Financial Position Remains Strong in FY 2021

Overall, the District’s financial position is excellent. Most metrics remained stable from FY 2020 to FY 2021. There are no significant areas of concern with regard to district finances, although I do note the employee cost ratio has increased to 83% and has been at or above 80% for the last four years. The increase in FTE due is due to enrollment growth and making strategic investments in hard to fill areas. The target for this ratio is 80%.

Some general observations include first and foremost the fact our general fund revenue increased by $411,821 or 4.8% from FY 2020 to FY 2021. Most notably, this increase came in the state sources object code and can be attributed to growth in enrollment and a slight increase in supplemental state aide, although a significant increase in federal funds due to COVID relief was also a major contributor. At the same time, the district’s cash reserves are full and it remains unnecessary to levy for cash reserves. Finally, our general fund expenditures increased by $135,135 or a rate of 1.6%.

The total general fund balance increased from $2,223,215 in FY 2020 to $2,393,171 in FY 2021. At the same time, the restricted fund balance increased from $221,734 to $236,633. The district was able to clear some of these restricted funds due to changes in legislation that permitted the creation of a ‘flex’ account. The district is encouraged to continue to utilize this tool in order to keep these balances as low as possible. It is worth noting that dropout prevention, talented and gifted; and early literacy are reserve funds excluded from consideration for flex fund spending. The district may wish to closely examine these programs against the fund balance to ensure maximum leverage is applied against these expenditures. As a reminder, these funds are reserved because they can only be used for specified purposes under Iowa Law. Reserve funds for Talented and Gifted make up the bulk of these restricted funds at $182,472, and as you can see from the table to the left, this fund continues to grow.

The solvency ratio increased slightly to 24.12% in FY 2021. This continues to be a positive metric for the district, insofar as our cash reserves continue to be full.  This is great news because the unknown variable in our district continues to be costs associated with our special education program, which has been dropping. 

Tax rates for the FY 2021 budget year were 14.04151, down from 14.20904 in FY 2020. Overall taxes were down for the district as well, in spite of the continued increase in the residential rollback and natural increases to taxable valuation district wide. 

The district currently carries a long term debt note of $5,140,000 when it sold revenue bonds during the winter of 2019. At the same time, the district carries short term debt primarily for the lease of computer devices that support the district’s connected learning initiative. Both of these notes are paid through the capital funds improvement funding stream and are not therefore general fund expenditures. It is also important to note the district is currently not utilizing any general obligation funding mechanisms.

In spite of our strong financial position, enrollment will need to continually be monitored. While one year certified enrollment may be down 22 students, the next year certified enrollment may be up 27. While enrollment remains strong, the COVID pandemic has resulted in a significant drop in enrollment. While expected to rebound, it is something that will need to be carefully managed in the short term. *Note: keep in mind the enrollment provided here is a look back at the 2020-2021 school year when we did experience a decrease in enrollment due to COVID. It does not take into consideration the substantial increase in enrollment that we are experiencing during the 2021-2022 school year. 

Finally we should take special note of the district’s unspent balance ratio. This is perhaps the most important of all the financial health indicators and one that should be closely monitored and watched. The news here is good, with an increase in this ratio every year since 2011 when the district completed major budget cuts and ended with a balance of $90,971 or 1.29%. In the prevailing years it has grown steadily to $3,501,131 or 28.53% in fiscal year 2021. Like the financial solvency ratio, this puts the district in a good position in light of unpredictable funding from the state, and particularly since we will be in a position to manage unbudgeted expenditures that have come about as a result of COVID-19.

For a complete and detailed look at the financial report, including all the ratios and calculations used for this Executive Summary, please click here. 

 

The Open Enrollment Factor

Open enrollment is a mechanism in Iowa Public Schools that permits resident students from one school district to enroll in a different public school. On the books since 1989, families wishing to utilize open enrollment must file paperwork with the district of residence and the receiving district by March 1 of the preceding school year for students entering grades 1-12 or by September 1 of the current school year for students entering kindergarten. Provided those deadlines are met, the receiving school district has the authority to unilaterally accept those applications unless they have determined there is insufficient classroom space. Applications outside that deadline can only be approved by the resident district acting first if good cause exists. Once a student open enrolls into another school district, the funding follows them into the receiving school district. For this year the funding is $7,048 per student plus supplements.

One also has to remember that open enrollment is a two way street. While Hudson is lucky insofar as we are net positive in open enrollment, that isn't the case in a lot of districts. I have many colleagues who are 'upside down' when it comes to open enrollment. This means they have far more students leaving than they do entering. Others consider it a 'win' if they are net zero: an equal number entering and an equal number leaving. In case you were curious, last year we had 46 students open enroll out of the district compared to 100 that open enrolled in to the district. 

The point is that open enrollment isn't a new phenomenon and the recent burst of open enrollment into our district is merely a return to the original intent in law; albeit with a temporary waiver of the traditional timeline. In the mid 2000s, several school districts in Iowa implemented policies that enabled them to deny open enrollment out of their districts, while at the same time accepting open enroll students from surrounding school districts. Think of it this way: a resident student in Hudson could go there, but a student there-could not come here. Prior to this change in policy, Hudson schools had benefited from a larger number of open enrollees into the district. Once the policy was enacted, open enrollment into Hudson dropped off dramatically. 

The influx of open enrollees over the summer came about due to a change in state law. During the waning days of the last legislative session, the General Assembly passed legislation outlawing policies that had permitted districts to deny open enrollment 'out' applications. At the same time, they waived the March 1/September 1 deadline for this first year only. Looking forward to the 2022-2023 school year the normal deadlines will apply. 

Because of the change to law and the waiving of the deadline, over the course of the summer we experienced an unusual number of applications for open enrollment into our school district. As the applications came in, we monitored our class and section size and if our class sections weren't full, we accepted those applications. Not only did it enable us to fill section sizes without needing to add employees, it will generate additional revenue. This infusion of capital will make it much easier to provide a broader range of opportunities for our students and create balance in our classes. At it's barest minimum it creates tremendous efficiency in operation. From a purely mathematical standpoint, a classroom of 20 pupils bears a lower cost [per pupil] than one of 15. Extrapolated across the system, this will allow us to make key investments in other programs that benefit the whole. This year we are examining early childhood programming and career and technical education. 

Think about this. Some have inquired about additional early childhood programs such as transitional kindergarten. In order to offer a program like this, there must be enough students to make it solvent. Open enrollment and the funding that flows to Hudson because of it very well could be the key to making an option like this a reality. Here is another example. For years at the high school we have struggled to employ a Family and Consumer Science (FCS) teacher. Why? Because we simply don't have enough students to fill out those classes. The result has been a shared position with another school district that is not very attractive and tends to turn over on an almost annual basis. It is very difficult to build a program when faced with constant turnover. This is further exacerbated by the fact that on any given year, Iowa only produces a handful of FCS teachers. When the need is in excess of 20 teachers to meet the statewide need annually, why would anyone choose to work a part time job in two separate districts? We are lucky that we have been able to hire an interim instructor for this school year. At the same time, we have made an offer of employment for a full time FCS teacher next year. When this decision was made, it was prior to the influx in open enrollment and was based on the premise of growth in residential enrollment. There is no mistake the open enrollment windfall has taken the pressure off this decision: one that needed to be made in order to attract and retain a quality employee. The fact of the matter is that the benefits of growth in enrollment through both residential and open enrollment are numerous and will open doors for the district to expand programs and access to students. 

In closing, perhaps a mathematical explanation makes the most sense. When the fiscal year 2022 budget was certified, I budgeted revenue from open enrollment at $592,032. Based on our most recent calculations, that number is now anticipated to be in the vicinity of $916,240. That is a net increase of $324,208.

The Day the Towers Fell

I was backstage at Beckman High School working in the costume shop when the high school principal announced over the PA system that an airplane had struck the World Trade Center. It was a very warm, in fact beautiful fall day. At first I thought it odd the principal would make such an announcement. The band was outside on the football field working through their drill for the game on Friday night. Truth be told, it was a perfect fall day; and one that would completely unravel. I remember the frantic calls to Ann as the morning unfolded, all while wondering what would happen next as the FAA took the unprecedented step of grounding every aircraft flying over or on the way to the United States. 

We had only been married a couple of years at that point. I still have a picture from our honeymoon, one with Ann sitting on a small ledge when we visited Ellis Island. The Twin Towers framed behind her. 

Each year on this most solemn of days I recall with precision the events of September 11, 2001. At the time I was a vocal music teacher in Dyersville and had first hour prep. Indeed I have vivid memories of where I was and what I was doing when first learning of the attack. At the time none of us knew it was an attack, thinking it must have been some sort of horrible accident. Then I watched in shock as the second plane struck the south tower on live television; and at that precise moment understanding with unequivocal clarity that yes, we were most certainly under attack. And also in that horrible moment unaware that it would get much, much worse when the towers fell. 

Instruction stopped that day. As teachers we worked hard to keep our students calm. They asked questions. How could this happen, we have two oceans protecting us? Is Iowa next? We had no answers.

I am a bit surprised that I can still recall these details with as much clarity as I can. Because it has been 20 years. Twenty years! Indeed the years fly by. I was a young man then and the world as it was on September 10th was not the world we would wake up to on September 11th. The fact is, that world no longer exists. 

In the intervening years as the anniversary approached we would mark the milestones along the way: the year the 9/11 'babies' went to kindergarten. When they graduated. On this 20th year of remembrance I find a couple of things quite striking. First, there is not one student in our school who was even alive on that horrific day. The second, and perhaps more interesting [at least to me] is the generational divide amongst our faculty and staff. More and more of our faculty is made up of those who were too young to recall this event. While there were many of us who were busily at work, teaching school and going about our day: a growing number of our ranks were in diapers and blissfully unaware of what was going on around them. 

Now America's longest war has come to an end. It will be up to history to decide how this chapter of our story is portrayed. But no matter what, we must honor the sacrifices of so many men and women who gave their lives in service. Who vowed to hold those responsible who attacked us. 

As is the case each year, there will be numerous documentaries on television about this day. Some old, some new. If you are too young to remember, please don't scroll past them with your remote. Watch them. Ask one of your colleagues to share their memories of that day. And for those of us who were there, I would encourage you to watch as well. Talk about this day with your students. Its important that we #NeverForget.