The School District 110 board of education approved a revised Waconia public schools’ budget for 2020-2021 and the preliminary budget for 2021-2022 at a meeting Monday, June 28, also resolutions requiring additional school board review and approval of budget processes.

The budget for next school year amounts to almost $46.7 million compared to about $46.6 million for 2020-2021. While expenditures are generally flat, with only moderate changes in staffing and programs from the previous year, the district’s finances will be buoyed next year by new revenues from the local school referendum that passed narrowly last fall, plus an increase of 2.45 percent in the state’s funding formula for 2021-2022.

That’s the largest student formula increase in 15 years, according to legislators, who finally hammered out the latest state budget last week at the eleventh hour of a special legislative session. About 80 percent of public school funding comes from the state.

The change in the per pupil funding formula represents an education spending increase of $1.1 billion for Minnesota schools over the next four years. Legislators say the education budget addresses the top request of public schools – money not mandates. Schools also are expected to benefit from federal COVID-19 relief money.

With additional revenues and earlier spending reductions, the Waconia school district expects to have a surplus of around $1.7 million at the end of the 2021-2022 fiscal year, which could be applied to help reduce the district’s operating debt.

As reported previously, the condition was driven largely by a shortcoming in state funding due to a change in the state’s special education funding formula. At its peak in 2018-2019, the deficit exceeded $6.4 million. The district has been working with the state on a plan to reduce the negative fund balance and regain its financial health within the next five years.

As of June 30, 2021, the deficit was projected at around $5.4 million. It’s now expected to drop to about $3.6 million in 2022.

In the wake of the district’s recent financial challenges, the school board last week adopted three measures of additional budget scrutiny.

One was a resolution requiring the administration to obtain prior authorization from the school board through a formal vote for any expenditures that have not already been budgeted for and approved by the school board. The second was a resolution to require the administration to provide monthly financial reports to the school board for review and action.

The third is to conduct a forensic audit, separate from the district’s annual audit, with a focus on the district’s preliminary versus final budgets to evaluate about an $11 million difference between them over the past eight years.

The vote on all measures was split, with some members calling the actions overreach and cumbersome for school administration. Opponents also called the discrepancies between preliminary and final budgets in line, noting the challenges in the school budget process because many preliminary budget decisions regarding revenue are determined based on student enrollment projections and by the state legislature, which often meets into May and beyond. Finally, the nays balked at the anticipated $10,000-$20,000 cost of an additional audit.

However, the majority of board members agreed to proceed with the audit, noting it could help hone budget processes, identify any inherent issues, and give the board and the public confidence in budget decision making.

School board leadership will work with the Minnesota School Board Association and the school board’s attorney to identify an independent auditor to conduct the forensic audit.

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