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Audit confirms Ennis incorrectly spent $7 million on new school

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Big Sky, Ennis consider options

By Emily Stifler Managing Editor

MADISON COUNTY – The Ennis School District misappropriated more than $7 million in property tax dollars between 2007 and 2012, $5.25 million of which came from Big Sky taxpayers.

An audit of the school district’s finances, released Oct. 29 and conducted by the Kalispell-based accounting firm Denning, Downey and Associates, confirmed the district acted illegally when it transferred property taxes levied for the adult education and transportation funds to its school flexibility fund and used most of that money to construct a new K-8 school – not the purpose for which it was collected.

The audit, a follow up to a Feb. 3, 2012 opinion issued by Montana Attorney General Steve Bullock stating the money was improperly spent, also issued recommendations for resolving several other issues with the district’s budgeting.

Property taxes from the section of Big Sky within Madison County – which includes Big Sky and Moonlight Basin resorts, the Yellowstone Club and the Club at Spanish Peaks – have accounted for about 75 percent of the Ennis School District budget since 2004, and about 50 percent of Madison County’s total collected taxes since 2007.

In return, Big Sky gets funding for its road plowing and maintenance, its law enforcement and bus service, as well as tuition for each student who lives in Madison County but attends school in Big Sky.

The Ennis School District, too, reaches into Big Sky, but its students cannot attend the new school in Ennis 20 miles away, because the two towns are separated by 10 miles of Lee Metcalf Wilderness and the private Jack Creek Road. The school district borders were likely drawn with the county lines more than a century ago – long before Big Sky was the thriving community it is today, with 243 students attending its growing school.

After the audit, “The biggest impact now is taxes will decrease in Big Sky,” said Interim Ennis School Superintendant John Overstreet. “With this coming up, we cut our mills almost in half, [and they’re] now $1.45 million less than last year… We knew there were some concerns, so wanted to give taxpayers some relief.”

The original decision to build the school was based on advice from the Montana Office of Public Instruction and others that would have allowed the Ennis School District to transfer the transportation and adult education monies into the flex fund – assuming it would indeed be spent on adult ed and transportation.

The Madison County Commission requested the AG opinion last April at the behest of residents upset the school was built without a public vote on a bond issue.

“There was no question they needed a new school, but how it was done was probably the biggest issue,” said Overstreet, who replaced previous Ennis Superintendent Doug Walsh last year, when Walsh resigned after collecting benefits from the Teachers’ Retirement System while receiving salary from the school. Overstreet was superintendent before Walsh and retired from Three Forks to act as interim for Ennis.

“Contrary to the information, [the district] couldn’t spend [the money] the way [they] thought,” said Madison County Commissioner Jim Hart. “Bottom line, the school’s been built, it’s a beautiful building… Now the dilemma is – if there is one – how do we proceed?”

Hart emphasized staying positive. “We’re going to move on,” he said, adding that the district would address the auditor’s recommendations.

But many in Big Sky want to know if the money is gone for good.

A mill levy, with residents agreeing to tax themselves, could recover the funds – a process that would likely be sparked by a taxpayer suing the district, according to the Montana Office of Political Practice.

Ennis School Board member Jim McNally says a mill levy wouldn’t make sense. “I don’t feel that it would be good for the taxpayers to pay twice for the same project – Ennis or Big Sky.”

Plus, the funds would go straight back into Ennis’s education and transportation funds. With Ennis’s adult education expenditures declining – from $30,528 in 2005 to $24,697 in 2009 – some question the point.

Overstreet suggested the two school boards meet once or twice a year “to compare notes,” and have representatives from the Big Sky School District attend the countywide combined school board meeting with Harrison, Sheridan, Twin Bridges and Ennis held annually in early spring.

Big Sky Superintendent Jerry House said he’d be open to working with the Ennis School District in the future – in hopes of finding a solution that’s more beneficial for Big Sky – but that right now Ennis needs time. “The auditors, the commissioners, the school board – they’ve got some things to work through.”

The audit found the district was also paying Walsh as an independent contractor, instead of as a regular employee, the subject of a TRS investigation that determined last year that Walsh and the district owe more than $750,000 in retirement benefits.

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