12/6/2019 Agenda Presentation to the School District • Apportionment Process Boundary Appeals Board (SDBAB) on the • Assets and Liabilities Proposed Dissolution of the Palmyra-Eagle Area School District (PEASD) • State Aids and Revenue Limit • PEASD Audit Findings Daniel Bush Director, School Financial Services December 5, 2019 Disclaimers Disclaimers Information in this presentation is • • Nothing in this presentation should be provided for background and context. considered legal advice. The Department of Public Instruction • PEASD and the surrounding districts • does not have a position on whether the should continue to rely on their own SDBAB should affirm or deny the legal counsel for legal advice. dissolution of PEASD. Disclaimers What is Apportionment? Any “post-dissolution” process Apportionment is the division of a • • information assumes the SDBAB school district’s assets (what it votes to affirm and there is no owns) and liabilities (what it owes) circuit court challenge that delays in a reorganization, such as a the July 1, 2020 date in law. dissolution. 1
12/6/2019 Tension in State Law Tension in State Law Wis. Stats. § 117.10(4): An order by the SDBAB • • An order by the SDBAB to affirm to affirm the dissolution shall assign assets and the dissolution identifies assets liabilities under Wis. Stats. § 66.0235(2c). • Wis. Stats. § 66.0235(2c) & (5): Apportionment and liabilities, and then the process starts with the dissolution order. apportionment process begins. What comes first, the order or the apportionment of assets and liabilities? Who Decides? Who Decides? • PEASD school board continues to exist • Apportionment Board throughout the apportionment process. All members of affected school boards, OR Spring 2020 election held as usual. • Members of committees appointed by the • Members as of 6/30/2020 continue in affected school boards. office until apportionment is complete. Includes the PEASD school board. Wis. Stats. § 66.0235(5) Wis. Stats. § 66.0235(5) How Does it Work? How Does it Work? Default is by shares of equalized • 1. Boundary changes are property values. communicated up the chain. • Alternative could be approved by ¾ Village votes of all affected boards no later Clerks SDBAB PEASD Board County than October 29, 2020. Order Clerk Clerks Town Clerks Wis. Stats. § 66.0235(2c) Wis. Stats. § 66.0235(2c) 2
12/6/2019 How Does it Work? How Does it Work? 2. Local governments certify latest 3. DOR converts assessed values assessed values to DOR & DPI. to equalized values. Village Clerks County Clerks Town Clerks Wis. Stats. § 66.0235(2c) Wis. Stats. § 66.0235(2c) How Does it Work? How Does it Work? 4. Districts assuming territory get 5. Districts provide values to the equalized values from DOR. Apportionment Board. District A District A Apportionment Board District B District B Wis. Stats. § 66.0235(2c) Wis. Stats. § 66.0235(2c) How Does it Work? How Does it Work? 7. Final disposition of assets and 6. Apportionment board adopts a liabilities takes place, after which final agreement and files it with both the PEASD school board all state agencies that pay state and the apportionment board will aid funds to PEASD. cease to exist. Wis. Stats. § 66.0235(5) Wis. Stats. § 66.0235(5) 3
12/6/2019 Practical Considerations Practical Considerations Calendar 2020 taxes and retirement • 2019-20 fiscal year would need to be • would need to be reported to IRS, DOR, reconciled, audited, and closed out. and ETF. September 2020 debt payments would • • Best practice: Adopt a fiscal agent need to be made from calendar 2020 agreement with a district/CESA, or hire a tax levy dollars. vendor/consultant, to close out finances. Assets and Liabilities Assets and Liabilities Assets Liabilities • Assets: What the district owns. Real Property Long-Term Debt • Liabilities: What the district owes. Vehicles & Equipment Payables Other Property Other Post-Employee Benefits Financial Assets State Aids Real Property Real Property • School sites and buildings: • Q: What is a school worth? Eagle Elementary • A: “The value of the use of the Palmyra Elementary buildings and sites.” Palmyra-Eagle Middle/High School and District Office Wis. Stats. § 66.0235(3)(b) 4
12/6/2019 Real Property Vehicles, Equipment & Other Property “Value in Use is the value of a property • Example: In Wisconsin, agricultural • assuming a specific use, which may or land is valued for tax purposes may not be the property’s highest and based on rental for agricultural use, best use…[and] may or may not be equal not fair market value or the land’s to market value but is different highest and best use. conceptually. Wisconsin Department of Revenue, Wisconsin Property Appraisal Manual (Madison, Wis.: 2019), 9-7. Wis. Stats. § 70.32(2r) Real Property Vehicles, Equipment & Other Property • Use value is different from the • Values are determined by the book value shown in the district’s apportionment board “from the audit reports. best information obtainable.” Book value is original cost minus depreciation over time. Wis. Stats. § 66.0235(7)(a) Vehicles, Equipment & Other Property Financial Assets Cash and investments Considerations: • • Taxes receivable • Most PEASD vehicles and equipment have been fully depreciated ($0 book value) but could have August 2020 final settlement from counties value at sale or auction. • Other receivables Non-capital items (books, supplies, desks, etc.) Accounts receivable aren’t included in the district’s book value. Outstanding 2019-20 federal grant & Medicaid claims 5
12/6/2019 Financial Assets Long-Term Debt Custodial assets: Money held by but not PEASD debt principal as of • • belonging to PEASD. 6/30/2019: $12,888,650 Would mostly be scholarships & student activities not MS/HS construction referendum: $3,990,000 under administrative control. Energy efficiency project: $7,965,000 Need to analyze purposes and original donor instructions, Other non-referendum debt: $705,000 some may have to be refunded. Does not include fundraising under district supervision. Technology leases: $228,650 Debt Principal & Interest Due by Year Payables $1,750,000 Accounts payable • $1,500,000 $1,250,000 • Payroll payables $1,000,000 $750,000 • Nearly all resolved early in the $500,000 apportionment process $250,000 $0 PEASD board would likely have expenses for the 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 School Year apportionment process and winding down. MS/HS Refi #1 MS/HS Refi #2 Energy Eff. Proj. Other Non-Ref. Tech Leases Other Post-Employee Benefits (OPEB) Other Post-Employee Benefits (OPEB) • Post-retirement HRA • Retiree buy-in to health plan: contributions: Retiree pays full premium to district. Reduced cost for buying coverage through the Eligibility based on longer service. district rather than on the private market is Closed to new entrants. called “implicit rate subsidy.” 6
12/6/2019 Other Post-Employee Benefits (OPEB) State Aids DPI and other agencies pay state • Leave payouts: • aids that would be due to PEASD in Accrued sick leave payout at resignation or 2020-21, which “have the same retirement from district. force and effect as if” there was no Unused vacation time paid out at year-end. dissolution. Wis. Stats. § 66.0235(5) State Aids State Aids • Who’s paid depends on where • Who’s paid depends on where we’re at in the process: we’re at in the process: While the apportionment board is working, After the apportionment agreement is filed, the PEASD board receives & holds funds. districts assuming territory are paid directly in shares specified by the agreement. Wis. Stats. § 66.0235(5) Wis. Stats. § 66.0235(5) State Aids State Aids in 2020-21 Estimated $4.7 million due from General Aids: No less than 85% of $3.5 • • million. DPI in 2019-20 under aid Per Pupil Aid: About 2/3 of $770,000. • programs PEASD would be • Common School Fund (Library) and eligible for in 2020-21. Transportation Aid: Less than $100,000. Nearly all are based on prior year data. 7
12/6/2019 State Aids in 2020-21 What About Federal Funds? Federal grant programs are current year • • Special Education Aids: allocations. 2019-20 estimate is about $400,000. • Without students, there would be no Money would have to go into a district’s Special 2020-21 PEASD eligibility. Education Fund and could not be used for a • Unused “carryover” from 2019-20 would different purpose (“same force and effect” clause). not be part of the apportionment. Wis. Stats. § 66.0235(5) Source: DPI federal grant staff Revenue Limits Revenue Limits Federal Other Local • A district’s revenue limit is: • Statewide, 81% of Funds Sources 7% 4% school district revenues Other GENERAL + PROPERTY State Aids fall under revenue limits. 9% Property STATE AIDS TAXES Taxes 42% General State Aids 38% Revenue Limits Revenue Limits • Based on “revenue per member.” • Revenue limit membership is a “Membership” is resident students “3-year rolling average”: • who are the district’s financial Sept. 2019 Average = Sept. 2017 + Sept. 2018 + Sept. 2019 responsibility to educate. 3 8
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