BISMARCK – A Bismarck lawmaker grilled state officials Monday on why some North Dakota school districts are receiving hundreds of thousands of dollars in state grants to offset impacts from the oil and gas industry despite their seemingly robust finances.
In one example, Republican Rep. Mike Nathe referred to the Bowman County School District, which was awarded a $256,080 grant in August for school security and teacher housing after ending the fiscal year on June 30 with a general fund balance of more than $2.1 million.
“That’s money that could be used by a district that could really use it,” Nathe said during Monday’s meeting of the Legislature’s Interim Education Funding Committee. “I’m sorry, but that’s just wrong.”
After authorizing $135 million in 2011, the Legislature last spring made another $239.3 million available in 2013-2015 for energy impact grants for cities, counties, school districts and other taxing districts that have incurred major expenses caused by energy development and related growth, including ballooning school enrollments.
The state Board of University and School Lands intends to allocate up to $25 million for K-12 education needs. About $6.9 million was awarded in August, with a total of 30 grants going to 23 school districts.
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Nathe’s questioning of the grants sparked a broader discussion about whether the Legislature needs to further limit the size of school districts’ general fund balances.
“There has to be some fine line, a number that we can look at or a range that we can look at that would be acceptable to us and quite frankly to the taxpayers,” he said.
Currently, state law allows districts to maintain a fund balance equal to 45 percent of general fund expenditures plus $20,000. Districts that exceed the threshold see an offset in state aid.
The Legislature has gradually trimmed the limit for fund balances in recent sessions, with the last reduction, from 50 percent to 45 percent, coming in 2009. The limit is set to drop to 40 percent in 2015 and 35 percent in 2017 unless lawmakers revisit it.
Statewide, public school districts had a total general fund ending balance this year of 23 percent of expenditures, or about $279 million, according to figures from the Department of Public Instruction. That’s up from an ending balance of about $160 million, or 21 percent, in 2003 and $104 million, or 19 percent, in 1996.
Nathe, the committee’s vice chairman, asked if there was a recommended standard for general fund balances within the education industry. Jerry Coleman, DPI’s director of school finance, said there is no standard for how large or small a district’s fund balance should be, and DPI has never recommended one.
“It’s been left up to local school districts to find their comfort level,” he said.
The Killdeer School District had an ending fund balance of $1.45 million, or 25 percent, yet it received four impact grants totaling more than $800,000, Nathe noted. Bowman County’s balance is at 30 percent of expenditures.
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Gerry Fisher, administrator of the land board’s Energy Infrastructure and Impact Office, said a school district’s financial position is only one of several factors considered when scoring applications for impact grants. Other factors include public safety, project readiness, debt and how recent changes in the state aid distribution formula affected the district.
Some of the districts singled out by Nathe will take a “significant” one-time hit this school year after a change in state law reduces their take of oil and gas production taxes from 35 percent to 5 percent, said Rep. David Rust, R-Tioga. The retired school superintendent also noted that fund balances are usually at their lowest in December and January, and he asked if DPI could compile balances at that time.
“That would give you a truer picture,” he said.
By tying the state aid formula to ending fund balances, Rep. David Monson, R-Osnabrock, wondered if the Legislature has “created kind of a wasteful attitude or monster,” where schools either spend down their fund balances or lose state aid. Coleman said it’s a “very, very small percentage” of school districts that bump up against the 45 percent limit, and he doesn’t believe the policy has “caused any very negative behavior.”
But when asked by Monson if dropping the limit to 10 percent or 20 percent would result in more spending down, Coleman said it “would certainly encourage that type of behavior.”
“I would hope that if they spend down, they spend it down on property tax relief and not new buildings or anything else along those lines,” Nathe said.
North Dakota’s public schools have seen an increase of roughly 2,200 students this year, which is about what was expected and not a surprise like last year’s increase of 3,300 students, Coleman said. If early enrollment numbers hold up, DPI will award fast-growing schools about $5.3 million of the $6.8 million available this year in the Rapid Enrollment Growth Grant program, he said.
The Williston and Dickinson regions have seen the largest increases in enrollment this school year, estimated at 13.8 percent and 7.1 percent, respectively, followed by Fargo and Minot at 2.6 percent each, according to a DPI analysis of enrollment growth that divided the state into eight regions.
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