The fiscal year for Iowa public school districts runs from July 1 through June 30. Schools are subsequently required to file a report on the financial status of the school district by September 15th with the Iowa Department of Education, this report is known as the 'certified annual report'. That data from that report is subsequently used to take stock of several financial ratios is the district in order to gauge overall district health.
The table to the right are nine of the key financial metrics that are used to determine overall financial health in our school district. This data can tell us, over time how the district is performing and can serve as a 'canary in the coal mine', serving as a tool for the district in the event a change in course is needed. The color coding is important as a quick reference point: green is indicative of a healthy metric, yellow would be one where extra attention is needed, and red of course would be an area of concern. The district last had a red metric in 2012, and multiple red metrics in 2010 and 2011 (not depicted in the figure shown). While I'll take a few minutes to highlight a couple of these metrics and what specifically they mean for us, first I would like to make a couple of high level observations. Additionally, if you are interested in viewing the entire report, please visit the 'About Us' page of our website. About halfway down the page you will be able to find a whole host of financial information about the district including budget documents, audit reports, and outstanding levy limits.
To begin, overall, the District’s financial position is excellent. Metrics remained stable from FY 2022 to FY 2023. There are no significant areas of concern with regard to district finances.
Some general observations would include first and foremost the fact our general fund revenue increased by $506,128 or 5.4% from FY 2022 to FY 2023. Most notably, this increase came in the local sources object code and can be attributed to growth in open enrollment, and in federal sources related specifically to the ESSER funds. ESSER funds were supplemental monies designed to be used for COVID relief. At this point, all of these federal funds have been expended. 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 $641,042 or a rate of 6.9%. This increase does not include a transfer of $318,272 from our capital projects fund to our general fund. This was an accounting requirement attributable to the expenditure of our ESSER funds. The rate of general fund expenditure growth is due to hiring additional personnel related to enrollment increases.
The total general fund balance decreased from $2,517,362 in FY 2022 to $2,223,561 in FY 2023. At the same time, the restricted fund balance increased from $288,159 to $318,967. The district was able to clear some of these restricted funds by moving them to the district’s ‘flex’ account. We should anticipate the restricted fund balance will continue to decrease in the coming years, by design, as more restricted resources have been allocated to the TAG program. Because of changes to district policy and spending practice, it is more likely than not that all of these restricted funds will begin to be expended on an annual basis. As a reminder, these funds are reserved because they can only be used for specific purposes under Iowa Law.
Even though the general fund balance decreased, it is important to note that the solvency ratio, which also decreased; is still at 19.21%. Financial solvency is the measure of the district's cash position, and generally speaking a long term target for solvency ratio is at least 10%. Solvency is important since it allows district operations to continue absent any inflow of revenue. Public school districts generally do no receive any revenue over the summer and need to rely on the general fund balance for operational expenses until revenue begins to flow again in September. There is an approximate 90 day gap between the ending and beginning of revenue in a fiscal year. Our calculations suggest the district could maintain operations for 99 days without the infusion of cash.
Tax rates for the FY 2023 budget year were 13.31578, down from 14.09778 in FY 2022. 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, and a general obligation debt note of $9,250,000 that was sold in the spring of 2023. 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. These notes are paid through the capital funds improvement funding stream and are not therefore general fund expenditures. Voters approved a general obligation bond in September of 2022 of $11.65 million that will impact tax rates in FY 24.
In my view, there is no metric more important that the district's unspent balance. This metric should not be confused with cash position, because it most certainly is not a representation of cash on hand. It is instead a measure of capacity; a legal designation that simply gives the district the authority to expend, and to generate the revenue [that creates the capacity] needed to expend those funds. Of all the financial health indicators, this is the one that is closely monitored, projected, and anticipated annually. The importance of this metric cannot be understated: it is illegal to have a negative unspent balance in Iowa and a persistent negative unspent balance can, and has forced school consolidation, a district going into receivership with the state, and ultimately lead to closure. 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 $4,659,569 or 31.34% in fiscal year 2023. Like the financial solvency ratio, this puts the district in a good position in light of unpredictable funding from the state.
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