Saline Area Schools Budget Balloons With Federal Funding, State Revenue Hikes
The Saline Area Schools' coffers are bulging.
Miranda Owsley, assistant superintendent of finance for the public school district, gave a rosey presentation at the annual Board of Education budget hearing Tuesday. The board must adopt the annual budget before July 1. The district must also close the books on the fiscal year before the end of the month.
What a year it was.
The district pulled in nearly $78 million in revenue in 2022-23 - a fiscal year that ends June 30th. That’s $9 million more than last year and more than $15 million in 19-20.
Spending rose from $68 million last year to $76.5 million this year.
To some degree, the ballooning budget is a little misleading at the local level. The higher annual figures on both sides of the ledger include more state money dumped into the struggling teacher retirement funds. Owsley said the state passed an extra $4.4 million in revenue to the district. And then the district has to pay that back into the retirement fund.
“The state said, hey we’d like to make an additional payment with this additional revenue. So it’s really started to skew parts of our budget,” Owsley said.
Still, even factoring for that, state revenue was up from $45.5 to $52.9 million this year. Saline, like other districts, is mostly funded on a per-pupil basis by the state. The state increased per-pupil funding by $450 last year. In addition, funding through the ISD was up from $9.2 to $10.6 million this year. The district also received $3.2 million in one-time funding on top of the $1.5 million in regular federal funding.
As always, the vast majority of the spending - 87 percent - is on salaries and benefits. Another 11 percent is on services and four percent is on supplies and materials.
Many of the district’s largest areas of spending saw increases of 5-10 percent. Instructional staff services increased by nearly 30 percent. Administrative costs were up by 14 percent. Maintenance and operation costs increased by 36 percent while transportation costs rose by 17 percent. The district’s information costs rose by 216 percent. Technology support costs rose by 20 percent. Athletics costs were up by 13 percent.
In all, spending was actually lower than expected by more than $1.75 million.
The district’s rainy day fund - which for years struggled to meet the board-mandated of five percent of general fund spending - is growing as fast as the spending. It now sits at $11.7 million. That’s 15.3 percent of spending. The higher fund balance is already paying dividends. For years, the district had to borrow funds to make payroll over the summer. A bountiful rainy day fund means the district can make payroll without borrowing - and save interest costs.
Looking ahead, Owsley expects the state to bump up the per-pupil funding by $458 as the district loses 67 students. That would increase the state funding by about $1.6 million. The problem for the district is that while local and intermediate revenue sources should be flat, the district is expecting to lose a $3 million federal revenue line. In all, the district is projecting $76, 611,184 in revenue. Costs, however, are expected to rise to $78,290,00, for a $1.7 million deficit - money that would deplete the rainy day fund.
Owsley’s projections show the deficit rising to $3 million in 2024-25 and $5 million in 2025-26. Those deficits would nearly wipe out the fund balance by the end of 2025-26.
Those projections are based on continued declining enrollment - not factoring for schools of choice. In addition, Owsley projects much smaller increases in state funding in the coming years.
“So it’s very conservative in that we saw some growth in classes last year and we do hope to see that again, but I’m not predicting that and we’re using these numbers as a starting point,” Owsley said. “If we don’t do anything and we aren’t talking and considering these factors, we can be in this situation really fast.”
Owsley said revenue conferences have shown a decline in a lot of revenues.
Another factor the district must consider is the retirement rate. This is the rate the district spends on retirement for each dollar it spends on salaries. In the mid-2000s, this rate was about 15 cents for every dollar. It rose drastically in the early 2010s. Coupled with a cut in state funding, it caused finding crises in school districts across the state.
After increasing from 16 cents to 24 cents in just two years, the rise slowed. Between 11-12 and 22-23, the rate increased from 24.46 to 28.23. This year, it’s rising by more than 3 cents, to 31.34. That’s the highest increase since 11-12.
“That is a significant thing to keep an eye on over the next couple of years,” Owsley said.
Trustee Brad Gerbe is chair of the Board of Education finance committee. He said he was proud of the work the district has done on finances.
“We're going to be watching. This upcoming year is really one where we're going to have to be watching our revenues versus our expenditures,” Gerbe said. “It's going to give us a good predictor about any things we have to do structurally.”
Gerbe’s was the only board member comment before the hearing adjourned.
On his Facebook page, Trustee Tim Austin noted the district has had a huge influx of money, something he wasn’t accustomed to seeing from 2015-20, when he previously served on the board. He said per-pupil funding has increased by an average of $491 a year over the last three years. Over the previous 10 years, the average increase was $66. On top of the increase in the foundation allowance, the district has seen more than $10 million in one-time funding from the state and federal governments.
“This influx of money has allowed SAS to have a healthy fund balance for the first time in years. We will need to start right-sizing our budget. SAS needs to do it in a way that is not disruptive to our programs. Students matter and creating a district that keeps its students at SAS will be vitally important,” Austin said.
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