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Closing of 'donut hole' benefits local schools

Wadena-Deer Creek will likely see a slight increase in state aid from a provision in the tax law passed earlier this legislative session, which closed a so-called "doughnut hole" that had left out Minnesota's mid-sized districts.

The additional aid means the district should be able to maintain its current annual budget of about $12 million a year while levying $39,270 less per year at the local level, a minimal impact that hinges on enrollment, said WDC Superintendent Lee Westrum.

"It's basically a wash," he said. "We'll probably come out a bit ahead."

But long term, the new law means the district could avoid a significant budget crisis - and subsequent steep cuts - if voters decided not to renew an excess levy referendum that expires in 2019. In addition to equalization dollars for districts with lower property tax bases, the provision allows school boards statewide to levy up to $724 per pupil without going to the voters.

Passed in 2009, WDC's 10-year excess levy referendum authorizes $902 per student - about $1 million per year.

Suddenly losing that money, Westrum said, would be "devastating" for the district. "It would be nearly impossible to take that out of the budget."

With the ability to raise $724 without a public vote, the budget impact of a "no" vote would be far more manageable, he said.

Last year, the legislature granted school boards throughout the state the authority to levy $300 per pupil. It also allowed districts within the seven-county metro area to raise an additional $424 per pupil without going to the voters (boards can vote to decline the increase), while outstate districts with more than 2,000 students could levy $212 per student. Districts under 1,000 students already received help through a separate program passed last biennium.

The hodge podge of programs left out 132 mid-sized districts including WDC.

"Now it's the same across the state," Westrum said. "It doesn't have anything to do with location."

Sen. Rod Skoe, DFL-Clearbrook, said he sought to correct the inadvertent doughnut hole as a part of a wide-ranging tax bill he helped craft early in the legislative session.

"I thought it was imperative we make that available to all school districts," said Skoe, the Senate Tax Committee chairman who represents the northern fifth of Wadena County. "Since some school districts have that authority, I think it's only fair that all school districts have that authority."

Unlike WDC and most school districts throughout Minnesota, Perham-Dent Public Schools operates without a voter-approved excess levy referendum.

Several failed votes have led to perennial budget struggles, said Perham-Dent Superintendent Mitch Anderson.

Under the new law, the district - unless the school board opts out of the aid - will be able to raise about $580,000 per year without going to the voters. That's on top of the $400,000 last year's law allowed.

"We're hoping to take over control of our classes sizes in the high school and add back some of the programs and positions that we've cut in the past few years," said Anderson, a board member of the Minnesota Rural Education Association.

Although some Republicans opposed the measure over worries about increased property taxes, Sen. Paul Gazelka, R-Nisswa, said he supported because "the state should be covering the basic education costs for every school district."

"Some of our rural schools use operating levies to cover basic needs," said Gazelka, who represents most of Wadena County.

Wadena's state House member, Rep. Mark Anderson, R-Lake Shore, said he'd prefer for school district property tax decisions to be made by voters, but he's OK with the provision as long as officials provide "transparency on the front end."

Westrum said he agrees that schools must be faithful stewards of taxpayer dollars.

"You have to be honest and forthright with your constituents," he said. "Don't ask for too much and explain why you need it."