Item B: School/Youth Services Funding

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The Eugene School District’s local option levy is projected to provide approximately $13.7 ? million in 2007-08, which is a 13% increase over 2006-07 revenues. That increase may not be sustained, however, due to state limits on local option levy revenue for schools. Any school local option revenue above the state limit is included in the school funding formula and reduces state aid to the district. The exclusion is the lesser of three limitations: the amount actually received by the district from local option taxes, 15% of the combined total of state general purpose, transportation and facilities grants, or $750 per weighted student. Given the district’s declining enrollment trend, local option levy revenue is expected to begin declining in 2009-10, the year after the $750 per pupil cap is reached. Bethel School District is able to fund activities this year due to higher tax turnovers and prior ? year adjustments, but anticipates a shortfall in the future with the loss of the 20-67 levy, with the defeat of its own levy, and with current student enrollment levels. Youth services currently provided by the City include prevention-based programs such as RecZone After School Programs, Fun For All, Youth Leadership and Community Service Opportunities, Teen Court, Project Rising Expectations and special neighborhood events. These services, which total approximately $1.3 million per year, are funded with a combination of levy and grant funding. At the June 26, 2006, work session, the council directed the City Manager to seek a recommendation from the citizen members of the Budget Committee to fund some or all of the City’s core youth services within the General Fund rather than through a local option levy. The citizen committee met in the fall of 2006, recommending to continue all existing programs and to expand programs and services to meet unmet needs. Alternative Revenue Sources Staff has provided information on two revenue alternatives: income taxes and business license fees. These revenue sources are flexible and may be used for any governmental purpose. Unlike the categorization issue the court ruled on in the Urhausen case, the revenues raised by these alternatives can be used by the schools and are outside Measure 5 limits. Set out below is a brief summary of each of the alternatives. Revenue templates for each alternative are included as appendices. Personal Income Tax A personal income tax could be imposed on the income of Eugene residents and nonresidents earning income in Eugene. No Oregon cities levy a personal income tax, although local governments do levy personal income taxes in other states. Based upon 2001 Eugene economic data, a Eugene income tax surcharge of 3% (levied as a percentage of the taxpayer’s state income tax liability) would raise approximately $8 million. Lane County Commissioners placed a public safety income tax proposal on the May 15, 2007, ballot to provide funding for the services previously funded through the Secure Rural Schools and Self- Determination Act of 2000. The Lane County public safety income tax proposal includes the following provisions: ?Imposition of a tax on personal, non-resident and business income at 1.1% rate ?Dedication of taxes (after collection) to public safety only ?Funding of 2006-07 service levels, no new activities ?Requirement of a dedicated fund and a reserve of 10% annual income tax revenue L:\CMO\2007 Council Agendas\M070418\S070418B.doc