School District Proposed Budgets Should NOT Exceed the Default Budget Calculation
School District Proposed Budgets Should NOT Exceed the Default Budget Calculation
In FY23 (school year 2022- 2023), the Amherst School District (ASD) was operating under a default budget. While some may think that this must have been a financial hardship for the district, it was not. In fact, ASD ended up with $791,175 more than it needed, even in a default budget year.
Add to this the $586,054 in excess revenue that the district collected, and you get a FY23 unassigned fund balance amount of $1,377,229. From this, the district was then able to contribute $605,000 to its Maintenance Trust Fund. The remaining $772,229 was used to reduce taxes. In summary, in a recent default budget year, ASD was able to meet all of its needs during the school year, make a $605,000 contribution to something that wasn’t even in the budget, and return $772,229 to reduce future taxes.
How could this be? And why did the ASD school board propose a budget in FY23 that was $495,831 larger than the default budget? The district obviously didn’t need the extra money.
The short answer is that default budgets are not bare-bones budgets. In fact, they are not technically budgets at all. A default budget is a calculation, a formula, that spits out a dollar amount. It’s this dollar amount that a district is limited to when a proposed budget fails. The default budget calculation is not confined to what the district needs to get by. This calculation is always larger than what the district actually needs (vacant positions are still included in the calculation, expensive teachers with expensive benefits retire and are replaced with less expensive teachers with less expensive benefits, etc.). The end result is that even in a default budget year, a district often has plenty of money to meet its needs, to fund additional items that are outside of the budget (like trust funds), and to return unassigned fund balance to reduce taxes.
Let’s continue on to FY24 (school year 2023 – 2024), another default budget year in ASD. Back-to-back default budgets must mean financial hardship for the district, right? Wrong. It turns out that ASD started its FY24 school year by purchasing most of the items that the school board had earmarked in its FY24 proposed budget; i.e. $20,000 for a Library Associate, $87,000 for technology, $92,000 for facilities, $51,000 for non-union salary and benefits, and $67,000 for school board services. So even though ASD was again operating under a default budget, the school board was still able to purchase over 75% of the items earmarked in its proposed budget. (As a side note, the $50,000 for the St. Anselm fellows was also purchased, but this money came from the Special Education Trust fund, not from the budget.)
When the FY24 school year ends, it will be interesting to see how much money is left over. How much unassigned fund balance will there be? $1,377,229? How much money will there be this year that the district did not need? $791,175? How much excess revenue will be collected this year? $586,054? Will the school board be able to contribute $780,000 to items that weren’t even in the budget ($675,000 to the Maintenance Trust fund, $75,000 to the Technology Trust fund, and $30,000 to the Vehicle Trust fund)? Almost certainly. Will there be a significant portion of unassigned fund balance returned to reduce taxes? Almost certainly.
As of 2/5/24, ASD has estimated the FY24 fund balance to be $1,165,000. If this is correct, the district will be able to contribute $780,000 to its trust funds, items that were not even in the default budget calculation. The district will also be able to return $385,000 to reduce future taxes. This is a lot of extra money to have available at the end of the school year, especially in a default budget year.
The same line of thinking applies to the Souhegan Cooperative School District (SCSD); operating under the default budget calculation does not result in financial hardship for the district. The default budget calculation in SCSD is calculated the same way as it is in ASD, which means that the SCSD school board can properly fund its needs and its reasonable wants by proposing budgets that are essentially equal to the default budget calculation.
For example, SCSD was operating under a default budget in FY23. However, SCSD ended the year with $1,256,498 in unassigned fund balance. $220,000 went to the Maintenance trust, $70,000 went to the Recreation Revolving Fund, $25,000 went to the Technology trust, and $941,498 was used to reduce future taxes. This is a lot of money to have leftover at the end of the school year, especially in a default budget year.
The SCSD FY23 proposed budget was $501,708 larger than the default budget calculation. This means that the entire proposed budget could have easily been funded at the default budget calculation amount, and still have money left over to fund all the trust funds, and to return some money to reduce taxes.
Knowing all of this, what can voters do? It’s simple. For the next few years, vote NO on any future proposed budgets that are larger than the default budget calculation. This will flush out a lot of the excess that currently exists in the proposed budgets. What can the school boards and administration do? For the next few years, they should propose budgets that are at or below the default budget calculation amount. This will allow more voters to support both the Amherst School District and the Souhegan Cooperative School District.