A sharper than expected cut in state aid is leaving Salem School District with a troubled financial outlook.

The district had been projecting about a $104,000 decline in state aid for the 2009-10 school year, calculating the loss based on its declining student population. But the state’s budget deficit prompted the Wisconsin Legislature and Gov. Jim Doyle to shift the school aid formula in the budget approved in late June, further reducing aid to many districts.

According to Salem Business Manager Peter Geissal, the result for Salem was “a drastic hit” in state funding.

Geissal said rather than falling $104,000, as he had projected, state aid for the district will fall $450,000.

Because the district’s overall revenue limit — which caps the amount of money districts can bring in through a combination of local property taxes, state aid and other sources — is unchanged, the reduction in state aid could lead to an increase in property tax rates for district residents.

If the board opts to collect all the money allowed under its existing revenue limit, Geissal said, the local tax rate could climb by 8.15 percent, or about 34 cents per $1,000 of assessed valuation. Geissal said that estimate is assuming that the total equalized assessed value for the district remains steady.

The board could also opt not to collect revenue up to that limit, but that would require further budget cuts.

“This made a difficult situation that much more difficult,” Geissal said.

Salem is already going into the 2009-10 with a leaner budget. After residents rejected four referendums asking for an increase in the district levy limit, the board voted to cut $1.16 million from the budget.

Those cuts included teacher and support staff layoffs, increases in class sizes, program reductions and the elimination of district-sponsored extra-curricular programs.

Geissal said the final budget will be approved in October. He said additional layoffs are impossible for next school year because the deadline for issuing layoff notices has passed.