Marion School District’s Financial Outlook

1. Marion School District’s Financial Outlook Focus group discussion—May 2019

2. Changes in K-12 Funding Formula • 2016 SD Legislature made changes to the funding formula: • State set a targeted teacher salary of $48,500 to base school’s state aid funding formula from. • 85% of the designated increase in funding was to go to certified teacher salaries and benefits for 16/17 school year. • State sales tax went from 4.0% to 4.5% to generate revenue. • Pension fund levy was eliminated. • 2-year average enrollment was eliminated. State funding formula is only based on the current year’s Fall count (last Friday in September). • Changes in CO fund and “other revenues”

3. Changes in K-12 Funding Formula • Capital Outlay fund changes: • 45% of tax revenue received can be transferred to General Fund • Starting with the 2021 calendar year, schools will only be allowed to tax at a level of $2,800 per student in the CO fund.

4. Changes in K-12 Funding Formula • Changes in “Other Revenues”: • Other revenues includes Utility Tax (Gross Receipts), Wind Farm Tax, Bank Franchise Tax, Local Revenue in Lieu of Taxes, County Apportionment, and County Revenue in Lieu of Taxes • Starting with the 17/18 school year, these revenues would be gradually included in the State Aid formula as follows: • 17/18: No change from base year • 18/19: 20% of other revenues included in State Aid formula • 19/20: 40% of other revenues “ “ “ “ “ • 20/21: 60% of other revenues “ “ “ “ “ • 21/22: 80% of other revenues “ “ “ “ “ • 22/23: 100% of other revenues “ “ “ “ “

5. Changes in K-12 Funding Formula • Marion School District’s estimated loss due to Other Revenue change (compared to 17/18 baseline): • 19/20: $2,250.00 • 20/21: $90,750.00 • 21/22: $179,030.00 • 22/23: $279,200.00 • Loss of revenue is due to Marion’s large amount of Utility Tax (approx. $300,000) coming primarily from the ethanol plant, and the district’s small enrollment for this amount of revenue.

6. General Fund Balance, Fiscal years 2014 – 2019 • June 2014: $1,199,526.64 (loss of $59,131.10) • June 2015: $1,053,619.19 (loss of $145,907.45) • June 2016: $922,639.56 (loss of $130,979.63) • June 2017: $925,873.35 (gain of $3,233.79) • June 2018: $885,439.77 (loss of $40,433.58) • June 2019 (estimated): $700,739.77 (loss of $185,000)

7. General Fund Opt-Out Amounts Taken, 2006 – 2019 • 2006: $150,000 • 2007: $150,000 • 2008: $130,000 • 2009: $100,000 • 2010: $80,000 • 2011: $40,000 • 2012: $40,000 • 2013: $0 • 2014: $0 • 2015: $0 • 2016: $0 • 2017: $0 • 2018: $0 • 2019: $0

8. Comparison of Area District’s Tax Levies Requested • Comparison of tax levy requests of Marion, Freeman, Parker, and Canistota school districts • http://marion.k12.sd.us/wp-content/uploads/2019/05/Area-District-Comparison-2019.pdf

9. Tax Levy Difference Between 2019 & 2021 (with Opt-Out & less from CO) • Estimated Decrease in CO levy: • $640,000 (2019)- $487,200 (2021) = $152,800 • Increase in GF Opt-Out: • $300,000 • Total Tax Difference • $300,000 - $152,800 = $147,200

10. Tax Levy Difference Between 2019 & 2021 (with Opt-Out & less from CO) • Estimated Tax Difference by Type (per $100,000 in property): • AG $552.86 (2021) - $555.61 (2019) = $2.75 decrease • OO $809.75 (2021) - $742.71 (2019) = $67.04 increase • Other $1,306.50 (2021) - $1,104.51 (2019) = $201.99 increase

11. Other Factors To Consider • Assessed valuations could increase or decrease over the coming year • Tax levy request amounts are set by State each legislative session • Legislature could change the Capital Outlay requested maximum • Changes in student enrollment will affect how much Marion will received from the State’s funding formula • Unforeseen changes in funding could take place