FY 2026 School Budget: General Fund

Last week we began a discussion on the FY 2026 school budget. In that post, I explained that the budget published in the newspaper and on our website is, in reality just a summary. That summary budget is composed of multiple funds, and our conversation last week centered on our capital improvement and project funds. I started there because the projects that are funded through this portion of the budget are the most visible to the community. You can see them, touch them, and when finally complete, they hopefully evoke a sense of pride in our school and community. But the reality is that portion of our budget is a relatively small part of our overall annual operation. To refresh your memory, next year we anticipate roughly $1.68 million in facility expenditures for the fiscal year that begins on July 1. If you closely scrutinize our budget summary, you will note that overall our total budget expenditures are expected to top $16.7 million for fiscal year 2026. (Bonus points for anyone who can tell me why we drop from a high of $25.9 million in fiscal year 2024.)

So then, what you can see, touch, feel: the tactile portion of our fund(s) account for about 10% of our overall proposed budget. Perhaps the tip of the iceberg? The lions share of the budget is of course the general fund. This is the portion of the budget that is used to fund the operation. It ensures the buses run on time, the schedule and bells operate with continuity, and we have the personnel with the right training to deliver instruction to the students of our community. In fiscal year 2026, we anticipate a general fund budget of $12.56 million. Of that, approximately 80% is in personnel costs. As I've mentioned many times, education is a very labor intensive enterprise. According to our most recent employee census, there are 152 individuals on payroll in the Hudson Community School District. Of those, 111 are considered full time.

Preparing the next fiscal year budget begins by first centering ourselves on the current year's budget. This provides for a 'jumping off' point when developing the spending plan for the new fiscal year. If you were to look at the internal budget documents for the new fiscal year, you'll see a number followed by zeros. That number is derived by looking at the current fiscal year, increasing the budget by a set percentage and rounding to the nearest $1,000. Once that budget is adopted, over the summer we begin to refine those numbers and by fall have a pretty accurate idea of how the (new) current year will perform and what we can expect. That really is the key: you can't prepare the budget for the next year unless you have an accurate grasp of how you are currently performing. Each month of experience that we have in any given fiscal year provides us with more data to evaluate the performance of the budget. 

We have numerous tools at our disposal that help us to measure a variety of metrics in our budget. The one shared here is one of the most powerful in our arsenal and helps us understand the performance of the current fiscal year. This is a variance report, and what it tells us is how far over/under the budget each primary category is operating. For example, in the month of February, we collected $1,470 more in property taxes than was budgeted (compare this to January where we collected $2,710 less than was budgeted). Cells that are shaded in green indicate budget categories that are performing better than expected, whereas those shaded in pink represent categories where we are performing worse than expected. The primary takeaway with this report suggests that we are currently underperforming our revenue by just over $62,000 and overperforming our expenditures by $67,771. Both revenue and expenditure are uneven, meaning they don't always arrive at the same time, which is one of the reasons you don't see a uniform color across the report. The other explanation is that the budget category is simply not going to be 100% accurate. If it was, well that might be suspicious; or lucky. And by lucky I mean lottery ticket lucky. In any event, this is the report that was used when we developed the draft FY2026 fiscal year budget. With 66.67% of fiscal year 2025 encumbered, this provides us with enough experience to begin development of the next fiscal year.

Once we have an accurate idea of the current year budget, then work can begin on the 'out' year budget. When developing the budget, the strategy deployed is to underestimate the revenue and overestimate the expenditures. Beginning first with the revenue side of the ledger, much of this is formula driven. In fact, roughly 78% of our revenue is generated by the formula. The formula determines how much property tax AND how much state aid the district will receive. Our inputs are known as miscellaneous income, which is comprised of anything that isn't property tax or state aid. As a reference point, our miscellaneous income inputs come out to just over $2 million. The largest driver of miscellaneous income is open enrollment tuition, at $1.42 million. This number has been suppressed by roughly $200,000. (Under-estimate revenue, over-estimate expenses)

On the expense side, we again start with the current budget. For this exercise, we've increased each category by 8% and rounded to the nearest $1,000. 8%! That seems crazy, right? Well, keep in mind that as our enrollment continues to grow, so too does our need to properly staff our programs. Also understand that the 2% SSA rate that was passed by the legislature nets out to 9.37% for Hudson Schools. See 'This Was Predictable' March 26, 2025. At the same time, the expenditure side of the ledger is developed in a way to capture all of the next fiscal year's spending authority. To put this in perspective, this spending plan would still result in an increase in our unspent balance-with the caveat that it is not all backed by cash. We'll discuss that in a few weeks when we tackle the concept of solvency. In any event, the expense side of the ledger is exaggerated by at least $140,000. (Under-estimate revenue, over-estimate expenses)

The balance of our total budget comes through a couple of funds that we won't spend much time talking about here: the debt service fund, which is used to service our long term debt. Primarily this where the property tax revenue that is generated for the repayment of general obligation bonds is accounted and expended. The final two funds that round out the total school budget include the activity fund and the nutrition fund. Neither of these funds generate property tax, but instead rely on fees for service. Revenue for the activity fund is largely gate receipts from events and the nutrition fund is primarily through the sale of student breakfast and hot lunch. 

Next week we'll spend a little time talking about the proposed changes to Iowa's property tax system and how that may impact our school district.