Jonathan Alder’s five-year forecast looks strong but growth in the district will likely result in more spending over the next few years as expenditures outpace revenue. This graph shows what happens if the .75% income tax, that is set to run out in 2026, doesn’t get renewed. The green line shows how sharp the drop off in the district’s fund balance would be.
(Graph submitted)
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With ongoing growth in the area, Jonathan Alder is predicting a need for more teachers in the next couple of years and that will mean an increase in spending on salaries and benefits.
Treasurer Mark Ingles told the board of education on Monday that the district is in a good place to handle that. He said the five-year forecast looks positive but part of the forecasting process is to factor in potential levy failures, which would significantly affect being able to handle those new wages.
As the district looks forward, keeping the levies going will play a significant role in the district’s success, he said.
Alder currently has two operating levies on the books on two different, staggered renewal cycles and one of those levies is set to expire in the middle of the forecast timeframe.
Out of the state and local contributions, 64.8% of Alder’s funds are local and those local sources include, among other taxes, a 34.9% real estate tax and a 20.3% income tax.
“The income tax, that 20% there, is made up of the .75% and the .5% (levies) that we have on our books,” Ingles said. “So, it’s a major source of our revenue stream.”
While real estate taxes might be reliable at the moment, given the rise in property values and continued development in the district, Ingles said things could change in the coming years and so the forecast has to consider that change.
Something definite to consider, he added, is the .75% income tax that is set to expire in two years, which would mean a rapid depletion of the fund balance if not renewed.
By the end of the forecast, the district could be up to roughly $1.5 million in deficit spending, if that happens.
Ingles explained that factoring in a levy failure shows what a rise in deficit spending would look like.
“We’re going to be spending a little bit less than what we’re bringing in for the next two fiscal years, a little bit more than we’re bringing in after that (and then) there’s a bit of a cliff there,” he said. “And that’s because the .75% income tax is due to expire in December of 2026. So, without that revenue, there’s going to be a sharp rise in deficit spending that also would erode our fund balance, which we have on hand to pay for operations.”
The other .5% levy is set to expire in 2031.
Board President Bill McCartney said although Ingles has to consider the possibility of the levy not passing, it’s not likely to happen.
“Historically, our community has broadly supported operating levies and we have no reason to believe that trend will not continue,” he said. “He’s just not allowed to submit with that assumption.”
He added that treasurers tend to be more conservative on their projections but the increase in housing purchases will contribute to tax growth.
“Folks buying $400,000-plus houses will bring income tax and property tax with them, presumably higher on average than existing homes,” he said. “The direct answer of how to prevent deficit spending is to of course either increase revenue or decrease expenditures. I don’t anticipate being able to cut expenditures as we have additional students and all of the requisite support staff, purchased services and capital outlay associated with a high headcount.”
Looking at expenditures, Ingles said, in fiscal year 2023, the total general fund expenditures sat just below $25 million but by fiscal year 2028, the forecast is projecting expenses going up to almost $35 million.
“Due to the growth we’re seeing here in enrollment, that’s going to require more staff for our students. So, for this area, I am forecasting adding staff,” he said. “And then, of course, salary and benefits are definitely going to be the biggest part of our expenses going forward.”
The estimated operating expenditures for fiscal year 2024 totals $27,023,076 and of that total, 81% is wages and benefits.
He said that percentage isn’t uncommon, however, noting many districts spend 75-80% of their funds on those items.
“That is to be expected,” Ingles said. “So, we’re right in line with what is typical.”
The estimated revenue for fiscal year 2024 is $29,018,087.
Overall, McCartney said the five-year forecast gives the district a good idea of what is needed going forward but a growing area requires attention.
He said the district has been very lucky with its financial support from the community and hopes that continues.
“Coupled with responsible stewardship of the tax dollars by previous administrations and boards, our district is in a healthy financial position,” he said. “As we enter a period of rapid growth, our cash balance will allow us flexibility and breathing room as expenditures will likely outpace revenue growth.”