other Cross Subsidies are Crippling School Districts financially.   Operating referendums are needed to address funding shortfall caused by the rising cost of special education and the nearly $700 million annual deficit in funding that is imposing a crushing financial burden on school districts.    Since 2005, Minneapolis cross subsidy has risen from $540 to $905 per student.  White Bear Lake’s cross subsidy has risen from $462 to $877.   Duluth’s has risen from $422 to $801.  Our own cross subsidy has risen to about $8 million, or more than $800 per student.  That means that we are taking 20% of the basic formula to fund the special education deficit.    The small relief that Governor Dayton’s budget provides school districts is a drop in the bucket compared to the magnitude of this budget.  Until you fix this problem, school districts need local property tax revenue to cover our huge special education deficit. 

•  In Outstate School Districts, referendum passage is uncertain and speculative.       

The chart below shows that our district has suffered major reversals in fortune depending on a slight swing in voter turnout.  A small change in voter sentiment can throw our district into a financial tailspin.   It means that we cannot plan effectively.  It means that major basic programs are at risk for sudden cancellation.   Because this revenue is critical to our mission, the elected school board should have the authority to renew.   Voters lack command of the details of school budgets.  They react based upon transitory sentiment.  An increasing percentage of our voters have no children in school, and a significant number of our parents are now immigrants who have no vote at all.  

The fact that 90% of Minnesota’s School Districts have operating referendums --- most of them at higher levels than ours -- is powerful evidence that we need the revenue that referendums provide.    In Minnesota, the right to an education is a constitutional right, not a right that depends upon the whim of the voters. 

In St. Cloud, we regularly conduct outside independent reviews of our operations to identify places we can save money.  We have an independent citizen advisory committee, with membership from the legislature that reviews our finances on a regular basis.   Our rate of teacher salary increases has been lower than the average increases across the state.   Our rate of special education cost increase has been lower than most school districts.    The system that forces us to run periodic referenda to make ends meet is illogical and unfair.    

The legislature needs to recognize that as long as this state funding shortfall exists, districts must have access to local revenues.  Children should not be forced to attend poorly funded school districts simply because they happen to reside in districts with high rates of poverty, or high percentages of students with special needs, or high parochial school populations.   Children in more conservative districts have the same educational needs as districts that are more liberal.   

Getting rid of referendum revenue would be irresponsible, because it covers our mandate deficits.  The responsible solution is to allow school boards to take local responsibility to renew referendum revenue, so that we can meet our constitutional mandate to educate all children.   We on the St. Cloud School Board have the courage to meet our constitutional responsibility to raise revenue necessary to do our duty.   We ask you to meet your constitutional responsibility by giving us the power to do what we all know needs to be done—to raise the revenue needed to deliver a quality education to all children. 

Table 1

St. Cloud Referenda From 1994 to Present

Year	Per Pupil	Length	Yes/No	Yes %
1994	$303	4 years	14,518  / 12,481	54%
1998	$332	10 years* (taken away by legis.)	16,215  / 15,830	50.6%
2001	$550	10 years	7,187 / 11,836	37.8%
2002	$375	4 years	13,844 / 15,020	48.0%
2003	$450**	4 years	9,737 / 8,967	52%
2007	$522	5 years	7,172 / 7,332	49.5%
2008	$555	6 years	24,295 / 22,176	52%

Passed Referenda  Failed Referenda

*Most of the 1998 levy was equalized away in 2001, and the funds used for equalization were given to taxpayers and districts without referenda.   The result was to create significant funding shortfall in St. Cloud leading to massive cuts and the loss of the District’s fund balance**2003 levy was broken into five questions.   Four questions passed, one by only 2/10 of a percent

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[1]   Ranking includes special education and compensatory revenue and makes our district look better than it really is, because we have higher than average special education.   However, higher special education revenue is actually worse than lower special education revenue, because it comes with a much higher special education cross subsidy.  Taking that into account, our ranking should be lower than 93d.