On Monday, March 31, the Salem Board of Education welcomed School Finance Consultant Dr. Rick Timbs to present his findings on the district’s fiscal health, as well as proposed recommendations for stability and security in the coming years. The district first engaged Timbs in the fall, and he spent the fall and winter conducting an independent review of budgeting and finances and encouraging development of a long-range fiscal plan for the future to sustain academics, extracurriculars and educational experiences for students.
Timbs looked at the district’s annual budget, expenses, aids, tax levy decisions and use of reserves over several years. Among his findings presented Monday night:
As previous budgets were developed, the district relied on state aid, federal aid and grants to minimize the tax burden on the local community. To that end, the necessary annual tax increases were insufficient to keep pace with current inflation rates.
Since the tax cap law was implemented in 2013, the district has lost about $6 million over time by opting to keep tax levy increases at or close to 0%, rather than proposing the calculated limit increases defined by law in annually proposed budgets.
“Right-sizing” and changes to staff assignments has helped the district’s financial situation, but will need to continue in the coming years, otherwise salaries and benefits will overwhelm the district’s finances regardless of any potential revenue gains.
Failure to take action immediately and in the next three years will make it increasingly difficult to sustain the district’s finances beyond 2028.
With significant sums of federal grants going away, the district will not be able to sustain pandemic staffing levels, programs and class sizes and/or maintain fund balances at their current levels.
The attempt to override the cap last year was wise, to help with revenue generation. However, it would not have been enough even with passage. More needs to be done.
Among the consultant’s recommendations, the Board and district leadership will need to:
Regularly balance and evaluate revenues and expenses, as the distance between anticipated revenues and expenditures has grown significantly.
Monitor the tax cap and limit the use of fund balance should the super majority of voters not approve an override.
Significantly decrease expenditures simultaneously while addressing necessary physical and structural needs of the district’s buildings.
Implement long range financial and capital project plans to help stabilize the tax cap. By implementing a long-term financial strategy, the Board can ensure the district’s financial health for years to come.
The next step in the budget development process is to consider three scenarios aimed at closing the remaining $1 million gap for the 2025-26 school year budget. Those scenarios will be presented at the next budget development workshop at 6 p.m. on Tuesday, April 8, in the school’s auditorium. The workshop is open to all members of the community.