Brainerd School Board members approved a preliminary 2020-21 budget Thursday, June 25, based on a projected enrollment decrease due to the coronavirus pandemic.
Marci Lord, director of business services, explained the projected revenues and expenses for the upcoming school year, reminding board members the budget will be revised in January and possibly again in April to account for changing numbers.
Lord highlighted the following changes to the general fund budget for 2020-21:
A 2% increase per student in state general education aid.
About a 6.7% increase in state funding for reimbursement of special education costs.
A 10% decrease in federal Title I and Title II funding. Title I funding provides financial assistance to districts with high percentages of students from low-income families, while Title II funding aims to increase academic achievement by improving teacher and principal quality.
A 7.3% percent decrease in poverty-based state funding, based on the district’s projected percentage of students qualifying for free and reduced lunch.
Addition of about $600,000 Coronavirus Aid, Relief, and Economic Security Act funds. The district is set to receive about $900,000 in CARES Act funds, but Lord said she only put a portion of that into the budget because the district does not yet know how all the funds will be used.
An increase in salary of negotiated labor agreements and related benefits.
A planned net reduction in staffing of approximately 28.53 full-time equivalent employees.
A decrease of the unassigned fund balance to a level equal to 7.4% of general fund expenses.
A decrease in enrollment from 2019-20 of approximately 72.5 adjusted pupil units, which are calculated based on student attendance and weighted based on grade level. Students in seventh through 12th grades are weighted as 1.2, while younger students are weighted as 1.
“As you know, a big part of our revenue is based on the student counts,” Lord said. “The projection model accounts for birth, transition rates between grades and fall enrollment versus end of year ADM (average daily membership).”
The projected enrollment decrease is due to COVID-19 and the uncertainty of all students returning to the classroom after distance learning, Lord said. For that reason, she decreased the 2020-21 projected enrollment by 26 students, or two per grade level.
Board Chair Tom Haglin noted this enrollment decrease is contrary to what a demographic study done a few years ago showed in terms of community size and its effect on enrollment. Lord said she plans to take another look at that study and prepare a graph for a future board meeting to show how enrollment numbers have tracked in comparison.
Preliminary budget deficits
In the projected budget, there is a deficit of about $1.53 million in the district’s general fund budget.
“That may seem a little alarming, but a large portion of that — the $1 million — is from long-term facilities maintenance revenue, which we set aside for Blueprint 181, so it’s related to the (construction) projects,” Lord said. “Please don’t feel like that’s an alarming number, that we’re deficit spending $1.5 million.”
Haglin, however, said he was still concerned, especially given how little money is in the general fund balance. The unassigned general fund balance is projected to be just under $6.6 million in the 2020-21 budget. That is essentially the district’s “rainy day fund,” Lord said, as that money is unrestricted and can be used on anything. The $6.6 million amounts to less than 8% of the district’s yearly operating budget, which is less than a month of expenses. The state recommends keeping about 25% of yearly expenses in the unassigned fund, but Lord said the amount the district has now is within Brainerd’s policy. The district's policy requires at least 5% of yearly operating expenses in the unassigned fund at any given time and recommends an optimal range of 5-7%. Lord noted Thursday — as she has done before — she would like to revisit that policy in the near future.
As for Haglin’s concerns, Lord reminded him most of the $1.5 million deficit is related to the various construction projects tied to the 2018 bonding referendum.
“In our plans we had allocated $1.2 million every year to go to the facilities plans, and those first two years we were actually under that,” she said. “We didn’t use all of it, and it went into the reserve. And now this year the cash draw has like $2.6 million for the projects, so it does look like it’s concerning, but it really — we’re catching up from what we had scheduled previously.”
The building projects are also largely to blame for the district’s seemingly projected spending deficit of more than $85 million. But all except roughly $3 million of that is due to construction bonds. The district issued the majority of the bonds in previous years, Lord said, and is now spending those funds.
“We’re really hopeful that this past school year that we’re going to come in better than the projected deficit that she’s got in here,” Superintendent Laine Larson said. “Like we shared a month ago, we decided just to keep the number that we projected prior to COVID because there were so many ups and downs that we just don’t know. So we’re actually cautiously optimistic that it’s going to be quite a bit better than this, at least for this past year.”
Despite the spending deficit, the 2020-21 budget projects a total surplus of about $48.3 million, as the revised 2019-20 budget shows the district closing out the fiscal year with approximately $133.3 million in total funds.
In July, the board will review and approve food service meal prices for the upcoming school year. Right now, Lord said she used costs from the 2019-20 school year for her projected budget.
In September, the board will approve a preliminary property tax levy for 2021. Members will approve the final levy in December after a truth in taxation hearing. Lord will then present a first budget revision in January and a second revision in April, if needed.