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September 2014

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KM's frugal history hurts district today

The last four to five years have been turbulent in regards to school funding, making financial forecasts for districts difficult at best. That's why the Kettle Moraine School District Board of Education invited Todd Barry with the Wisconsin Taxpayers Alliance to look at KMSD on Dec. 18.

Barry focused on a couple of important points that are not well understood - state revenue limits and enrollment. The bottom line, according to Barry - state revenue limits really matter and enrollment really matters.

"You may hear talk about spending and revenue and state aide and such, but it is really the state revenue limits that are the driver of so many things," Barry told the school board. "They are a function not only of what state government allows school districts to do but also in a very real sense in enrollment."

Revenue limits

While revenue limits across the state grew gradually since 2003, districts saw a sharp downward decline in 2011 after the last state budget.

In revenue limits per student, Kettle Moraine ranks among the bottom half of districts in Waukesha County, with only Waukesha, Oconomowoc and Palmyra allowed less revenue per student for 2012, according to Barry.

The revenue limit Kettle Moraine works under at $9,712 per student, is about $100 per child lower than the state average at $9,804.

Madison politicians have talked about increasing state aid in some years, however, districts can't spend state aide that isn't allowed under the revenue limit, said Barry.

Part of this is historical. State revenue limits were set in 1993 and the level districts were spending at that time was the base point for future years. Frugal districts, such as KMSD have had a harder time than districts that spent more like Arrowhead, Pewaukee and Hamilton.

"In fact, districts have been punished in a historical sense for being frugal," said Barry.

Enrollment

On the other side of the coin sits enrollment. With revenue limits calculated on a per student basis, enrollment has a huge impact.

The KM enrollment is dropping at a faster rate than the state average having declined from 4,494 students in 2007 to 4,217 in 2012 or a 6.2-percent decrease compared to a 1.4-percent decline at the state level.

"It's not that KM is not well-regarded," Barry pointed out.

Enrollment can reflect a lot of things in a community, including the age cycle of residents living there.

KM has more students from other districts opting to open enroll at KMSD, than those who enroll out of the district - about a three-to-one ratio or the third highest district in the county for open enrollment - showing the district is desirable and offering a little financial compensation to the district. Open enrollment figures also reflect well on the reputation of the district, Barry added.

Tax impact

The difference between state revenue limits and state aid is the amount districts can collect in property taxes, explained Barry. If revenue limits go down it puts downward pressure on property taxes. If state aid goes down it may put upward pressure on taxes. With the most recent state budget, state aid went down and the state pulled the revenue limit down as well, said Barry.

However, one thing is clear, Barry added, KM has been losing state aid for a number of years, decreasing about 30 percent since 2003. With the revenue limit not growing very quickly, the property tax number drops out of the bottom, he explained. With state aid dropping, funding for the district shifts to residents resulting in higher property taxes even though the district is not increasing spending.

KM is the third lowest district in the county for per pupil spending at $11,390 per student compared to $11,261 in Mukwonago and $10,773 in the Hamilton district, while Oconomowoc and Pewaukee each spend more than $11,500 per student.

The state aid formula constructed a number of years ago reflected on property values of districts, providing less state aide for property rich areas and more for property poor areas. Since KMSD is considered more property rich than say Milwaukee, the formula provides les state aid for the district, Barry said.

While enrollment figures are declining, just how much those numbers will drop is not known with some projections showing a sharper decline than others. Additionally, the Wisconsin Taxpayers Alliance is seeing some recovery in revenue limit growth and some in state aid. Dumping all the numbers together points to the possibility of a slight drop in the tax rate, said Barry, but with the state aid formula driving down aide to the district, there could be pressure on property taxes in the future.

Visit the KMSD website at www.kmsd.edu and click on the story under News for more information about Barry's Dec. 18 presentation to the school board.

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