MERCER, Wis. -- The Mercer School District will dip into its fund balance to make up for a shortfall in revenue in its 2008-09 budget.

At the annual school district meeting on Monday, a budget of $3,298,176 was approved. That's an increase of $200,760 -- or 6.5 percent -- from the 2007-08 expenditures of $3,097,407.

While expenses are up, revenue is down.

That reflects state revenue limits, "because our enrollment is continuing to drop," superintendent Jeff Ehrhardt said Tuesday.

The budget lists $3,043,683 in total revenue, $109,293 less than in 2007-08. That's a 3.47 percent decrease in revenue.

And it is $254,484 less than expenses.

The revenue includes $250,000 in tax revenue above the state levy limits. It is the third and final year of the $250,000 windfall previously approved by district voters.

The fund balance listed for 2008-09 is $635,726.

Ehrhardt said the intent of the current referendum money was to build the fund balance in the first of three years, accumulating money to cover an anticipated growing deficit by the third year.

The budget proposes a tax levy of $2,035,666. That includes the extra $250,000 approved by voter referendum.

The levy rate is projected to be 4.36 mills -- or $4.36 of school taxes per $1,000 of equalized property value. The owner of a home valued at $50,000 would pay $218 in local school taxes.