The Vermillion School Board officially agreed Monday night to opt out of the state’s property tax freeze in the amount of $880,000 for five years.
The district is currently operating with extra revenue providing from an $880,000 opt-out that began a little over five years ago and is due to expire.
A resolution approved by the school board Monday that calls for the new opt-out notes that the school district needs the extra revenue in order to properly operate.
School Board President Doug Peterson read the resolution aloud before the board took action.
“The governing board of the Vermillion School District … do state that the above said board is unable to operate under the tax limitation measures currently in statute. We therefore opt out of such limitations in the amount of $880,000 starting with the calendar year 2020 taxes payable in the calendar year 2025,” he said. “This action has been taken by the board and approved by at least a two thirds vote of the board.
“This decision may be referred to a vote of the people upon a petition signed by at least 5 percent of the registered voters in the district and filed with the governing body within 20 days of the first publication of this decision,” Peterson said. “Unless this action is referred to a vote of the people and reversed by such vote, this resolution authorizes the county auditor to spread an excess levy to raise tax dollars in the above stated amount.”
He noted that the school district has opted out of the state’s property tax freeze for three five year periods.
“This $880,000 is a critical part of our budget that enables us to retain a number of the programs and educational opportunities that we have in the district for the last 15 years,” Peterson said, “and I certainly do hope that we have the continued support both of the board and of the community for this.”
“We’ve all done a lot of work over the last many years with the state Legislature, also,” said board member Tim Schwasinger, “and it just seems like we really do need the public’s confidence to allow us to continue this.
“Gov. Noem’s address -- the zero percent increase that she’s proposed -- doesn’t look promising, so we need to make this decision to keep us moving forward,” he said.
“The resolution reads it as being a tax increase, but because it’s already in place, it simply retains the current taxation level that property owners in the district have been paying,” Peterson said.
An informational sheet prepared by district administrators notes that South Dakota law provides an opt-out option in order to raise additional revenue for general funds. According to the Associated School Boards of South Dakota, an opt-out is a practice that has become more commonplace for districts in recent years.
The paper notes that if the opt-out is continued for another five years, the Vermillion School District will be able to maintain the quality of education for the students in the community. With growing enrollment, opt-out dollars will help keep class sizes at their current levels in addition to attracting and retaining quality teachers, administration and staff.
The informational sheet also states that if a new opt-out fails next year, the Vermillion School District would be faced with a struggle to maintain current offerings to students and staff. It may result in increased class sizes, decreased staff, as well as reduced professional development opportunities.
It is estimated that the annual property tax increases due to the proposed opt-out on property valued at $100,000 would $46 on ag land, $103 on owner-occupied property and $213 on commercial property.
Tax increases on similar classifications of property valued at $150,000 would be $69, $154.50 and $319.50, respectively.
Property with a $200,000 value would see its school district property taxes increase by $92 for ag land, $206 for owner-occupied property and $426 for commercial property.
The Vermillion School Board agreed in January 2005 to opt-out of the property tax freeze for the first time by $800,000 annually for five years. The board noted that at that time that it locally would have to cut the school budget by $350,000 that year to make ends meet while maintaining only necessary programs.
The $800,000 figure was chosen at that time because the district would only receive half the amount — or $400,000 — during the first year of the opt-out, enough to stave off cuts in 2005-06. Board members noted the opt-out would not bring back past cuts.
The board then voted unanimously to put the opt-out on a March 15, 2005 ballot for voters to approve or reverse the decision. The district’s first opt-out began with the 2005 taxes payable in 2006 and concluded with the 2010 taxes payable in 2011.
The Vermillion district's opt-out very first opt-out in 2005 was based on three assumptions: a 2 percent annual increase in state funding, a 3 percent annual rise in expenses and an average loss of five students a year.
The 2005 Legislature approved $4,237.72 per student in state aid. The figure ran $32 higher than Gov. Mike Rounds' request, but the funding still fell far short of what is needed, Vermillion school board members said.
Rounds said the state-aid figure represents about a 3 percent increase. However, Vermillion board members in 2005 interpreted the state-aid increase as a hike of about 1 percent in new dollars because one-time money was no longer included in the aid.
Since then, a new $800,000 opt-out was approved by the school board in 2010 and received no public opposition. The current opt-out which expires soon -- at $880,000 for five years -- was approved in 2015 and like before, the issue was not referred to a public vote by school district citizens.