If not for drawing on its fund balance, the Wrangell School District’s 2023-2024 budget would come up short.
However, by drawing $112,000 from its general fund balance, the first draft of the budget matches revenues with expenditures.
Tammy Stromberg, the district’s business manager, presented the draft to the school board in a work session on Jan. 16. In the draft budget, total expected revenues for the 2023-2024 school year are $5,036,098, whereas expenditures total $5,148,136, a difference of $112,038. Drawing on savings covers the gap.
“We are projecting expenses in excess of revenue, but we’re not in the danger zone,” Stromberg told the board. “Our fund balance is healthy. We’re not in danger of running out of fund balance. We’re at a good spot.”
The proposed draw would bring down the fund balance to an estimated $632,550 as of June 2024, slightly more than half of the $1.181 million balance in June 2021.
The district has been drawing down its fund balance in recent years as it tries to manage its finances with less state assistance and inflation. State funding is based on student count, and Wrangell’s enrollment is down from before the pandemic.
However, Stromberg questioned the budget’s sustainability beyond 2024 due to various factors such as the end of the state’s hold-harmless benefits that gradually ease the revenue loss for districts with declining enrollment, grant funds used for principals’ salaries expiring and the uncertainty whether the Legislature will approve any increase in the per-student funding formula.
There has not been an increase in the base student allocation since 2017 other than a 0.5% raise for this year.
“I believe a 20% to 25% increase (in the state funding formula) would allow district funding to ‘catch up’ to the effects of inflation over the years and ease pressure placed on municipalities who are also dealing with decreased support from state programs,” Stromberg said.
Wrangell’s enrollment is around 265 students this year and is projected to be about the same next school year. It was over 300 the year before the COVID-19 pandemic drove more parents toward homeschooling or correspondence programs for their children.
Payroll takes the biggest chunk of the budget at a little more than $4 million, or 78% of the overall budget for 2023-2024. The high school/middle school and elementary school principals’ salaries have been covered by federal pandemic aid grant funds, but those grants expire next year and the salaries will be added to the general fund expenditures of the 2024-2025 budget.
Other increased costs are attributed to insurance, fuel and heating and maintaining unused classroom space, Stromberg said.
“The costs to operate empty classrooms siphons dollars away from the educational program,” she said. “I see the district’s and borough’s financial challenge as two-pronged: District costs to operate unused classroom space and state foundation funding that hasn’t kept pace with inflation.”
Total general fund expenditures in the 2023-2024 draft budget are $5.148 million, whereas the total revenues are $5.036, before the transfer from savings.
State funding covers more than 60% of the district’s general fund budget. Municipal money is No. 2, with federal funding the smallest of the three sources. Burr said the district would ask the borough for $1.6 million in local funding.
“We’re asking what we were given last year,” he said. “This was just the first draft, and as we’re adjusting things, we’ll be looking at it.”
A formula in state law sets a minimum and maximum for local contributions to school budgets, and the Wrangell borough’s $1.6 million for the 2022-2023 was the maximum allowed. The formula is based on assessed property value in the borough, which changes every year.
During normal years, state law limits school district fund balances to no more than 10% of their annual operating expenses — otherwise they must return any excess funds to the state. The pandemic caused what Stromberg called “financial oddities,” and the state put a moratorium on the 10% requirement. That moratorium will go away in the 2025 budget cycle and the 10% requirement will return.
“Think of (the general fund balance) as a savings account,” Schools Superintendent Bill Burr said in an interview last Friday. “The fund balance, that savings account, we know money is coming and the state will send a check, but there are a number of things that could happen, and it allows us to pay expenses ahead of time. … There are always things that come up; an unexpected expense, that’s what the fund balance can help with.”
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