The Basics and Challenges of TSD’s Budget

As many are aware, Thompson School District has been facing a budget shortfall for the past few years and has been “balancing its budget” with a combination of spending constraints and by drawing upon its reserves. With the reserves expected to be expended by the 2019-2020 school year, the District needs to enact further cost reductions in order to balance the budget. This blog is intended to provide a brief summary of how our K-12 education schools are funded and the approach the Board of Education will use to address these budget issues.

How are our schools funded?

General Fund – Includes teacher / staff salaries, books, bus transportation, building utilities and repairs. The State Constitution directs the legislature to “establish and maintain a thorough and uniform system of free public schools.” The School Financing Act (SFA) requires the legislature to set a mill rate, or property tax rate, for each school district. The state then contributes additional money from state revenue sources such as income taxes and sales tax. A portion of Specific Ownership Taxes from vehicle registration fees are also included. Altogether, the SFA makes up 83.7% of the 2016-17 General Fund revenue. The other 16.3% is comprised of locally approved Mill Levy Overrides (MLO) and other revenues such as partial reimbursement of transportation, special education and vocational education costs and other smaller miscellaneous items. Figure 1 shows the General Fund revenue sources.

Are there any other funding sources?

Yes. Both the federal and state governments provide additional funds through their grant application process. These funds must be applied for and used for the specific stipulated purposes such as free and reduced lunch, English as a Second Language and grants for at-risk children due to low family income. In addition, the District receives mill levy money to service the debt on voter-approved school construction bonds. A comprehensive presentation of the current and past schools budgets can be found on the District website through the following link:

If my property values increase, as they have been doing, wouldn’t the schools get more funding?

No. The State Constitution, through the TABOR amendment, prevents total state expenditures from increasing, except proportionally in response to population increases and inflation. Each year the state determines the SFA funding level for each district. As property values increase, mill levy tax rates have been proportionally decreasing in order to keep the annually determined funding at the level set by the state. The tables below compare assessed property values and education-related mill levy rates for the past 13 years.

What is the Budget Stabilization Factor (Negative Factor)?

“The “budget stabilization factor” (formerly known as the negative factor) is a provision in state budgeting that reduces the amount of total SFA program funding provided to K-12 school districts. The economic downturn beginning in 2007 reduced state operating revenue from income taxes and state sales tax. As a result, the General Assembly faced budget shortages across all functions of government. Although the constitution requires annual increases in base per-pupil funding, the constitution also requires a balanced budget. In short, the budget stabilization (negative) factor is the difference between what a school district is supposed to receive in SFA funding according to state law and what the state actually provides to the district. Since it was first introduced, the cost of the budget stabilization (negative) factor has grown from an original recission of $130 million statewide to its current balance in FY 2015-16 of approximately $855 million.

(Copied from ‘THE NEGATIVE FACTOR AND PUBLIC SCHOOL FINANCE By Josh Abram. See link below)

The budget stabilization (negative) factor for the Thompson School District is shown in the chart below. Without the budget stabilization (negative) factor the District would have received an additional $115.6 million over the past 8 years ($14.5 million per year average)

If the State has reduced school funding since 2010, what has the District done to meet this new reality?

The District has implemented multiple approaches to manage the reduced budget, including the following:

  • Reduced administrative staff – lowest in comparison to all neighboring districts
  • Eliminated cost of living raises in some years
  • Deferred building maintenance
  • Postponed upgrades to academic curriculum
  • Postponed upgrades to technology and infrastructure
  • Delayed replacement of worn-out buses
  • Use of financial reserves

What is the value of the District’s financial reserves and when will they be expended?

As explained above, the District has been drawing down its financial reserves as one of its strategies to address reduced school funding. The chart below shows the reduction on a year-by-year basis from 2007-08 through 2016-17. State law requires the District to maintain a TABOR reserve equal to 3% of the prior year’s General Fund revenue, or approximately $3.9 million for 2017-18. In addition, since 2000 the Board of Education has required an additional 2% reserve. As the chart shows, the District unrestricted reserve is projected to be nearly expended at the end of the school year 2019-2020.

Since the District will exhaust its financial reserves by school year 2019 – 2020, what does the District intend to do?

The State Constitution requires the Board of Education to approve the school district budget, a responsibility which each Board member takes very seriously. District staff report regularly to the Board on its proposal for the next school year’s budget, which begins on July 1 of every year. After review and Board directed changes, the Board approves the following year’s budget in June. This year, the Board has directed District staff to develop two budgets for the upcoming school year (beginning July 1, 2018) and for the subsequent year (beginning July 1, 2019). The Board has also directed staff to present recommended budget reductions necessary to balance the budget, based on best estimates of revenue and expenses.

Since the budget must be reduced, what is likely to be cut?

This is the focus of the Board’s attention and every budget line item will be reviewed for efficiency and potential impacts on educational outcomes. It is premature at this time to speculate, but every option must be analyzed as nothing is off the table.

If the budget cuts aren’t necessary until the school year starting July 1, 2019, why identify the cuts one year in advance?

This is necessary for several reasons:

  • Since the cuts will impact the District, it is advisable to reflect on the choices made over the course of one year before they are implemented and also allow time to make advisable changes.
  • It allows the District to present the proposed changes to our families and the community. The District will encourage public input and seriously consider proposed changes.
  • It allows the District to prepare for the forthcoming changes in order to minimize its impact to students, parents and staff.

Thompson School District and your Board of Education are committed to providing the absolute best educational opportunities for all students and to do so within the financial resources available. Some tough choices will be necessary to balance the budget and as presented above, the District will undertake an orderly process to make the best decisions possible. If you have any questions or wish to contact me directly, I would be happy to discuss any thoughts you might have.


David Levy

Board of Education Member

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