Palmyra-Eagle Neighbor Districts Say Dissolution Could Put Them In Financial Jeopardy

Nov 26, 2019

The nearly-broke Palmyra-Eagle School District in southeastern Wisconsin could be the first in the state to dissolve under current funding structures.

That worries the surrounding school districts. At a recent public hearing, some of Palmyra-Eagle’s neighbors warned the dissolution could create a domino effect — leading other school districts to collapse.

Read: Advisory Vote On Fate Of Palmyra-Eagle School District Shows A Divided Community

Palmyra-Eagle is a rural district of about 700 students that spans parts of Jefferson and Waukesha counties. Its enrollment and, in turn, funding has rapidly declined in recent years because of demographics and students leaving the district through open enrollment. The district tried to stay afloat with a property tax referendum last spring, but voters rejected it. That’s when the school board decided the only option was dissolution.

“This outcome makes me sick. But it doesn’t make it any less real,” Palmyra-Eagle School Board President Scott Hoff said at a hearing of the school district boundary appeal board. The state-appointed board is tasked with deciding whether Palmyra-Eagle should dissolve.

The School Boundary Appeal Board held a hearing on the Palmyra-Eagle dissolution at the district middle school on Nov. 21.
Credit Emily Files

If Palmyra-Eagle folds, state statute says the territory and students would be assigned to other districts. But the districts would also absorb Palmyra-Eagle’s close to $13 million in debt, and other costs, like transportation. 

That’s a big reason most of the districts surrounding Palmyra-Eagle are reluctant to see it dissolve. Officials with the Kettle Moraine School District made the most urgent case, saying their district is three to five years away from dissolution itself unless it can raise more revenue through a voter referendum.

“I think it would be unconscionable to move students to a district, uprooting them, only to face a similar process within a few years,” said Kettle Moraine Superintendent Patricia DeKlotz.

School districts in Wisconsin are becoming increasingly reliant on property tax referendums to balance their budgets because of restrictive state funding rules.

Another Palmyra neighbor, Whitewater School District, successfully gained voter approval to increase taxes. But School Board President Casey Judd says that doesn’t mean the district is financially secure. 

“We are bound by the will of the voters. I’ll just say it, it’s a terrible system when you have to go begging to finance your school district,” Judd said. “Which is pretty much what we do every four years when we try to pass a referendum.”

"We are bound by the will of the voters. I'll just say it, it's a terrible system when you have to go begging to finance your school district." - Casey Judd, Whitewater school board president

The Whitewater School Board signed on to a resolution with the Mukwonago School District that proposes splitting Palmyra-Eagle between the two of them, allocating Eagle to Mukwonago and Palmyra to Whitewater.

But Whitewater officials said they had major concerns about the financial consequences of taking on more students and debt.  

“The very worst thing that could happen is that you put another district in financial peril by doing this [dissolution,]” Judd said.  

Mukwonago officials did not express as much concern. Mukwonago already has more than 200 Eagle students open-enrolled in its schools, and Superintendent Shawn McNulty said they would try to keep Eagle Elementary School open if it’s given to them.

“We are willing to be a part of the solution if you guys decide that Palmyra-Eagle Area School District is going to be dissolved,” McNulty said.

The fact that about half of students in Eagle open enroll in Mukwonago schools speaks to the split between Palmyra and Eagle. Palmyra residents are more attached to the local district, while many Eagle residents associate more closely with Mukwonago.

Some school supporters think the solution is to let Eagle join Mukwonago and then form a Palmyra-only district. But that is not allowed under current state dissolution laws.  

The boundary appeal board must decide Palmyra-Eagle's future by Jan. 15. In a state where declining school enrollment and restrictive funding are common problems, the decision could set a precedent for other districts on the verge of financial collapse.