Growing Pains

On Monday we posted a new leadership opportunity for Hudson Schools by announcing our search for a middle level principal. While this is something that had been under consideration for the past several months, it follows a recent press release from the Iowa Department of Education that shared statewide enrollment figures. That communication indicated that Hudson achieved the highest percentage enrollment growth among all districts in the state for certified enrollment. Keep in mind certified enrollment is a depiction of resident students only and does not include those open enrolled. So how did we get here, and better yet; where are we headed? First, some context.

During the 2010-2011 school year, Hudson Schools enrolled 721 students. In the intervening decade, student numbers fluctuated between that 720 and 750, reaching a low water mark of 692 during the 2016-2017 school year. Then, beginning in the 2017-2018 school year, we began reporting enrollment PK-12 as that was the year we launched our statewide voluntary preschool. That first year of operation, we reported 28 students in the program. Over that epoch, staffing levels have flexed to meet the needs of all students throughout the district, sometimes requiring an extra section here or there, or other times not replacing a position when it became vacant. The point is, as enrollment either grows or retracts, so too does our staffing configuration. 

But what has happened to enrollment since 2020-2021 is not a mere fluctuation in enrollment. It has been a steady, if not rapid increase. Think about this. In the 2020-2021 school year, our PK-12 enrollment was 766. This year, enrollment tops 924 across that same grade span. Projections do not seem to suggest a slowdown anytime in the next 5 years. Even more jarring is a comparison between 2010 and 2025. A staggering difference of 203 students.

The question is, what is causing it? Well, we can certainly point to changes in the open enrollment laws that have made it easier for families to choose Hudson Schools. But that isn't the only, or likely even the primary reason for this growth in enrollment. After all when it comes to open enrollment, we have the option to deny those requests when we become full, or even slow open enrollment as residential enrollment growth accelerates. Both of these options have been and will continue to be exercised in our district as we even out our section sizes in open grade levels. The fact of the matter is that open enrollment today is largely limited to existing siblings who are enrolled and employee's children.

Yet, we still must wonder, what happened in 2020 and the subsequent years that sparked our growth? The answer is simple: residential development. When I arrived in Hudson in 2010, Upper Ridge Estates was the only game in town and it was just a little more than half full. In 2020, Ann and I built our home in the second addition of Upper Ridge, and ours was just the second home to be built in that development. Today, that section is full, and another section to the north of us is about 3/4 complete. I haven't counted, but would approximate there are somewhere around 75 homes in our neighborhood. The fact is, in 2010 we were able to swing a bus through that neighborhood on the tail end of an existing route. Today, that is a route in and of itself. 

Upper Ridges is only part of the story. We also have Twin Oaks, Dean Lee, Marian Lane, and Buffalo Trace. Am I missing any? Maybe. There are preliminary discussions occurring right now that likely will result in even more residential development. As of January 2025, there are currently 84 lots in Hudson available for residential construction. 

So then, back to staffing levels. Our staffing plan needs to meet the needs of the students that we are serving. And as I mentioned in the first paragraph, over the years our staffing levels have flexed to meet those needs. Sometimes the decisions are pretty easy calls. If you have 80 students in kindergarten, 4 sections of 20 is not that difficult. On the other hand, if you have 48 it becomes a bit more challenging. We've lived in both worlds and I can promise you that being in the '80 student' camp is much more preferable. 

But the easy calls really do stop there. There are a lot of other issues to be resolved that, well, are lurking in the shadows. For example, when the current 2nd grade class was in kindergarten (our largest current class at 87), we were about 2 weeks into the school year when the teachers pointed out that we didn't have enough restrooms available for the students. This year's first grade started out as 3 sections in kindergarten. We closed open enrollment early and held fast to that decision. This was partly to address the restroom issue, and partly because once we decided to add another 4 section grade level, it would require additional auxiliary positions, namely art. While it was a wise decision at the time, it was short sighted. What happened? Well, over the course of the school year families continued to move into the district. What had started out as a 3 section kindergarten became a 4 section first grade. Adding another classroom also comes with another set of classroom furniture. And Mrs. Betts pointed out to me a few weeks ago: we are out of lockers. So it goes. In 2010, we employed a professional teaching staff of 54. Today that number stands at 72 and will be larger next year. 

What hasn't changed in the past decade and a half is the administrative configuration of the district. For those of you who were around in 2010, you may recall we employed 3 building administrators along with a Director of At-Risk Services. In 2010, one of our administrative positions was eliminated when we had to cut approximately 10% of our general fund expenditures. So here we are. We have decided that now is the time to move forward with the appointment and hiring of a mid level principal specifically to serve grades 5-8. Please believe me when I tell you this decision was not taken lightly. I understand all too well the perception of 'administrative overhead'. But I think we all know the value that strong leadership can bring; not only to the students in that school, but the support they can provide our families, and the instructional leadership they will be able to provide the staff. It is my hope that a middle level principal will help all of us create a visionary framework that will best serve these students now and into the future.

As I wrap this up, it's probably worth mentioning, and wise to think about what is next for the district. Again, enrollment projections do not appear to be slowing anytime soon. Once the current 2nd grade gets to 7th grade we are going to have to figure some things out. Additional auxiliary and supplemental positions will be needed. To help us better understand our trends and trajectories, we have commissioned a study with RSP and Associates to dig deep into these very issues and provide us with the detail and expertise that will be needed to help chart our course. I am excited to learn what the future holds for us. However, there must be no doubt that the future is bright for the Hudson Community School District.

Indeed, its Great to be a Pirate!

Tax Rates and SSA: Part 2

Last week, we ended with a bit of a teaser. What will our budget look like in five years assuming a supplemental state aid growth factor of 2.5%? To remind you, we predict enrollment growth and property valuations to grow at 2.5%. We also expect miscellaneous income growth to fall to 1% due to our inability to serve open enrollment students. That, because increases in residential enrollment growth means there simply isn't room. Finally, we are predicting expenditure growth to drop to 4% per annum following fiscal year 2026.

Budget Forecast at 2.5%

Assuming those variables, the table above is what we can expect our budget forecast to look like. The top line measures the unspent balance. As I have reminded you time and again, in my opinion, the most important metric of school district financial health is the unspent balance. You will note in this example, that regardless of a low supplemental state aid (2.5% in this example), this metric remains healthy. 

However, look at the second line in the table. This is the predicted tax rate based on the variables that are described above. This tax rate has a direct relationship to the bottom line of the table. The solvency ratio is a measurement of how much cash the district has on hand. The low end of what is considered the target range would be 5%. Our property tax rates have been set at a range that ensures our solvency remains in the safe range, albeit the low end of that range. Now, you may be wondering how it is that our solvency ratio went from 17.4% in fiscal year 2024 to a predicted 5.2% in fiscal year 2026. I'll go even further. In fiscal year 2019, our solvency ratio was 25.15%!

So then, what's going on? The answer is quite simple: rapid enrollment growth. And let me be very clear; I am not talking about open enrollment. Remember, open enrollment comes with the cash tuition paid during the year. Residential enrollment is one year in arrears. When that enrollment count hits on October 1, any student that wasn't on that residential count from the prior October 1 count isn't funded in that current year. While we are able to capture the spending authority for that growth in enrollment, the cash doesn't come until the next year. That means we are funding residential enrollment growth with our reserves (and to some extent open enrollment tuition). Because the growth is so rapid, we are expending our cash faster than it can be replenished. Furthermore, there is a provision in Iowa Code that forbids school districts from growing their reserves if the solvency ratio is greater than 20%. The last time we were below that threshold was 2015. It wasn't until enrollment really began to take off that the ratio dropped below 20%.

There is one final caveat that is not depicted in the table above that also impacts property tax rates. The management fund. No, this is not the fund to pay for management expenses. The primary purpose of this fund is to pay for post employment retirement benefits and property and casualty insurance. In recent years, the deductibles for catastrophic losses for district property has increased to 1%. This may not seem like a lot, but considering the value of property in our district, we need to have enough in the fund to cover that deductible, which could easily top $500,000. We have made provisions in our forecast to maintain this balance.  

In last week's column, when discussing this idea of supplemental state aid (SSA), I argued the point that the rate should be set both timely and adequately. I also suggested that the adequacy of that rate is in the 'eye of the beholder'. It depends largely on the context of each local school district and the dynamics that are at play there. However, each year advocacy groups such as the School Administrators of Iowa (SAI), the Iowa Association of School Boards (IASB), and the Iowa State Education Association (ISEA) all publish a range of numbers. Those numbers may range from a low of 3% all the way to 6%! So what is the number for Hudson? Well, if we are looking purely within the context of the property tax rate, 4% would seem to be a great starting point in offering property tax relief for our residents. The table below illustrates the impact a 4% SSA rate would have on our budget forecast.

Budget Forecast at 4%

The only variable that changed between this table and the one at the top of the column is the rate of SSA growth per annum. All other variables: enrollment, property valuation, miscellaneous income, and expenditure growth are exactly the same. What I have done in this example however, is reduce the property tax rate so as to maintain that floor target solvency ratio of 5%. The result is a difference in property tax rate of $2.99! You should also note the difference in unspent balance-it is staggering. This is under that same spending plan, roughly 4% per annum. Granted, we were spending under our annual spending authority by roughly 1%, but in this example, by fiscal year 2030 we would be underspending our annual revenue by almost 6%. Think of all the programs and support mechanisms for our students that could be implemented with a 4% SSA rate!

Unfortunately because of such historically low SSA over the last decade, we have been conditioned to believe that a 2.5% growth rate is good enough. Even more unfortunate, last week we learned that 2.0% was proposed. I haven't even shared with you the impact that 2.0% SSA has for just one single year. With all other factors remaining constant, our solvency ratio will drop to 3.2% in fiscal year 2030. Math is math. The reality though, is that 4% used to be the norm. When I began the superintendency, it was 4%. 2015, the year right outside the decade I illustrated for you last week: 4%. 

In the final analysis, I do not believe we will even get close to 4%. The fact is, I am planning for the 2.0% scenario. Truth be told, we have some issues in the state budget. We'll dive into that next week. 

Tax Rates and SSA: Part 1

Well, the legislative session is now underway. Where the holiday season is the most wonderful time of the year, the legislative session is the most stressful time of the year. I'll spend the next several months waking up wondering what they are going to do to us next under the guise of 'fixing' education. But to pick up and carry forward my theme from the post last week, I'll hope for the best! As we have come to expect this time of year, the first order of business from the legislature should be to set supplemental state aid (SSA) timely and adequately. State law requires the SSA rate to be set within 30 days of the governor releasing her budget targets. That clock is now ticking.

To remind my readers, SSA is the amount which the state cost per pupil grows annually. Last year, supplemental aid grew by 2.5% or $191 per pupil. Remember, the base budget revenue for a school district, or regular program district cost is a simple calculation: cost per pupil multiplied by number of resident students. (Resident students will become important in a few minutes, so stick with me.) So, by knowing what the SSA rate will be, a district can determine how much their budget revenue will grow for the new fiscal year. This is important insofar as planning purposes are concerned. What staffing is needed? How will compensation packages be structured? Will the district be able to implement a new curriculum? All of these decisions need to be made in a relatively short window because state law requires a school budget cycle be completed by April 30, with legislatively mandated milestones along the way. We have a lot of big decisions to make in a compressed timeframe. This is the reason why it is important to set the rate timely. 

What that rate should be, the adequacy so to speak is largely in the eye of the beholder. Each of the 327 school districts in Iowa have differing enrollment(s), priorities, staffing needs, and operate within unique contexts characterized by diverse demographics, socioeconomic factors, and community values. School districts with decreasing enrollment may require greater resources simply for 'maintenance of effort'. Property owners in school districts with increasing enrollment may benefit from a higher SSA as it relates to their property tax rate. That is certainly the case for Hudson. Before I reveal to you the number that I believe is 'adequate' for Hudson, I think a historical perspective might first be in order.

The table above depicts the rate at which supplemental state aid has been set for the last decade. It averages out to 2.04%. The rate at which the governor recommended in her Condition of the State address on Tuesday evening was 2.0%. But, in the spirit of keeping the hope alive that was discussed last week, we'll presume the SSA rate for FY 2026 will be set at 2.5%. Furthermore, based on the last decade of known rates, I think we can [hope] speculate a rate of around 2.5% for the next five years. A bit of a teaser: the lower the SSA, the higher the property tax rate. 

How will this impact how our budget, and by extension, the property tax rate forecast into the next half decade? Well, to get there we are going to first need to infer some other key variables to understand how this interplay work. 

Enrollment Growth: For this exercise, we'll use a static growth factor of 2.5%. In the near short term, it has ranged from 1.9%, to this year being 4.1%. I want to underscore this important point: this is considering residential students only. Open enrollment won't factor into the equation since that cash inflow occurs occurs 'on time', or during the current fiscal year, whereas residential enrollment growth is in arrears by a year. When we complete our certified enrollment count on Oct. 1, that sets the base number for the follow on fiscal year. 

Property Valuation: This variable is a bit more difficult to predict due to ever changing state laws and how rollbacks may or may not be applied to different classes of property each year. Additionally, as the property tax base grows due to residential development, so too will our valuation. Over the last 5 years, property valuation has averaged 4.36%. However, if one were to look at how property values have changes from 2019 to 2020, you would see a growth of 2.06%. From 2020-2025, 2.44%. For our purposes, we'll use 2.5% as the operative variable. 

Miscellaneous Income: Anything that isn't either property taxes or state aid is considered miscellaneous income. For the current fiscal year (FY 2025), our miscellaneous income is expected to be just over $2 million. Now, the largest driver of miscellaneous income is tuition from open enrollment. In Hudson's case, approximately 70% of our miscellaneous income is generated by open enrollment and special education tuition. For this reason, I predict this will slow from a historical double digit increase to just 1%. Why? Because as our residential enrollment grows, we will have less capacity to serve open enrolled students. In fact, this has already begun to slow as we have made the deliberate decision to limit open enrollment in many of our grade levels. 

Expenditures: In the current fiscal year, our expenditures are expected to grow an eye popping 8.74%. For the budget year 2026, we anticipate expenditures will grow another 8.36%. While these are staggering numbers, it is very important to point out that in both fiscal years, we will exhaust just 96.7% of the available revenue for the current fiscal year and 99% of the available revenue for the following fiscal year. In the follow on years out to fiscal year 2030, we'll make the assumption that we can back that off to a roughly 4% growth rate per annum. If you are wondering why such large increases in the short term, the answer is simple. As enrollment grows, so too will our need for additional staff!

That seems like a good place to stop for today. We'll tackle part 2 next week. I'm sure that is a lot to digest. Plus, you want to hear the ending don't you? Next week, we'll answer the question: Based on the variables above, what can we expect our budget forecast to look like assuming 2.5% SSA. Stay tuned!

The Word: Hope

I've been doing the 'one word' thing since about 2017. A lot of the reason for that is that it means I don't have to worry about a New Year's Resolution that will quickly be broken! Whatever 'vices' I may have I'm perfectly willing to continue! So at the end of the year, when preparing for this post I like to look back at the word I chose from a year ago and reflect on that decision. Why did I choose that particular word? What was going on at that time that made me think of that particular word? 

Last year the word was acceptance. I chose that word because Ann was diagnosed with cancer the spring prior. At that time, she was going through chemo treatments every 6 weeks. Our social calendar revolved around doctor visits. We were very limited in where we could go and who could come to visit. It was scary and it was stressful. That regimen lasted through the entire 2024 calendar year. On top of that, both of us had lost parents. So in preparing for that blog post one year ago, 'acceptance' seemed like a pretty good choice. There wasn't anything I could do to change those circumstances but accept them. We had to learn to live with a new 'normal'. 

One year later, the challenges mentioned above continue to ring true. But a brighter future is on the horizon. So now as we stand on the precipice of a new year, I believe 'hope' is the perfect word for 2025. But please understand that hope is not blind optimism. It's the belief that even in the face of adversity, there is still good to be found. It's the courage to face uncertainty with a positive outlook. It's the fuel that drives us to persevere, to seek solutions, and to build a better future.

Hope is not a passive state of wishful thinking. It's an active, intentional force that fuels our resilience and propels us forward. It's the belief that even amidst the darkest of storms, there is a glimmer of light-a possibility of brighter days.

Indeed, uncertainty continues to loom large. Hope does not mean we ignore the realities of the world around us no matter what they are. Perhaps for you it is climate change, social injustice, or political divisions. For us it is largely personal health struggles. Whatever your reality, acknowledging these challenges is the first step toward finding meaningful solutions.

And let's be clear eyed about this: hope is not about ignoring problems. Since this blog is rooted in education and coming from an educator, it is about learning. It is about actively seeking solutions. It's about identifying areas for positive change and taking concrete steps. Let's also remember that while individual actions are important, collective action is even more powerful. By working together we can achieve far greater things than we could ever accomplish alone. 

In spite of our personal and collective challenges, hope cannot flourish in a state of despair. We must prioritize our own well-being. Hope is not a feeling; it's a choice. A decision to believe in the possibility of good things to come. So then, let 2025 be a year of cultivating hope. Hope within ourselves, within our communities, and the world. 

So about that brighter future? Ann was admitted to the hospital the day before Thanksgiving for a bone marrow transplant. We had planned on her being able to come home sometime between Christmas and New Year's Day. As it turned out she was able to come home on December 21, almost 10 days ahead of schedule! Think about the significance of that day. The winter solstice. The darkest day of the year. Even in darkness, we see light. Each day forward will be a little brighter, both figuratively and literally. The doctor told her that is she had to give her a grade on her progress, it would be an A+! There is nothing better than being home at Christmas. Granted the next 6 months will be challenging, but we have hope.

2025: Hope! We'll face the challenges ahead with courage, determination, and hope. Brighter days are on the horizon.