District prepares for operational referendum ask

CLINTONVILLE – The Clintonville Board of Education continues to work through the process of planning the financial future of the school district.
As part of the that process, the board approved a resolution at its May 27 meeting, authorizing the defeasance portions of the district’s $9 million general obligation school building bonds, for each of the years of 2023, 2022, and 20221.
Nick Curran, licensed school business manager and business manager oversight for CESA 8, who the district contracts with regarding its finances, presented a plan to the board at the meeting that would include asking district residents to approve an operational referendum, that if approved, would increase the state aid the district receives, as well as keep the mill rate the same for property owners in the district. No action was taken on the plan at the meeting.
“We have great opportunities here to take and utilize the state’s funding formula to our advantage,” Curran told the board.
The board was presented financial projections into the future for the district.

Curran said the projections included the district doing debt defeasance, which would increase the district’s shared costs. This would increase the amount of state aid that the district would receive from the state of Wisconsin due to the way the state’s school funding formula works.
“We get more state aid back, we have more dollars to spend, right, and less reliance on the tax levy,” Curran said.
The financial projections presented to the board included a $2 million operational referendum in April 2026.
“You pass that, you increase your spending, you increase the revenue, your flatlining or increasing your shared costs with no additional spending, it gives you more state aid,” Curran said.
According to the projections, if an operational referendum would be approved, district taxes charged to property owners would be below the current tax rates for five years, because of the increase in state aid the district would receive, Curran said.
“We’re maximizing our non-local revenue dollar to increase spending here at Clintonville by reducing the reliance we have on local tax dollars,” Curran said.
Board Vice President Kris Strauman asked what would happen to the financial projections if the way schools are fundedwould be changed by the government.
Curran said hypotheticals can’t be predicted. He said data that is currently known was used for the financial projections.
“Every school district in the state would have the same exact problem if those things happen,” Curran said.
Based on the projection, Curran said the state aid the district would receive over a five-year period would increase by more than $2 million.
“That’s where you’re going to get the dollars for your operating referendum,” Curran said. “They have to come through the local taxes, but that’s just how the funding formula works. But your taxes are going to stay flat.”
Curran added that the district would need to continue doing debt defeasance to keep its shared costs up.
Curran said that the way the state’s funding formula works for school districts, if the district would reduce spending to reduce taxes, the district’s shared costs would decrease, which would result in a decrease in the amount of state aid the district would receive the following year. This would result in an increase in property taxes in the district.
“We don’t want our state aid to go down,” Curran said.

Debt defeasance

The defeasance amount would be $5 million, which would result in a net debt savings over the life of the bond of almost $2.5 million over the life of the loan the district currently has. The debt payments would be reduced by 2.5 years. This would also result in the district’s state aid increasing by $1.5 million.
“But if we don’t continue to keep our costs to that level, that $1.5 [million] is gone the following year,” Curran said.
He added that prior to the district considering debt defeasance, it put funds into Fund 80, but Fund 80 costs are not shared cost eligible for the state aid formula.
“You can use those dollars for Fund 80 purposes, but when it comes to shared costs or state aid standpoint, it doesn’t bring any additional dollars to the district,” Curran said.

Board discussion

Board President Glen Drew Lund said,“It’s hard for me to wrap my brain around just going and spending more money because then we’re going to get more money back. There has to be a tradeoff somewhere.”
Board Treasurer Jason Moder asked for clarification that essentially the district would not be spending more money, but rather, it would be moving funds around in order to get more state aid.
Curran said that was correct, except for the fact that there is a funding gap between the district’s preliminary budget and the district’s needs.
“We’re setting you up to potentially pass an operating referendum with no additional hit on the taxpayers,” Curran said.
Lundt said he didn’t understand how the referendum fills up the financial gap.
Curran said in future years, the debt defeasance will decrease, with the operating referendum filling in the gap.
Curran also recommended that the board not cut expenses to balance the district’s budget.
“We’ve set you up to flatten your taxes or even reduce them a little bit,” Curran said. “Reduce your mill rate and increase your spending. …Financially speaking, it’s not in your best interest to reduce your spending right now. You want to keep your spending up, to keep your shared costs up, to keep your state dollars up. If you reduce your spending, it’s going to have a counter effect. If your costs go down, your state aid is going to go down, your taxes are going to either have to stay where they are or you’re going to have to cut [expenses] further, or your taxes are going to have to go up to keep your level of spending. It’s not in your interest to reduce your spending level.”
Near the end of the discussion, board member Christopher Hoffmann asked what the contingency plan would be if the district’s residents did not pass an operational referendum if one was presented to them.
“From a financial standpoint, its significant cuts, because you’re going to have to deal with that $1.2 million (deficit),” Curran said.
He added that the district would also have to consider another debt defeasance to keep the shared costs up, which would keep the state aid up that the district receives.
“That’s where my concern is, if we’re going to run a $1.6 million deficit in anticipation of that (operational referendum) going through, once that money is gone, it’s gone,” Hoffmann said. “If we don’t have public interest, that $1.6 (million deficit) would be better in the budget spread out over three years, as opposed to a deficit of one.”
Lundt said all the board members need to be on the “same page” regarding the district’s future finances.
“The only way this is going to work is if everybody understands what is going on,” Lundt said.