You can read Part 1 here.
In Part 1, we went through an exercise to simplify what the School District’s spending has been over the last several years. In summary, spending has increased over the last several fiscal years drawing our fund balance down from $10,000,000 + to just over $3,000,000 (projected).
In Part 2, I want to look at each fiscal year and what was budgeted versus what was the net result. All the numbers presented in the screenshots below were taken from the Germantown School District annual report for years presented.
If we continue to start with the 2015/2016 budget year, we can see that the approved budget was estimated to expenditures to outpace revenues by over $800,000. The unaudited actual result, however, was positive. The Board under-estimated revenue and over-estimated expenses. The results were that they could add to fund balance.
In the 2016/2017 budget year, we found a similar instance where the Board approved a budget where expenditures were going to be larger than revenues in. They estimated a $1.05 million shortfall that would be covered by fund balance. It’s worth noting that beginning in 2012/2013, the School Board had a goal of bringing fund balance to 12%. At the end of 2016/2017, fund balance represented almost 26% of the budget.
In the 2017/2018 budget year, we continued to see estimated expenditures to be greater than revenue by almost $600,000 (covered by fund balance). This year, however, the Board spent over a million dollars more than budgeted. Beginning during this time, they had made the decision to take on additional expenditures to provide improvements to schools and additional equipment above and beyond what was approved in the referendum. That decision alone isn’t a poor one. However, I don’t believe they did the proper research and forecasting to estimate what possible expenses may be for the ongoing maintenance of what was included in the work in the referendum. One thing to notice is that in beginning this year, revenue continues to be estimated well, however, expenses were not.
Expenses continued to outpace revenues in the 2018/2019 budget. In this year, the Board was within about $150,000 of what the budget estimated. Once again, the revenue figure was fairly accurate. The expenditure estimate however was off by over $400,000.
And for the last year that we have full information for, the Board spent almost $600,000 more than budgeted after planning a shortfall of over $1.2 million. This time it wasn’t so much the expenses that hurt us. It was a decrease in expected revenue. Fortunately, there was some cost savings that occurred to better offset the loss in revenue.
While we don’t know exactly how the 2020/2021 actual figures will turn out, we do know that the School Board approved a budget that was short by over a million dollars. Not included in the budget were what was going to be accumulated due to COVID specific expenses. According to the Board packet for the meeting on January 25th, actual COVID expenses now stand around $335,000.
With the approval of the 2020/2021 budget, the fund balance is expected to be a bit over $3 million (not including those COVID expenses). That would represent about 7%, well short of the Board stated goal approve in 2020 of 13%.
This now leads us to the work that begins to develop the 2021/2022 at the January 25th Finance Committee meeting at 6:15pm at the Germantown High School PAC. As presented in the Committee packet, based on what appears to be sound projections, there is a projected financial gap of about $2.5 million dollars. Even after the proposed revenue solutions and expenditure solutions are taken into consideration, the Board still sees a shortfall of over $500,000.
In addition to the proposed solutions, they will also take up the consideration of selling the District Administration building. Selling assets that are no longer needed to save on maintenance costs make sense, however, this is still a short term injection of cash to help make up the expected deficit (and cover those COVID expenses that are not budgeted and will continue to grow).
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