The Appleton Area School District Board of Education met 04/14/2025. One of the information items they received was a report on the District’s current financial outlook, the factors that have resulted in a structural deficit of $11 million, and the impact that a $20 million operational referendum would have on local property taxes.
I’ve prepared a transcript of the discussion for download:
AASD Superintendent Greg Hartjes pointed to the revenue limits that were put in place by the state legislature in 1993 as the start of the District’s financial issues. The revenue was not the same based on per pupil revenue for all districts across the state and the formula did not change as the population of students changed. Appleton’s revenue limit was set in 1993 based on the AASD students at the time and it has not changed since. Madison, Milwaukee, and even Sun Prairie receive several thousand dollars more per student now than does AASD based on the revenue limits that were set in 1993.
Ideally, the districts revenue would keep pace with inflation, but over the last 10-15 years the Consumer Price Index has outpaced the revenue limit meaning that although the amount the District receives per pupil has gone up on paper, it has effectively decreased because inflation has gone up more than the revenue increases. Per Superintendent Hartjes, if the revenue limit had kept pace with inflation “all districts in the state would have $3,380 per pupil more for revenue limit authority.”
In the case of Appleton, that would be approximately $47 million in additional revenue which would be split between 57% coming from equalization aid from the state and 43% coming from local property taxes which would mean $20 million would come in through increased property taxes.
The purpose of revenue limits had been to hold property taxes down. It has accomplished those goals, but per Superintendent Hartjes, “Unfortunately, it has significantly impacted public education because our revenue has been held to a lower number than what we need to function.” $20 million in additional revenue from property taxes would result in a $161 increase in taxes per $100,000 of property. Superintendent Hartjes did not think it would not be unreasonable to ask for $20 million more from local taxpayers.
The District’s revenue and revenue limit was also negatively impacted by decreased enrollment. 10 years ago during the 2015-2016 school year, enrollment was at 16,373 which was a high point in enrollment for the district. Holly Burr the Executive Director of Finance at AASD said that it was a good benchmark. [It wasn’t clear to me why the high point made a good benchmark because I would think doing that would make other numbers look artificially low, but that’s how it was presented.]
The 2020-2021 school year saw the beginning of significant drops in enrollment and they have since levelled off with the 2024-2025 school year having an enrollment of 15,230 which was a decrease of 1,143 students compared to 2015-2016. If AASD had not lost all those students, they would have $12,944,000 more in revenue which would balance AASD’s budget. So the loss of all of those students significantly impacted their budget.
Beyond enrollment, salaries and the interplay of the revenue limit, CPI, and salary increases is the foremost driving factor in AASD’s structural deficit. The 2021-2023 state budget had a 0% increase in the revenue limit. However, even though revenue did not increase, schools still needed to provide raises to their educators and staff in order to compete with other local districts for talent as well as to keep staff members from leaving for the private sector.
In the 2021-2022 school year there was no increase in revenue; inflation increased by 1.23%; and AASD raised salaries by 3.3% which created a $3.3 million structural deficit.
In the 2022-2023 school year, there was no increase in revenue; inflation increased by 4.7%; and AASD raised salaries by 4.7% which created a $4.7 million structural deficit on top of the $3.3 million deficit from the year before for a total deficit of $8 million.
The 2023-2025 state budget provided a revenue increase of 3.9% the first year and 2.75% in the second year.
In the 2023-2024 school year, revenue increased by 3.9%; inflation increased by 8%; and AASD raised salaries by 6.47% which created a deficit of $2.6 million for the year and a $10.6 million deficit total when added to the $8 million deficit already in place.
In the 2024-2025 school year, revenue increased by 2.75%; inflation increased by 4.12%; and AASD raised salaries by 3.11% which resulted in a $400,000 deficit which when added to the $10.6 million deficit they already resulted in a total deficit of $11 million.
Over the past 4 years, AASD has had an average annual deficit of $2.64 million.
Additionally, operational increases are up across the board. Over the past 5 years:
- Salaries have increased by $15.2 million or 15%
- Health insurance has increased by $12.4 million or 50%
- Contracted services (including transportation, custodial, software as a service, and special ed/mental health services) have increased by $7.8 million
Ultimately, over the last five years revenue has increased by $22.2 million but expenses have increased by $35.4 million.
Superintendent Hartjes noted that they have decreased staff as enrollment has gone down, but the problem is the decrease in enrollment is spread out across all of the schools in the district. The loss of 3 students per grade level per school, does not result in a decrease of teachers commiserate with the decrease in revenue. Likewise, the loss of, for example, 10 students at an elementary school will not result in the reduction of the principal, engineer, secretary, and school counselor so there is still a lot of overhead cost.
Special Education costs have also increased even though overall is down. The increase in cost was mainly drive by inflation but also by student needs that were causing the District to contract out for services that they did not have five years ago.
Finally, AASD was losing students to private schools through the voucher program. As of the 2024-2025 school year, 857 students had used vouchers to attend private schools which resulted in around $8 million going to those other schools. Per Superintendent Hartjes, the students leaving to attend private schools were not “high cost” students and, “We’re losing those students that we used to be able to take some dollars from, not a lot, to offset the cost of other students.”
It was noted during the discussion after the presentation that the District also has between 900 and 1,000 students from other districts who open enroll into AASD. The District gets around $9,000 per open enrolled students which would be between $8 million and $9 million in revenue.
Superintendent believed that the increasing the reimbursement rate for special ed students was critical because the schools were not reimbursed enough for how much they spent on special education students.
Board Chair Kay Eggert thought that Appleton’s issues were not unique given the impact of migration in and out of the state, declining birth rates, and the fact that school budgets to change proportionally with students.
It was mentioned that a large number of school districts had recently had to go to referendum to seek more money from taxpayers. Holly Burr commented, “It’s a it’s a bad—it’s a sad way to have to run a business.”
There was the possibility of the District being penalized if it went to referendum and the referendum did not pass. Although an effort was underway to eliminate the penalty, currently if a district goes to referendum and fails their revenue limit will not increase automatically as normal but will have to stay at whatever revenue limit they were at.
Board member Ed Ruffolo asked how the development on the north side of the city, particularly the Thrivent Development, might impact AASD’s revenue. Per Finance Director Burr, responded, “It’s a potential value in the fact that the more you can spread out the cost over higher equalized value, it will not drive the mill rate to go up. It actually drives it down. So, the Fox Valley area has been very fortunate in that we have a—we’ve enjoyed a steady increase in our equalized value for the last—I think only once in the last how many years, that it was zero or went negative. That’s always a benefit. It keeps that mill rate fairly low. So, communities that don’t see a lot of increase then also won’t see a lot of increase in their taxes.”
There was no action taken on this item, and it was presented only to provide information and to lay the groundwork for future discussion.
[I appreciate Superintendent Hartjes’ openness in admitting that AASD needs low impact students in order to subsidize the costs of high impact students. I think perhaps there should be more discussion around that and the ways in which AASD could attract more low impact students to the District. One would assume that the vast majority of students who open enroll into AASD are low impact students who bring in more revenue than they cost to educate or the District wouldn’t be accepting them; it would be interesting to find out what causes those families to send their children there and what AASD could do to increase its desirability amount out of District families. Additionally, it might be worthwhile to investigate why families are removing their children from AASD and figure out if there is something the District can do to ameliorate the issues and/or concerns that have resulted in them moving their children elsewhere.]
View full meeting video here: https://aasd.granicus.com/player/clip/32
View meeting details here: https://d3n9y02raazwpg.cloudfront.net/aasd/b9ffda8c-10c5-11f0-955d-005056a89546-2171d860-3ac4-49db-84a5-200d91432c4c-1744403264.pdf
Be the first to reply