Inflation outpaces state funding
By Robert Cloud
The New London School District’s budget deficit could escalate from nearly $1.2 million in 2024 to $4.2 million in 2028.
Joe Marquardt, the district’s director of business services, presented his forecast at the school board’s Jan. 9 meeting.
His projections showed no budget deficit or surplus for the 2023 fiscal year, but the potential deficit steadily increases almost every subsequent year.
The potential deficits also lead to a significant decline in the district’s fund balance, as the district uses it to pay for operating expenses.
Currently, the fund balance is about $4.02 million and represents 11.43% of total operating expenditures. At the end of 2024, the fund will drop to a negative balance of $4 million.
School districts use their fund balance to minimize short-term borrowing, avoid cash flow problems, temporarily finance unanticipated expenses, and maintain a good credit rating.
Marquardt said his projections are based on a number of assumptions about the budgeting decisions made by the state.
“Our school district is very dependent on the outcomes … of the (state’s) biennium budget,” he said.
Revenues
Marquardt said the state has frozen school districts’ revenue limit at $10,000 per student for the past two years.
Noting that the state Department of Public Instruction (DPI) has requested a $350 per student increase in the revenue limit for 2023-24 and $650 for 2024-25, Marquardt said in his report, “This would be a 3.5% increase next year when inflation is roughly 8%. This does not match well in inflationary expenditure growth.”
Another significant source of state revenues is categorical aid for special education costs.
This year, state aid will cover about 35% of New London’s expenditures for special education.
“This was one of the few variables that increase in the last biennium,” Marquardt said.
Historically, categorical aid has covered between 25-30% of the district’s special education costs.
The DPI has requested that the state’s upcoming biennium budget cover 45% of the costs in 2023-24 and 60% in 2024-25.
“This increase would provide substantial revenue growth because special education costs are rising due to the complex needs of students,” Marquardt said,
About 387 students in New London qualify for special education services.
Expenditures
Marquardt said that the school board has more control over expenditures than it does over revenues.
Among his assumptions, Marquardt projects wage and benefit increase of 8% based on the rate of inflation shown by the Consumer Price Index.
The 8% raise will increase the school budget by approximately $1.1 million in the 2023-24 budget.
In January 2022, voters in the New London School District approved a $6.65 million referendum for improvements at the Intermediate/Middle School. About $1 million remains to be paid and some of that will come out of the 2023-24 budget.
The board approved $2.3 million for improvements at Sugar Bush Elementary School, but it will make a final decision on the amount in February.
The budget normally includes an annual expenditure of $500,000 for school buses. The new buses are purchased on a seven-year rotation.
Marquardt said the district’s budget would have a more sustainable outlook if the state had increased the revenue limit and increased student aid.
The purpose of his report was to start a conversation about planning for future school budgets.
Other districts have responded to their budget challenges by relying on federal Elementary and Secondary School Emergency Relief funding, cutting back on staff and programs and going to referendums to cover operating costs.
Marquardt said New London has not taken those steps.
“It is possible those may need to be explored to have a more sustainable outlook for the district,” he said.