The Austin School District will have a 16 percent increase in its property tax levy, after the Board voted on the measure Monday evening.

The nearly $8.2 million levy is a slightly more than $1.1 million increase from the 2019 levy, about $7.1 million.

While the levy is based on the calendar year, the budget is based on the district’s fiscal year, which begins in July.

In January or February, the district will be looking at amending its budget based on current finance.

While the district sets its own levy, a limit on it is set by the state using a formula and much of the financial details involved in property taxes are also determined by state rules, said Executive Director of Finance and Operations Lori Volz.

“The majority of the financials involved in the property tax are driven by the Legislature. Very little decision-making points by the local school board actually come into the property tax,” she said.

A big challenge for public schools is that general education funding from the state has not kept up with inflation, Volz said. The gap between what is being paid and what the amount would be if adjusted for inflation is $1,367 per pupil.

“It just shows we’re not adequately funded,” Volz said. “That is why many districts have substantial operating referendums to fill the gap.”

The state contributes 82 percent of state aid revenue, with federal aid providing 4 percent of the general fund’s revenues.

During a previous discussion on the district’s annual audit, Board Member Don Leathers said it astounded him that the federal government was not contributing more than 4 percent when it had said years ago it would contribute 40 percent of the average cost per special needs student.

“It just confounds me that the federal government won’t help fund special education the way it has promised to,” Leathers said.

In Austin, special education makes up 22 percent of expenditures, he said.

The biggest drivers of the $1.1 million levy increase were a $500,000 increase for the capital improvement fund for leases, $220,000 in increases to the general fund and $200,000 for a new annual other post employment benefits levy, with the other $200,000 being for other miscellaneous adjustments across the district, Volz said.

The other post employment benefits levy is used to levy funds for covering retiree benefits like health insurance.

Some of the items are one-time, such as the money for the capital improvement fund, and the situation next year will be more normal, Volz said.

The general fund contains most of the costs for the district each year as it is what covers payroll. Paying staff their wages and benefits represents 80 percent of the district’s costs, Volz said.

This is typical for school districts across the state, she said.

In the current budget, the district is expected to spend more than it generates in revenue, taking money out of its fund balance, Volz said.

While the total deficit spending is listed as $7.5 million, $5.5 million is for a construction project that the district had the funds for last year, she said.

Deficit spending has been going on for several years and the district’s general fund reserves, $4.7 million, has fallen below 8.33 percent of annual expenditures, which is what the district would like to see it at, according to John Lorenzini of CliftonLarsenAllen, which conducted the district’s annual audit.

Superintendent David Krenz said spending down the general fund balance has allowed the district to not have large property tax levy increases.

Under the new levy, for a homestead residential property valued at $100,000, annual property taxes would go from $340 to $373.

For every $250,000 in value, an apartment building would go from $1,217 to $1,350 a year in taxes.

Agricultural homesteaded property valued at $625,000 would go from $1,340 to $1,488, although there is an ag tax credit going from 50 percent to 70 percent of the property’s value between 2020 and 2023, which would apply to the debt service portion of the levy as property tax relief, Volz said.

Property owners can also contact the Minnesota Department of Revenue to find out about other property tax credits, she said.

The district has been implementing cost-saving measures to help reduce deficit spending, Volz said.

The Board approved the levy unanimously.