Financial Position Remains Strong

Iowa public school districts' fiscal year runs from July 1 through June 30. Following the end of each fiscal year, we are required to file an annual report with the Iowa Department of Education reporting on our financial status. Because we are governmental entity, we follow Generally Accepted Accounting Principles (GAAP) in order to ensure our reporting is consistent, transparent and comparable. For this reason, even though our fiscal year ends on June 30, we have an approximate 60 day 'hold open' period where, as revenue and expenditures are realized, we have to determine which fiscal year those disclosures need to be accrued. That report is due annually no later than September 15, and we were able to complete and certify the report last week.

Using data from that report, we run a test against 9 separate financial metrics to determine the overall fiscal health of the school district. While useful in the immediacy, it also provides valuable information over time to help us understand trends and take corrective action when necessary. The table below shows the trend over the last decade. I am pleased to report to you that the fiscal health of the Hudson Community School district remains strong. This is due in no small part to our outstanding business office, the governance and oversight structure of our Board of Directors, and the ability to say 'no' when a request doesn't reflect the facts on the ground. It is about fiscal discipline and separating out the 'wants' from the 'needs'. You can read the full analysis under the subheading Basic Financial Data on our school website. 

The district’s overall financial position remains good. One year ago, the primary concern was a decreasing solvency ratio with a cash balance lower than the expected target range. It was further exacerbated by the number of complex special education cases and an increasing special education deficit. The district took corrective action by implementing a cash reserve levy. This has resulted in the stabilization of our solvency position. 

General fund revenue increased by 12.6% or $1,367,305 from FY 2025 to FY 2026. This is due primarily to increases in enrollment. The base enrollment number used for fiscal year ending on June 30, 2026 was measured on October 1, 2024. This represented an increase of 50.85 student over the fall 2023 count; an anomaly that does not appear to be the norm going forward. Other contributing factors include an increase in the cash reserve levy to counterbalance the decline in the solvency ratio and an infusion of TSS (Teacher Salary Supplement) to meet state mandated salary minimums. General fund expenditures grew by 3.7%, coming in at grand total of $11,846,9054. 

The district carries $304,460.29 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 is 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. 

Tax rates for the FY 2026 were 16.69275, up from 16.67884 in FY 2025. The higher rates are directly related to the overall valuation of the school district and efforts to maintain a healthy solvency ratio through the implementation of a cash reserve levy. For the fiscal year that just ended, the district levied $362,590 in CRL. 

The district currently carries long term debt of $20.054 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 $11.650 million of general obligation debt, $1.780 million of physical plant and equipment levy capital notes, and $8.404 million in SAVE, revenue bonds. The final piece of financing for the high school was completed during this fiscal year and as such the debt was structured in a manner that permitted the district to take advantage of market conditions and property valuation growth. These notes are encumbered through our capital funds improvement and debt service funds are therefore not general fund obligations. Further, the district carries short term debt of $574,277.50 (which is included above) to support the connected learning initiative in the district. 

Enrollment projections remain stable for both the short and long term. Projections that were previously indicative of large gains do not appear to be coming to fruition. At least at this point, plans for rapid increases in enrollment will not need to be addressed insofar as adding infrastructure is concerned. Instead, it will be important for the district to manage staffing patterns in relationship to enrollment since employee costs consume 80% of the budget.

The district also realized a decrease in the special education deficit; from $771,671.30 in FY 2025 to $442,276 in FY 2026. This is due primarily to fewer students attending specialized schools and one fewer special education bus route. It is important to also note this area tends to be unstable and fluctuate widely as students with special needs move into and out of the school district. 

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 $6,580,569 or 35.71% in fiscal year 2026. Like the financial solvency ratio, this puts the district in a good position in light of unpredictable funding from the state. It is important to note that a new state law, effective July 1, 2-26 has put a 35% limitation on the maximum carry forward, so it is anticipated this balance will be throttled back in order to comply with this new mandate.