The Budget Problems Have Been Years in the Making

When talking about the District’s financial situation, current Board members seem to conveniently forget that they voted to borrow $10.5 million in early 2016. Voters then approved the referendum for $84 million in the fall of 2016. The Board then followed that up with an approval of an additional $11 million in debt. How else could any of them boast $100+ million in recent improvements? During this time, we only had a fund balance of approximately $10.5 million. We borrowed $21.5 million.

The use of excess fund balance to perform improvements makes sense. It’s money in the bank without having to take on additional debt. But that’s not what happened.

They took on this extra debt without an increase in the tax levy to offset the debt service that they approved. Why? Most likely they knew that taxpayers in the Germantown School District may not have been able to stomach even more of an increase than they already had voted for. In other words, they kicked the can down the road.

Moody’s, in downgrading the District’s debt, rightly pointed out that the financial issues that we are experiencing are due to a combination of non-referendum debt and not levying the full amount to offset those costs.

“Poor budgetary management practices in recent years has resulted in the material use of general fund reserves to pay for non-referendum debt service, instead of levying the full amount, and by doing so has weakened the overall financial profile. Additionally, the new financial management team expects to further draw on reserves in fiscal 2021 which would erode an already weak financial position when compared to peers. In levy year 2022, the new financial management teams intends to levy the full amount needed to cover debt service on the non-referendum debt, which will help stabilize the reserves for the district.” Source: Moody’s (see picture)

While certainly, the additional unbudgeted COVID-related expenses of $400,000 or so don’t help our current situation, it is not the root cause. Neither is the expected $1.2 million decrease in revenue due to the decline in enrollment. Combined, those two items only make up approximately $1.6 million of the originally estimated $2.5 million shortfall for budget year 2021/22.

There are reasons why the Board in approving the 2020/2021 Board goals removed the “Balance educational services with community tax expectations…”