Savings, extra revenue pushes Medford schools into black for end of year
Medford is still facing a fiscal cliff in two years, but thanks to help from increased revenues and lower expenses is able to take steps now to help cushion a fall in the future.
According to district finance director Audra Brooks, the Medford Area Public School District is projected to have a $1.9 million surplus following the closeout of the 2020-2021 budget year. The district’s fiscal year matches the state of Wisconsin’s and ended on June 30.
At Monday afternoon’s school board finance committee meeting, Brooks highlighted where the surplus came from and presented options on how it could be applied to help with future costs.
The district’s budget called for revenues of $32,001,469 for the 2020-2021 year. The district’s year-end actual revenue was at $32,277,000. The district received $100,000 above budget in rev- enue from open enrollment — largely due to the Rural Virtual Academy (RVA). It also received $105,000 above budget in Medicaid revenue from services to qualifying students that can be billed back to the federal program. The district was also able to increase the amount of funds reimbursed to the district for high cost special education by $63,000 over what had been budgeted.
Brooks explained the district actually qualifies for several hundred thousand dollars in high cost special education dollars, but that the state has a set amount of money in the budget that is divided among all the districts that apply for the aid. She noted that in recent years, the district has gotten better at applying for the funds and this revenue area has grown.
Beyond the additional revenue, the district also saw some significant savings within its budget with the RVA, again, playing a major role.
The district gained $721,000 from the explosive growth in the virtual education school that occurred during the pandemic last year. According to RVA administrator Charlie Heckel, the demand for services from the RVA has increased dramatically from member school districts even within their brick and mortar buildings. The teachers supported by the RVA nearly doubled from 171 in the 2019-2020 school year to 307 last year. Students served through the RVA’s District Connect program, which brings the RVA’s digital platform into the school buildings of member districts, also increased from 1,201 in 2019-2020 to 4,017 last year. The most dramatic increase was in the total courses jumping from 3,507 in 2019-2020 to 15,384 in 2020-2021. These services are all billed to the districts with the revenues coming back and being divided among the partner schools in the consortium.
While the explosive growth due to families seeking alternatives to in-person school during the COVID-19 pandemic is not expected to continue, the RVA is continuing to grow and expand the services it provides. Currently about one-tenth of all school districts in the state are part of the RVA and the RVA is the second largest virtual school in the state.
According to Heckel, the area that saw large growth was in RVA classes being taken in the school buildings at primarily smaller, rural districts where they may not have the teacher capacity for a wide array of courses. He noted that the Elcho School District does not have a certifi ed high school science teacher this year and instead is contracting with RVA to provide a science teacher for a class each day at a cost of about $15,000 to that district. Heckel compared that to the approximate $90,000 cost with wages and benefits to hiring a full-time teacher.
Committee chairman Brian Hallgren suggested that may be an option for Medford Area Senior High School to look at in the future, especially with advanced or specialized classes.
Heckel said the services the RVA offers vary from providing course content for classroom teachers to live instruction on a set daily time such as will be done at Elcho high school this year. Heckel noted that it is often difficult for rural schools to find the teachers they need and that even with the advantage of being able to hire teachers from anywhere within the state, the RVA faces the same challenges due to teacher shortages.
Another area where RVA has been able to improve revenues is in making sure their classes are full. Heckel noted that the funding formula used for virtual charter schools is based on a per diem basis for classes delivered to students. This means that in order to maximize its revenues, the RVA must work to fill vacancies. Heckel noted they have done a better job about how to do this climbing from around 84% a few years ago to 95.1% last year.
“As soon as a seat became open we were able to fill that seat very fast,” he said, noting the closer they get to 100% the better off the school will be.
Other areas of savings were in healthcare benefits, transportation and substitute teacher pay.
Last year’s budget had included a health insurance increase, but when the school board chose to switch to Aspirus, the cost to the district did not change resulting in budget savings of $469,000.
Likewise with fewer trips scheduled, lower than projected fuel prices, sports travel reduced and additional days off last school year, the district saw $250,000 in savings for transportation.
Brooks also noted the district was $50,000 below expenses in substitute pay, in part because of having teachers be able to teach remotely when sick or quarantined with a proctor in the classroom. It was noted there was also an overall shortage of substitutes making finding them more challenging.
Planning for the future
With the school tax rate projected to drop by more than $2 per $1,000 of equalized value as the result of paying off a substantial amount of debt this spring, Brooks said this is a prime opportunity to set aside funds for the future.
She proposed the district apply $427,045 of the funds to the Fund 73 post retirement benefits trust account. This will partially offset the approximately $490,000 the district just paid out in benefits to recent retirees.
When asked about possibly putting more toward that, Brooks said that is the capped amount by the state in order for it to count to expenses for state aids. Under the state’s school funding formula, aid is based on the amount spent each year.
Brooks also proposed putting $500,000 into the Fund 46 longterm savings account to be used for future school renovations, repairs and other projects. Fund 46 is a tool set up by the state government under the Walker administration in order to make it easier for districts to save up funds for larger projects versus needing to borrow for them. Money placed into Fund 46 is treated by the state as being spent as far as aid purposes, as opposed to fund balance which serves as the district’s general savings account. Money placed in fund balance doesn’t count as being spent under the state’s aid formula.
Brooks explained that the ESSER federal dollars will run out in 2024, which will be about the same time as the district will be able to tap into the money set aside in Fund 46. She said this will help the district be ready for when that need arises.
Brooks also proposed placing the remaining amount, approximately $1 million into fund balance. She cautioned that until the district’s audit is completed in the next few weeks, she will not have an exact amount that will be put into fund balance. She noted that adding $1 million will bring the district’s fund balance up to 19% of operating budget.
Much like the operating reserves in a business, fund balance for school districts provides a cushion minimizing the need for short term borrowing to cover things like payroll expenses between tax settlements and state aid payments. Board president Dave Fleegel asked if the additional funds would be enough to eliminate the need for short-term borrowing this year. Brooks said that it would not, however she noted that the RVA is charged with the interest on the short-term borrowing so it does not impact the levy.
Committee members agreed with Brooks’ recommendations and later on Monday night the full school board voted to transfer the funds as recommended.