The Crested Butte News Serving the Gunnison Valley since 1999
Planning for the worst could cost $400,000 a year
Like a fishing trawler off the coast of Maine, the Gunnison Watershed School District is facing what school board president Anne Hausler calls “a perfect storm.”
On top of wave after wave of “rescissions” in the amount of funding the district will get from the state this year—ultimately resulting in a loss of almost $1 million—a second front is building, this time at the ballot boxes.
Propositions 60, 61 and 101 will be on the November ballot and have most government officials on edge. All of them affect the way the school district, or any governmental entity, gets its funding, through property taxes, borrowing or ownership taxes.
If all three measures were to pass in November, Hausler thinks the outcome would be “volatile,” adding that together, or in some cases independently, “they would tie our hands in ways you couldn’t imagine.”
The looming possibility that any or all of the three ballot initiatives will pass this November has the Gunnison Watershed School Board worried—and ready to say so. They unanimously passed a resolution opposing the proposed constitutional amendments at a meeting on Monday, July 26.
While the propositions that set out to tamper with the district’s tax revenue, 60 and 101, have the school board’s hackles up, it could be new debt limitations defined in Proposition 61 that could really affect district finances.
A priority for district business manager Stephanie Juneau recently has been to look at the impacts of seeing Proposition 61 pass, which is mainly through the Interest Free Loan program operated by the state. The program has already been put on hold for a year, as state finances have tightened. Passage of Proposition 61 would serve the program a fatal blow.
The program allows a cash flow maneuver between the state and school district. The district’s need for an interest free loan is a product of timing, Juneau explains. Since the Gunnison Watershed School District is 100 percent reliant on property taxes paid by local people in the spring and processed through the state, the money doesn’t actually make it to the district until the following January. The money is usually enough for Juneau to cover expenses in the second half of the school year and into the summer.
“So we have enough money to carry us through July, August and September. By October we’ll need to start borrowing,” Juneau said. “Historically that’s no problem: I do a little cash flow worksheet, send it up to the state, they send us the cash. Life is good.”
But that’s history. With the program on hold for this year, Juneau has been out looking for alternative ways of getting the $2 million needed to pay operating expenses and payroll through the last fiscal quarter of the year. The details of that loan, she said, haven’t been worked out with the district’s primary bank, Wells Fargo.
“The source of repayment for the short term loan would, in the case of [Proposition] 61 failing, be the interest free loan. The state will bring back the interest free loan program and it would start funding December 15,” Juneau explained. “So the short-term loan would be paid off by the interest free loan returning in December.”
Even though the scenario would cost the district money, the district would still be able to continue operating. But if Proposition 61 were to pass, the district would be stuck with fairly substantial short-term (30-day) debt and still need to find a long-term solution.
One emerging solution, Juneau said, was a lease purchase, which would be handled a lot like a loan, but doesn’t bring the restrictions of debt as defined in the Taxpayers Bill of Rights (TABOR).
“If 61 were to pass, this long term solution is highly expensive to the district. In speaking to an investment banker at this point, it would be a $5 million loan repayable over 20 years,” Juneau told the board. “So out of our operating budget, we would have to find $400,000, approximately, out of thin air.”
Clarifying what Juneau said, board member Jim Perkins asked, “That’s $400,000 a year?” Juneau confirmed, “A year. Correct.”
Juneau explained, “We don’t want to get caught in the situation of having no funding and not being able to make payroll so we are pursuing that long-term solution in case it were to pass. It’s a terrible solution, but it’s the only one we have.
“And if the proponents of 61 understood what they were doing… because what a terrible waste of school district funds, $400,000 to pay a loan that we have historically had interest free, and fee free, and it has worked out just perfectly,” she continued.
But unlike the Andrea Gail (the vessel lost in The Perfect Storm), the Gunnison Watershed School District isn’t alone in weathering this storm. Districts around the state are facing the same problems should one or more of the measures pass.
Seven school districts are situated exactly like Gunnison Watershed and the solutions being proposed for dealing with the worst-case scenario are varied, and in some cases far-flung.
At the meeting, Hausler related a suggestion that was half-jokingly given to her about closing the schools down for a year and saving what is left of this year’s funding to augment the budget for 2011-12.
Juneau wasn’t laughing. Those ideas weren’t far from what she was hearing at statewide forums. “One of the ideas was [to] take our summer break in the winter. If we can’t fund November, December, January…” she said, letting the board members draw their own conclusions.
“The long term solutions that the state is tossing out, they are not good solutions,” Juneau said with a growing frustration. “There are no good solutions, but in the interim, we as a district have to find something to make payroll.”
The other six districts that share a similar situation with the Gunnison Watershed School District are all in similarly situated communities, where pricey homes make up a large share of the property tax base.
“The other seven districts that are exactly in our boat—which means they are receiving no funds from the state this year and they need to borrow before the election—they are all talking about the same idea I just presented,” Juneau said.
Some concern was voiced from the board that the perceptions will be that the school district is always in need of more money, when the district operated without cash flow problems prior to massive funding cuts that put the interest free loan program on hiatus for a year.
And the financial reality the district is facing, with the timing of property loan payments, requires a short-term loan from someone. Juneau would say it’s better to get the money from someone who isn’t charging interest than from someone who is.
Another concern for the board was a report from the state that said the school district was operating well within their finances. But Juneau warned that the information the state used to get to that conclusion was more than a year old.
Board member Bill Powell didn’t like the idea of making the statewide reports public until after the election. “This is just the kind of information Douglas Bruce and his people jump all over to show that the school district doesn’t need to borrow any money,” he said, and asked that those sentiments be passed onto the state.
