Bridging the funding gap
October 5, 2010
The East Grand School District faces a major funding gap that would hurt the quality of local education if Colorado voters approve Amendment 61 on this November’s general election ballot.
In response to the chance that Amendment 61 could pass, the East Grand School District is placing question 3B on the November 2 ballot. Question 3B, if passed, would allow the school district to bond for $4 million and permanently bridge that funding gap if and only if Amendment 61 passes.
A political issue committee, Solutions for Our Schools, has been formed to inform voters about the problem that would be created if Amendment 61 passes and to urge a “yes” vote on question 3B.
Amendment 61, if approved, prohibits loans between governmental entities. That prohibition means the East Grand School District won’t be able to borrow interest-free money that has gone to the East Grand School District and several other Colorado school districts. Those interest-free loans funded school operations each year from November through February since 1993, when Colorado changed its fiscal year.
The state agreed to provide such loans because the fiscal-year change created a funding gap for school districts like East Grand, where the bulk of funds for operating don’t come in until March when property taxes are paid.
Most school districts in Colorado don’t face this funding gap problem because they don’t rely as heavily on property tax revenues. They receive their operating funds from the state earlier in the school year.
Question 3B asks voters to approve a $4 million bond issue that would permanently make up the $4 million shortfall if Amendment 61 passes. If the amendment fails, then there will be no need for the bond issue and it would not go into effect, even if voters passed 3B.
If 61 passes and the voters OK 3B, that would allow the district to borrow the $4 million that would be used to permanently fix this funding-gap shortfall. That would involve a property tax increase to pay off the bond.
If 61 passes and 3B fails, the consequences will be dire for the East Grand School District.
In that case, rather than closing schools for three months, the District would enter into a “certificate of participation” for a lease purchase on school buildings. This means the district would borrow money against its hard assets. The loan payments would take money out of the existing operational funds of the district.
This would mean probable cuts in staff, activities and buildings. It’s estimated the district would have to find $224,000 a year in its operational funds for 25 years to pay off the debt.
The East Grand School District has already laid off 32 employees and cut $1.5 million from its budget. The school board and staff agreed the District simply can’t afford more compromises on its educational quality.
The East Grand School District is not over budget and is not operating at a deficit. In fact, it has paid back the bridge loan from the state every year. The problem of timing, however, creates a cash-flow shortage that’s difficult to resolve without borrowing money.
If the bond is needed and the voters approve it, there would be property tax increase for East Grand County property owners amounting to $3.35 per $100,000 of actual value for residential and $12.20 per $100,000 of actual value for commercial.
The campaign also urges a “no” vote on Amendments 60 and 61 and Proposition 101 because of the dire impacts they would have on educational funding for the school district. An analysis of the impact on the school district if all three proposals pass shows that the district would lose roughly $3.6 million in the first year.
The impact of such a cutback would be devastating.
A fundraising campaign is currently unde rway to fund Solutions for Our Schools. Checks should be made out to Solutions for Our Schools (SOS) and mailed to P.O. Box 125, Granby, CO 80446.
Patrick Brower is managing the campaign. If you have questions or input, call Brower at 970-887-9694 or 970-531-0632.