While the Highland School District projects operating at a deficit for the next fiscal year, district administration said the 2018-2019 tentative budget illustrates a gradual uptick in the district’s financial situation.
“We are improving. We are seeing some growth,” said Tim Bair, the district’s business manager.
The Highland School Board approved putting the tentative budget on public display during its July meeting. The budget has been on display since Aug. 24, and will be available for the next 30 days. After a public hearing on Sept. 24, the board will vote on adopting the budget.
Overall, the budget projects about $31.7 million in total revenues and about $32.1 million in total expenditures, which is about $800,000 less than last year’s budget. A $395,323 deficit is also projected. However, the deficit is not large enough to require a deficit reduction plan, according to Bair.
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While the budget puts the district in the red, Bair pointed out some positives that aren’t reflected by the negative balance.
“We’re okay moving forward,” Bair said.
Bair said this will be the fourth year in a row that the district has seen a growth in its tax base. It will also be the second year of positive revenue from evidence based funding, the state’s new education funding formula.
In addition, this year will also prove to be the first year the district has seen an increase in enrollment in several years, with an increase in 14 students enrolled at the start of the school year, according to Bair.
However, Bair said he is cautious of the optimistic outlook with the November election on the horizon. Bair said talk of pension reform and a potential Property Tax Extension Limitation Law (PTELL) could pose some risk for the district.
“Things are looking good but they can turn sour pretty quickly in this business it seems like. We’ve gone through a lot of difficult times here, so it is certainly nice to be sort of on the upswing. We just hope it can continue,” Bair said.
The tentative budget
The district has four operating funds—Education, Operating and Maintenance, Transportation and Working Cash. These are the funds the district actively pulls money from to operate its day-to-day business.
The district’s most used fund is the Education Fund. About 63 percent of the budget is made up by the fund, which pays for teacher and administrator salaries, benefits, instruction materials, and tuition.
For 2018-2019, the Education Fund is expected to be in the black with a surplus of $178,588. The budget projects the fund’s revenues to come in at about $20.4 million, which is about $132,651 more than last fiscal year.
“We’re seeing some growth there,” Bair said.
On the local level, Bair said the district is seeing about a 2 percent increase in its property tax revenue, which will help to bring in an estimated $86,087.
“This is about the fourth year that we’ve seen some small growth in our tax base,” Bair said.
The district expects a $228,799 increase in state revenues, which Bair said was split between new orphanage money, and an $110,00 increase from evidence based funding. In total, Bair said the district expects to see about $7.3 million from the state funding formula.
However, the district expects a drop in federal funding. Bair said this decrease is due in part to the loss $100,000 of room and board money, from a residential student who moved out of the district. The other loss of funds comes from an expected decrease in Title I grant money.
“That could go back up, but right now that is what that is based on,” Bair said.
Looking at expenditures in the Education Fund, the district expects to spend about $20.3 million, which is about $16,104 less than last year. Out of this spending, Bair said the most notable difference can be seen in salaries.
About 75 percent of the Education Fund expenditures are for salaries of teachers and administrators. Bair said this year the district plans to spend almost $500,000 more on salaries due to the addition of seven teaching positions and three program assistants, for a total of $14.6 million.
The only other major increase in Education Fund expenditures is in purchased services, which will add another $169,175. Bair said this is due to some grant writing services, and the leasing of a tractor for programs at Highland High School.
However, Bair said that these increases are weighed out by other Education Fund expenditure decreases. Last year, the district spent about $400,000 on new interactive white boards. The district also plans to spend less on benefits because of a reduction in sick leave grant penalties the district had for a group of employees who retired last year. Finally, the district expects to spend about $59,950 in materials, and $8,129 in other miscellaneous expenditures.
The fund is projected to end the fiscal year with a balance of $390,447.
Moving on to the district’s other operating funds, the Operating and Maintenance Fund shows a $159,601 deficit. This fund holds all of the moneys used to maintain the district’s buildings and pay custodial and maintenance staff.
The district is entering its fourth year in its five-year facility plan. The plan lists all of the projects the district would like to complete in five years to maintain and improve its facilities. About $2.1. million worth of projects is left on the plan.
“Based on the projects that we have planned for this year it’s putting us in the red,” Bair said.
However, Bair said that the fund does have some reserves, and a transfer from the district’s Tort Immunity Fund will help cover the deficit.
“Transportation is probably the fund that we may have the biggest concern on,” Bair said.
The Transportation Fund pays for all of the district’s day-to-day bus services, and transportation for athletic trips and extracurricular activities. The budget projects total transportation expenditures at about $2 million, with revenues at $1.9 million, leaving the fund at a little less than a $100,000 deficit.
“The biggest problem is that we’re only getting a portion of our state money,” Bair said.
While Bair said the state has done well with evidence based funding, transportation reimbursement is being pro-rated at 84 percent for regular education. Overall, the district received about 91 percent of the money it was supposed to get.
“That resulted in about $200,000 that we did not get. So that would more than make up this $100,000 deficit,” Bair said.
If the district continues to receive funds at this rate, Bair said the fund’s reserves will slowly be depleted. The budget projects the fund to end the fiscal year with about $355,402.
“Not unless they change something,” Bair said.
The district’s last operating fund is the Working Cash Fund. Bair explained the fund as more or less the district’s “bank” for deficit spending years. The account allows the district to borrow operating funds for cash flow purposes, or provides a buffer against any missed funding from the state.
“The revenue there is just our interest in taxes that we levy every year,” Bair said.
This year, the fund is projected to operate at a $308,000 surplus, which will top the reserves off at the end of the year at about $5.6 million.
Outside of the operating funds, the district has five special revenue— Debt Services Fund, FICA and IMRF Fund, Capital Projects Fund, Tort Immunity Fund, and Fire Prevention, Life, Safety Fund. Bair said these are restricted funds, which have revenue saved for a specific purpose.
The Debt Services Fund, from which the district pays the principal and interest on all of its outstanding debt, reflects a deficit of $5,075.
“We don’t have a great deal of control over that,” Bair said.
Bair said that the balance of this account generally depends on how tax revenue comes into the district from the county. However, the fund’s projected reserves of about $160,0273 should help to cover the deficit, according to Bair.
The district pays all of its retirement, Social Security and medicare through its FICA and IMRF fund. The budget projects a $41,783 surplus in this fund at the end of the year.
The Capital Projects Fund holds the largest deficit at $740,000. Bair said the fund was created for the district’s life/safety projects. Last July, the Highland School Board approved issuing the district’s remaining of life/safety bonds, giving the district about $5.6 million.
“This fund holds the majority of the bond money,” Bair said.
Outside of the bonds, Bair said the funds does not have a big source of revenue, so the account will continue to show a deficit until the money is depleted, at which point the fund will remain idle.
“Then the projects are done and we’re on to something else,” Bair said.
The Tort Immunity Fund reflects a surplus of $75,069. This is the fund from which the district pays its unemployment, workers’ compensation insurance, property casualty insurance, risk management plan costs, and school resource officer costs.
“So anything that essentially helps us reduce our risk,” Bair said.
Finally, the Fire Prevention, Life, Safety Fund holds all of the funds for approved life/safety projects. The fund remains consistent with last year’s budget, with expected revenues and expenditures at $195,000. The budget projects the fun’s balance will remain steady at $359,062.