Superintendent News & Views
North Tama’s Financial Future
By David Hill,
North Tama Superintendent
I’ve recently had a few North Tama district patrons inquire about the school district’s financial stability. These people are asking because they care about North Tama, and they are concerned because they’ve heard about the financial troubles that many of Iowa’s smaller school districts are going through. They’ve heard that most Iowa districts are experiencing a decline in enrollment, and they know that Iowa’s schools have had several consecutive years of low supplemental state aid.
Since these folks have taken the time to contact me due to their concern about the future of North Tama, I figured there are probably others that have had the same questions but haven’t taken time to inquire. That’s why I decided to address the topic in this week’s column.
I want to make it perfectly clear: North Tama’s current major financial indicators are POSITIVE. Our cash balance is healthy, and our spending authority is even greater than the level recommended by the Iowa Association of School Boards. I believe that North Tama can and will remain a financially viable school district for many years to come as long as your school leaders – including myself – manage resources appropriately.
That’s a very basic analysis, in “layman's terms” as they say. Now, I’ll explain the reasoning behind that assessment. The number one indicator of a school district’s long-term financial viability is the Unspent Authorized Budget, abbreviated as UAB. UAB represents the district's legal authority to spend. Districts with a negative UAB may be dissolved by the state; or, the state may give these districts a two or three-year extension if they can come up with an approved financial “work-out plan.”
For optimum financial health, the IASB recommends districts maintain a UAB ratio (calculated by taking the UAB divided by the Maximum Authorized budget) between 5% and 15%. North Tama’s UAB ratio at the end of fiscal year 2017 was 22.9%, well above the recommended range.
Even with several years of declining enrollment and low supplemental state aid, North Tama’s financial health (as indicated by the UAB ratio) has continued to improve. Your school board’s careful decision making and outside-the-box thinking are the primary reasons for this. We have implemented three shared administrative positions (including my own) and two shared teaching positions in recent years. This provides savings as well as additional revenues through state incentives. We’ve realized significant savings by reducing a bus route. North Tama has joined a health insurance consortium to get a better deal on employee insurance. To the extent legally possible, we have used sources of revenue other than the general fund to pay expenditures. Some teaching and support staff positions have been reduced to part-time and others have been eliminated completely. Our general goal is to look for opportunities to reduce staff without layoffs, so we look for opportunities to reduce through attrition whenever possible. We also carefully consider all general fund expenditures. All of these measures have contributed to an improved UAB ratio.
North Tama uses an approved financial model to project the UAB ratio five years into the future. Our model predicts an average decline in enrollment of ten students per year and supplemental state aid increases of 1% per year. Using these assumptions, our projections show the UAB ratio declining to about 10.9% by the end of fiscal year 2022. While this declining ratio is a concern, the projected ratio still falls within the recommended range.
Keep in mind that the whole purpose of these projections is NOT to tell us when the district will be in financial trouble; rather, it is to PREVENT that from happening by providing a warning to the district – along with time to adjust. Knowing that our spending authority is likely to decline will help the school board make informed decisions to secure the long-term financial viability of the district. Looking ahead 5 years gives us time to make adjustments now to ensure the district's viability. This means we can implement cost-saving measures and take other actions this year, next year, and in the following years which will positively affect the district’s outlook well into the future.
For the past 13 years, I have served as an administrator in schools with declining enrollment. Based on my experience as well as the information provided by noted school finance experts, it is my honest belief that as long as there is a collective desire among the school board and school community to make it happen, the North Tama County Community School District will be able to maintain its financial viability for the long term.
I'm proud to be North Tama’s superintendent, and excited to have the opportunity to provide leadership as we work together to ensure a quality education for students in the North Tama district – now, and for many years to come.
I welcome any questions you may have about the district’s financial status. Feel free to visit my blog at http://redhawksupt.blogspot.com where you can leave comments or ask a question about the information in this column. You can also refer back to other blog posts and Star-Clipper articles that I’ve written over the past few years. Also feel free to reach out or follow me on Twitter, where my handle is @DavidRobertHill.