Financial Metrics for the District Remain Strong

School corporations in Iowa operate a fiscal year that runs from July 1 to June 30. As such, we have completed our end of year financial report. I am pleased to report the financial position of the school district remains strong due to both enrollment growth and disciplined budgeting practices employed by the Board of Directors. 

General fund revenue increased by 5.8% or $579,337 from FY 2023 to FY 2024. Most of this came from state provided resources, or state aid, which showed a 14.8% increase over FY 2023. This, along with a modest 1.4% increase in locally sourced revenue can be attributed to enrollment growth. The increase in revenue is notable, particularly when compared to a loss of $340,652 in federal funds, which were allocated in FY 2023 specifically targeted to address to the COVID pandemic. Our cash reserve remains full even though our fund balance has dropped by $144,714. While our solvency ratio remains above the targeted benchmark, the trend is moving downward. For this reason, it would be wise to begin implementing a cash reserve levy to avoid a precipitous drop in the future. General fund expenditures grew by 7.4%, coming in at grand total of $10,638,306. Our rate of general fund expenditure growth is due to hiring additional personnel related to enrollment growth.

The district carries $313,777 in restricted funds. These funds are restricted for purposes that are specified under Iowa Law. However, a provision exits to transfer some restricted funds to a flexibility account if the original intent of the restriction has been satisfied. In the case of ‘professional development’ it has. The decrease in the TAG balance was deliberate due to programmatic improvements, whereas the restricted fund balance in preschool is due to a function of how preschool expenditures are a blend between this restricted fund and the special education fund. 

As alluded to above, our solvency ratio is trending downward from 24.12% in FY 2021 to 16.82% in FY 2024. Although this metric remains strong (the benchmark is 10%), the downward trend should continue to be monitored and a cash reserve levy should be implemented in effort to stabilize the trendline. As a direct measure of cash on hand, it is important to carry a healthy fund balance since these funds are used to fund operations over the summer when there is no revenue coming into the district. Furthermore, costs associated with special education continue to trend upward and are somewhat prone to volatile swings that sometimes come with unpredictable and transient enrollment patterns. 

Tax rates for the FY 2024 budget year were 15.82823, up from 13.31578 in FY 2023. This increase in rate is due to the passage of a general obligation bond rate in September of 2022 of 2.700000 for the renovation, remodeling, and addition to the high school. 

The district currently carries long term debt of $17.425 million in varying instruments that is being used to meet the capital project needs of the school district, including updates at both the K-8 attendance center and the 9-12 attendance center. That debt includes $9.35 million of general obligation debt, $3.94 million in Revenue Bond Anticipation Notes, $876,945 in PPEL Capital Note Projects, $1.84 million in general obligation bonds (Series 2024), and $1.44 million in general obligation bond notes (BAN). It is anticipated this debt will be restructured on a timeline that permits the district to take advantage of current market conditions and property valuation growth. These notes are encumbered through our capital funds improvement funding stream and through our debt service funds and are therefore not general fund obligations. At the same time, the district carries short term debt of  $574,277.50 that originates in the PPEL fund to fund computer devices that support the district’s connected learning initiative. 

Enrollment projections remain strong both the short and long term. The increase in 15 pupils during the year can largely be attributed to open enrollment. These trends are likely to continue in light of a recent change in open enrollment laws in the State of Iowa. Further, the City of Hudson continues to grow at a steady pace with multiple housing additions currently in development. Barring any unforeseen changes, the District will need to plan for rapid enrollment growth in the next half decade.

The district employs a 9 point test to gauge the overall health of the school district. Of those nine measures, none is more important than the unspent balance ratio, which has been trending upward since 2011. It has continued to grow steadily to $5,343,874 or 33.44% in the fiscal year just ended. This provides the district with continued stability in  light of unpredictable funding from the state. 

While we won't spend time to discuss every measure here, I will offer just a few highlights. 

As has been mentioned in previous blog posts in the past, school operations are very labor intensive enterprises and as such, personnel costs take the lions share of the budget. You'll note that for fiscal year 2024, 80% of our budget was expended on personnel costs. The target for this ratio is 80%.

Transportation costs are a ratio that hardly gets a mention. While we encompass almost 60 square miles, comparatively speaking, our geographical footprint is quite small. This is evidenced by the fact that our transportation costs were limited to just 3%. The target for this ratio is 5%. 

'Day's Net Cash' assumes expenditures are even over the course of the school year (which they are not), and then calculates how long the district could maintain operations without the infusion of cash. Over the summer months, school districts have a 90 day period where there is no revenue stream. Our current DNCR is 92, which means in theory the district would have enough cash on hand for a 92 day period. Note in the table above this ratio has been decreasing over the last five years, which is directly related to the solvency ratio which is discussed above. Indeed those two are closely related!

The full report can be found on the About Us page of our website.