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Lake Oswego School District receives less through local option levy but still counts it as integral source of funding

The Lake Oswego School District has encountered yet another setback: one of its primary sources of funding, revenue from a local option levy, will be around half what was expected this year.

“The quality of our schools is a very, very significant part of the quality equation in Lake Oswego,” said Superintendent Bill Korach. “Our schools are a very, very important part of the fabric of what makes this a very special community.”

To continue to deliver on this expectation of excellence, LOSD relies heavily on the local option, allowing the district to ask voters to approve additional operating funds for Lake Oswego schools at a rate of $1.39 per $1,000 of assessed property value.

"Voters approved the local option expecting that would raise a certain amount of money for the district this year," said Nancy Duin, LOSD director of communications. "It's not."

School board members discussed the issue at a meeting Nov. 5. The problem stems from two past ballot measures.

Starting in 1991-92, Measure 5 amended the Oregon Constitution to place a limit of $5 for every $1,000 of a property’s real market value that may go toward education. Measure 50, passed in 1997, “rolled back and altered taxable valuation to an assessed value based on 1996 real market value plus a maximum growth increase of 3 percent per year,” said school board member Linda Brown.

Under these constraints, “local option levy authority … allows school districts to ask voters for property tax levies above the Measure 50 assessed property value limit, so long as the resulting tax would not put taxpayers above the Measure 5 real market value limit,” Duin said. “If a property does not have a sufficient gap to support the local levy assessment … the property is assessed only to the Measure 5 limit.”

That means that when the real market value of a property falls, Brown said, "the ability of a school district to actually collect that local option money is compressed if the property value means the limits imposed by any of those measures is hit.”

Local option revenue is based on the difference between assessed value and real market value on the county tax rolls.

“During the run of growing real estate prices between 2003 and 2008, the difference between actual value and real market value grew and more local option tax revenue was collected, which helped out schools tremendously,” said board Chairman John Wendland.

However, he added: “As real estate prices have gone down, the difference has compressed the past several years, thereby reducing what we collect.”

In the Lake Oswego School District, “the effects of compression are slightly higher than anticipated, though not as steep a drop as experienced at some other Portland metro area school districts," according to school board materials.

“I had estimated that we would lose $300,000 due to compression this year, but the actual loss will come closer to $600,000; certainly over half a million dollars,” said Stuart Ketzler, executive director of finance.

“I’ve thought for some time that your estimates were a little bit rosy,” Brown responded. “It is a very complicated issue and it is difficult to explain, but it is real and unfortunately there’s nothing that we can do about compression except try to explain that even though the levy is there, the actual collection, because of the way it’s designed, is a cap, and therefore we can’t collect.”

Even so, Korach is adamant that the school board, administration and community must strive to ensure that the local option is renewed for a third time in November 2013.

"It is the one source of revenue that the school district can ask for and that the community can provide on their own," he said. "It is a significant source of revenue for us. Even if it continues to do go down, it still makes a huge difference. If we didn’t have it, we would be cutting millions of dollars and we would be a very different school district because we’d be able to offer far less to our kids.”

No estimates yet from change with corporate kicker

With the passage of Ballot Measure 85 in the Nov. 6 election, the Oregon Constitution has been amended so that if corporate income and excise tax revenues received by the state's general fund, which pays for state services, are at least 2 percent in excess of what was estimated, they will no longer be kicked back to corporations, but retained in the general fund and used to provide additional funding for kindergarten through 12th-grade public education, in an amount determined by the Legislature.

"Because we're going to have such a challenge with state funding, any help from the state ... with the economy the way it is is going to be meaningful," said Bill Korach, Lake Oswego School District superintendent. "But right now we haven't gotten any estimates. The governor will come out with a budget in early December and then the Legislature will go to work on that. We're hoping that we will have a sense of what the budget will be some time toward April or May, but there have been years where we have gotten into June without knowing what we are going to get from the state."

In the meantime, Korach has set to work on preparing several hypothetical budgets, planning for varying amounts of additional state funding.

"You have to plan without certainty, and so you have to plan for a range of variables," he said. "The important thing for people to know is that we're spending, right now, more than we're taking in, approximately $3 million a year ... and so we have got to build a financial plan ... that gets us to a sustainable level of funding."

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