In our previous article, we discussed the two major income sources the district must predict in order to develop an operating budget that keeps the district financially sound. Local property taxes and state funding combined make up almost 90% of the district’s operating income. Property taxes are 52% of that mix. Assuming state funding stays relatively consistent from year to year, the district’s largest exposure to changes in income is directly associated with property taxes.
As mentioned in the previous article, some school districts have the good fortune of having all their operating levies approved on a continuous basis. That means, taxpayers have agreed to fund the district at a continuous level without requiring a periodic renewal of the tax. In such a case, a district would only need to return to voters when it was necessary to ask for an increase in income. Some districts like Lakewood have one or more levies that require voters to renew an existing tax every so many years.
Lakewood maintains two “Emergency” levies. One has a five-year term that provides $2,400,000 a year in revenue and the other has a ten-year term that provides $3,700,000 per year. The five-year levy will expire at the end of 2018. The ten-year levy will expire at the end of 2020. In both cases, the district will need to ask voters to “renew” those levies to continue receiving the same income it receives today. Combined both levies produce over $6,000,000 per year. Practically speaking, that means the district could lose that amount of income should voters decide not to renew these levies in the future. Up to 28 % of the district’s budget could be eliminated once every five to ten years.
Renewing an existing levy as a taxpayer does not increase taxes. It simply extends the tax for another period like the five and ten-year terms. The reality is that the district must rely on the income from the temporary levies, and that the failure of either or both would have major consequences on the how district operates. Imagine your employer telling you they reserve the right to reduce your pay by 28% every five to ten years. How would you manage your budget?
Lakewood’s two temporary Emergency levies are critical to the ongoing operations of the district in that combined they contribute $6,000,000 per year in income. The district must rely on this income well beyond the renewal cycles of the levies as it represents a significant 28% of the district’s budget. Failure of either levy would hurt the district’s ability to maintain the level of service being provided today.