Duties mandated to public schools during the COVID-19 pandemic and a decline in enrollment complicated an update of the Hutchinson Public Schools' budget this past week.
A break-even budget is expected through June 30, 2021, but looking ahead to next school year, administration is recommending a $700,000 reduction in expenses. The recommendation follows several years of declining enrollment — a reduction of 122 students from 2011 to 2020, which means the school has lost $1.5 million per year in state aid. Though the lower enrollment matched a similar statewide trend, there seemed to have been some stabilization in Hutchinson in 2018 and 2019. However, following the pandemic, the school has seen an additional decline of 184 students whose families had chosen to enroll elsewhere.
The resulting loss of $1.6 million in state revenue for the current school year is mostly covered by a one-time stop gap due to the first round of federal pandemic aid. More federal aid is expected, but at this point it is unclear how that money can be used. School budgets are divided into portions administrators can use as needed, and portions that must only be used for mandated purposes. The district plans to use the second round of federal aid to balance the deficit, along with this latest round of cuts next year as expenses are expected to outpace revenues.
Specific recommendations for reductions are expected to take shape throughout the next month.
"Programs are not anticipated to be impacted," Rebecca Boll, director of business and finance, said in an email. "Positions directly related to executive orders in the current year may be reduced. Additional positions may also be reduced based on lower enrollment projections. If more students enroll by the fall than planned, positions may be brought back over the summer. Additional reductions may fall within student support, transportation, purchase services, supplies and equipment."
During the School Board meeting, Brian Tillmann, president of Education Hutchinson, implored board members to find a way to avoid cuts.
"This is a year we should be focusing on adding counselors ... instead of cutting," he said. "You as a board have to try and convince 184 families to re-choose Hutchinson."
Tillmann said he appreciated the care the district takes to safeguard its finances and longevity, but asked why the district cannot use its fund balance to help stave off cuts. Policy dictates the school maintains at least 14% of its total annual expenses on hand in its fund balance at any given time in case of emergencies. In the past, for instance, the state has delayed payments to schools in order to deal with financial hardship. The district has found a balance of around 20% of its roughly $34 million annual expenses (excluding building projects) is a good target.
Boll acknowledged that there are snapshots in time where the fund balance may seem quite high when compared to policy, such as on June 30, 2015, when it was $8.1 million, or the same time in 2020 when it was $9.1 million. But, she said, at other times it could be as high as $13 million or as low as $5 million. That's because the balance fluctuates constantly as state payments are made to the school district, and as it makes payments to vendors and payroll. While it may appear like a rainy day fund, Boll said, its purpose is to maintain cash flow.
"There is business being done every single day," she said.
Boll said that if the school began to dip into its fund balance and there was then an emergency, such as legislation opting to cut school funding or federal stimulus rules becoming more inhibiting than previously reported, it would place the district in a position where it may have to borrow money to pay its bills. That would mean, going forward, the district is spending money on debt.
"There is a lot of value in having the right amount of money on hand," Boll said.
Board members will discuss budget reduction recommendations at future board meetings, likely next month. In addition to the regular May 10 meeting, there is a May 24 quarterly meeting.
As is always the case when discussing school budgets, facts may change over time. The state mandates school districts pass a budget for the coming school year by July 1, but legislative changes to funding or enrollment figures can shift months later. That's why projections made this time of year are discussed as anticipations or assumptions based on what knowledge is presently available.