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State aid rises, but Grand Forks schools still feel poor

GRAND FORKS -- A big change in North Dakota's education funding system aims to leave more money in taxpayer pockets, but fast-growing school districts such as Grand Forks Public Schools may feel a financial squeeze.

House Bill 1013's new funding formula approved last week by the Legislature would result in $656 million in property tax relief for state residents by requiring the state to carry more of the education-funding burden.

"The school districts got a lot of money, and the state now will pay approximately 75 percent of the cost of education," said Rep. Ray Holmberg, R-Grand Forks.

While taxpayers and other districts could see more money, the changes could have the Grand Forks Public School District running a deficit -- as much as $3 million by Superintendent Larry Nybladh's calculations.

"It's a positive thing for the taxpayers. It's not exactly new money for us," he said. "We're pleased overall. However, the formula doesn't recognize growth and doesn't pay for that growth."

Without that recognition, Nybladh said the state won't be providing enough funding for the district's nearly 7,000 students.

Not a penny

The current funding formula pays schools based on the enrollment numbers of the previous year. Grand Forks schools grew by 225 students this year, and Nybladh said the district hasn't seen a penny for those students.

Declining districts can reap benefits from this system, according to Nybladh. "You're getting paid for phantom students."

A bill was submitted to the Legislature to address this concern but failed before the session's crossover. The newly approved formula allows this structure to continue.

Enrollment for next school year in Grand Forks is predicted to increase by another 300 students, which means the district could again be shorted state aid for some of those additional students.

The district doesn't meet the requirements for a rapid-growth funding, which requires an enrollment increase of 4 percent or more, Nybladh said.

District options

Running a deficit leaves the school district with three options, according to Nybladh.

The district could cut expenditures, find other sources of revenue or a combination of both.

Nybladh said he is hesitant to start cutting budget items, as 85 percent of the district's funds are designated for salaries. Attempts to reduce staff would result in larger class sizes and have a negative impact on the quality of education, he said.

The other option is finding revenue, which could mean a levy increase, but Nybladh said it's too early in the budget process to tell.

The district is one of three in the state classified as an unlimited mill levy authority district. This means the district isn't subject to a levy cap imposed by the state, which was lowered to 60 mills in HB 1013.

Even with the unlimited status, the district hasn't abused its ability to maintain a higher tax rate, according to Rep. Mark Sanford, R-Grand Forks. Sanford preceded Nybladh as superintendent.

In the past five years, the school district steadily decreased its mill levy, with the value remaining the same for the past three years at about 139 mills. For a house worth $100, 000, the tax rate amounts to about $626.63 in annual taxes.

The district's 2013-14 budget, up for discussion Monday, shows a cut of 60 mills. For the same house, that's a savings of $270.

New formula

While the new formula doesn't address Nybladh's concerns, it would have a significant impact on state aid for some school districts.

The current formula requires the state to give each school district the same amount of money no matter how much each district collected in property tax, according to Sanford.

Under the new formula, the state is committed to providing $8,810 for each student in the updated formula's first year and $9,010 the second year. Each school district would contribute its local share from taxes and other sources toward the totals, and the state would be responsible for making up the difference.

Reporter Chris Bjorke contributed to this report.