The financial condition of the Hudson Community School District deteriorated over the course of the 2010-2011 school year. This is due primarily to the fact that the district has been subject to declining enrollment at a time when cuts were made to the state aid portion of the foundation formula over a three years (including the fiscal year 2010-2011). In total, the district experienced a cut in state foundation aid of $574,295. In the fiscal year 2010-2011, state aid was underfunded by $222,435.
Additionally, the state failed to adequately fund the allowable growth formula, which contributed to a deterioration of the unspent budget authority and cash balances. At the close of the Fiscal Year, June 30, 2011 the unspent balance had deteriorated to $78,380, down from $210,606 the previous year. Unspent budget authority is one of the most important financial indicators in a school district.
The Board of Directors acted decisively in the spring of 2011, making significant and systematic budget cuts totaling over $574,000. While the financial condition of the school district is beginning to improve, it is important to stress that now is not the time to relax. As we continue to face declining enrollment and an allowable growth of zero percent for fiscal year 2013, we will need to carefully examine our spending habit, ensuring that we are maximizing all of our capital and human resources wisely.
|Creditor's Equity Ratio|
The table and chart to the left is what is referred to as the Creditor's Equity Ratio. This tool is used to measure the amount of current assets that are provided by creditors. The amount of short term borrowing would be symptomatic of how dependent the school is on credit to cash flow business operations. Logic would suggest that as a school increases available cash to service operations, the less dependent on short-term debt it would become. Ideally, this ratio would be zero. There are two key takeaways from this ratio. First, the district currently participates in short term borrowing, typically during the month of September, which is prior to the first state aid payment of the school year and prior to the first of two large tax draws during the school year, and second; this ratio is on the decline which is good news for the school district. For Fiscal Year 2011, the district borrowed $350,000 in the month of September. In Fiscal Year 2012 (current) for the same month of September, the district borrowed $250,000.