The Grand Forks School Board has approved the 2020-21 District Budget and Tax Levy document, which shows that the school district will operate with a $5.7 million deficit budget in the 2020-21 fiscal year.
This represents a nearly $1.25 million increase in the deficit compared to a preliminary budget approved by the board July 28, according to Scott Berge, the district’s business manager. The preliminary budget reflected a deficit of $4.47 million, he said.
The budget document, approved by the board on Monday, Sept. 28, must be filed with the county auditor by Oct. 10. The fiscal year runs from July 1 to June 31.
The district’s total budget expenditures for this fiscal year is anticipated to be $113.8 million, with about $108.1 million in revenues, Berge said.
Expenses stemming from changes necessitated by COVID-19 are major causes for the $1.25 million deficit increase, Berge told the School Board at its regular meeting Monday, Sept. 28.
“COVID has aggravated our budget fairly significantly this fiscal year,” he said. “The impact is going to be far-reaching.”
Much of the increase in the deficit is tied to the hiring of 13 additional teachers for distance learning, whereby students learn completely remotely, and for staffing of isolation rooms -- one in each of the district’s 18 schools -- for students who exhibit COVID-19 symptoms.
Of the total deficit, $3 million is allocated for construction projects, Berge said.
Given the need for additional staff, overtime and more custodial work, he projects that COVID is costing the district a little more than $1.6 million in staffing costs, he said.
Decrease in per-pupil funding
District administrators also are facing the loss of state support, in per-pupil funding, for 78 students who have elected to be home-schooled this year. Their parents or guardians are responsible for their children's education, with some oversight by the district; but the state does not provide per-pupil funding for those students.
The state’s per-pupil reimbursement rate is $10,036, a 2% increase over the previous rate, Berge said.
Enrollment has dropped this year. The district’s demographer predicted an increase of 70 students, but enrollment actually decreased by 58 students, he said.
“Home-schooling is a big factor in that enrollment decline,” he said, adding that other school districts are facing the same dilemma.
The total decrease in the state’s per-pupil funding to Grand Forks is slightly less than $1.3 million, Berge said.
He and other administrators are hopeful that the enrollment dip, due to home-schooling, will be “a one-year situation,” and those students will return to Grand Forks schools when the COVID threat subsides, he said.
Effects of CARES funding
Adding to district administrators’ concerns -- and complicating their budget planning -- is that funding from the federal CARES (Coronavirus Aid, Relief and Economic Security) Act expires Dec. 31.
“We will not be through with half of the school year at that time,” Berge said.
Those funds are intended to pay the salaries of employees who are under contract to work through the end of the school year in late May.
“We can claim only about $700,000 by Dec. 31,” out of the $1.68 million that is available, Berge said.
The deadline presents a “big unknown,” he said.
“Will some of those unspent dollars be carried over to the next year, or will there be another (round of) CARES Act funding?" he said. “There’s too much uncertainty to build into a budget."
He and other district administrators hope the government will extend availability of funds past the Dec. 31 deadline.
In response to a question from board member Cynthia Shabb about whether CARES funds could be used to improve buildings or for ventilation, Berge said the funds “are limited to salaries and contracted services beyond what we would normally incur” and cannot be used for equipment or building structural improvements.
Few mills to support budget
The district levies 10 mills for its building fund, but the state allows up to 20 mills. If the district had those extra 10 mills in place, it would have meant at least $2.5 million more in revenue for this fiscal year, Berge said.
The Grand Forks school district has “half of what other large school districts (in North Dakota) have -- that is a big aggravant to our budget,” he said.
The number of mills is decided by school district voters, and that question may be part of a referendum package the district is in the process of planning for next year.
The deficit situation is not new to the school district. It has been operating with a deficit budget since 2015, but before the 2019-20 fiscal year, construction costs -- mostly for emergency boiler issues and infrastructure projects, notably at South Middle and Phoenix elementary schools -- comprised the biggest component, Berge said.
In the past, to cover construction costs, the district budgeted $2.6 million in 2018-19 and $3.6 million in 2019-20. If those extra 10 mills for the building fund had been in place, the revenue would have considerably offset the deficit, Berge said.
The district levies a total of 101 mills, the same as the previous fiscal year, Berge said. This figure includes 86 mills for the general fund, 10 mills for the building fund, 2 mills for the special assessments fund and 3 mills for the special reserve fund.
A mill, in property tax terms, is equal to $1 of tax for each $1,000 of assessed value of a property. With county property valued at $250 million, one mill would equal $250,000, he said.