Fiscal sustainability

To the Editor:

What is the driving force behind the MCW referendum? Above and beyond all is fiscal sustainability.

That might seem like an interesting reason, as building a new school is not cheap. However, all other options paint a bleak picture for the future of OUR school district. A thorough financial analysis has been completed by the school board and district leadership. Building a one campus facility is the most fiscally sound option for both the district and the taxpayer and will ensure we can operate the school district for decades to come.

Why is MCW in this position? There are many reasons for this. Inflation and unfunded state mandates are among the major contributors. In addition, slowly over time, like most other rural districts, the population has declined. As this decline has occurred, so has per pupil funding. However, students don’t come to us in perfect class sizes of 18, therefore, the ability to adjust programs and services causes greater financial challenges.

As a result, our school district is facing budgets that are in deficit every year and we cannot operate this way much longer. To help understand this budget issue, here is a short budget history.

Think of the school’s unassigned fund balance as a savings account. If we track the unassigned fund balance at the end of each fiscal year back to 2017 (information available in the school district’s audit), the school district has a trend of deficit spending. Other than two years when COVID funds eased the overall budget, the trend has been deficit spending. The school had an unassigned fund balance of $2,972,666 (or 29.80 percent of their overall budget) at the end of fiscal year (FY) 2022. Deficit spending of $439,664 in FY 2023 led to an unassigned fund balance of $2,690,396 (or 27.40 percent of overall budget). Projections for the end of FY 2024 (which ends June 30th) has the school at an unassigned fund balance of $2,395,396 (or 24.19 percent of the overall budget).

Why is this important? The district was in a healthy financial position, which has allowed them to weather the storm, so to speak. However, the fund balance is getting to a critically low point. Based on recommendations from the auditor and the school’s financial management firm, the school board adopted policy 313 in April of 2011 saying, “The school district will strive to maintain a minimum unassigned general fund balance of two (2) months of operating expenses.” Two months of operating expenses for our school district is about 16.67% of the overall budget (we will use the figure of 17 percent for convenience). As you start to evaluate the dollar figures above, you can see that MCW has been inching toward that unassigned fund balance minimum of 17 percent, and projections in the next two years are bleak.

At the April 8th, 2024 school board budget work session, business manager Dan Schroeder said if the school board does not change anything in the budget for next year (FY 2025), the district is facing deficit spending of just under $562,000, which will put the unassigned fund balance at just over 19 percent. By June 30, 2025, the MCW School District will be critically close to the policy requirement of having 17 percent or 2 months of operating expenses in the unassigned fund balance. Schroeder went on to project that the district would finish FY 2026 with a $800,000-1,000,000 deficit, which would put the unassigned fund balance at around 10 percent, well below the 17 percent fund balance goal according to policy.

The school board is taking a critical look at budget cuts in FY 2025 and FY 2026 to stave off this drop in the unassigned fund balance, but those budget cuts come with a cost – the education of our students. The proposed cuts for FY 2025 do not completely erase deficit spending, and cuts will have to be even more significant in FY 2026 to keep the fund balance at or near 17 percent.

Some have suggested the district pursue an operating levy to address this deficit. The cost of an operating levy to a taxpayer is nearly identical to that of the bond referendum to build a new school.

And, this still leaves us with aging buildings that have needed updates and education spaces that are inefficient and don’t meet our needs. A levy would mean that we pay to continue inefficient operations.

This financial picture is why the referendum is of utmost importance to MCW voters. We are deciding the fate of OUR school district. If we choose to vote no, we disregard the projected financial outlook and take a gamble with the future of our school district as we know it. The potential “what-ifs” of failing another referendum are staggering, and losing any students because families are uncertain about the future of the district will further exacerbate the financial problems.

Let’s join together to support the future of Martin County West. This is our school district, and the alarms are sounding that our district needs our help. Please vote yes for Martin County West.

Stephanie Wohlhuter, and other members of the Vote Yes for Martin County West Committee

Sherburn