Laconia school leaders present budget that leans on reserves after $1.2M state funding drop

Laconia school officials presented a budget to the Laconia City Council budget hearing that closes a roughly $1.2 million state funding shortfall largely by drawing on reserve accounts, cutting positions and prebuying supplies while keeping the district inside the city’s tax cap.

The district’s business administrator, Diane Clary, told the council that reductions “in state funding for Laconia” — including adequacy, special‑education and building aid — required a mix of cuts and one‑time uses of reserves to avoid direct impacts to students. She said the plan brings “our net budget to within a few dollars of this year, just a 2.6% increase overall.”

Clary and other school leaders said the district faces two primary drivers of the adequacy reduction: a lower count of families completing free‑and‑reduced‑price meal applications since COVID and an increased equalized valuation for the city following recent construction. “The biggest 2 items impacting our funding are free and reduced eligible families and our equalized valuation for the city of Laconia,” Clary said. She added that the district will intensify efforts to increase applications for free and reduced meals but that higher application rates would not restore next year’s lost state funding.

To close the gap, Clary outlined specific steps: cut five positions (two currently staffed and three funded but unfilled) that she estimated would save $562,000; replace retirees and resignations with lower‑cost newer teachers to save about $100,000; prebuy about $20,000 of supplies at each school using fund balance; and draw from reserve accounts. Clary described plans to take $400,000 from the special‑education reserve to cover large out‑of‑district placements and to use the educational stabilization reserve to offset salary obligations under two collective bargaining agreements the city approved.

Assistant Superintendent Amy Hines described how out‑of‑district special‑education placements drive costs. “For court ordered students that are identified special education… we have a cap, they call it a 402 cap, that we have to pay up to. And then after we reach that cap, then the tuition is paid by the state,” Hines said, summarizing the district’s process for costly placements and the state cap mechanism. Hines said typical out‑of‑district tuition can be among the largest line items in special education and that the district currently has about 17 such placements, with only two being district placements.

Officials provided reserve balances and the projected effect of withdrawals: the special‑education reserve held about $1,152,000 before the proposed $400,000 withdrawal (which would reduce it to roughly $715,000), and the educational stabilization reserve held about $1,370,000 and would drop below $1 million after the planned draw. Clary warned these are finite, one‑time funds: “We’re fortunate that Laconia has healthy reserve accounts that we can lean on. Unfortunately, they won't last forever,” she said.

Council members asked for clarifications on terminology and formulas. Clary described the state’s adequacy formula as having “about 10 inputs” including special‑education counts, free‑and‑reduced‑price eligibility and equalized property valuation, and said the formula is “quite an involved procedure.” Councilors also asked whether recent property development and higher equalized valuation can reduce state aid; Clary confirmed that higher property valuation can lower adequacy aid because the formula treats the community as less in need.

School leaders also reviewed how federal COVID relief funds affected recent budgets. Diane Clary said the district “has been fortunate to receive ESSER funds since 2020,” and that those funds — tied to federal pandemic relief (ARPA/ESSER) — ended last September, creating a fiscal “cliff” the district is now managing.

The school board approved the final budget last week, Clary told the council, voting 7‑0. That board action now moves to the Laconia City Council, which this evening has the budget before it for consideration; the council is made up of six voting members for the municipal approval step.

Councilors pressed on longer‑term sustainability. Clary said she expects adequacy funding to decline again next year and warned that repeatedly drawing reserves is not sustainable: “If we have to dip into those reserves every year to make up that deficit, they'll go away pretty quickly,” she said.

The presentation included background figures on enrollment and local impacts: the district’s enrollment is “just over 1,800 students,” Clary said; the free‑and‑reduced eligibility rate has fallen from about 70% to roughly 50% (she attributed part of that change to fewer families completing applications after pandemic‑era universal free meals); and the district’s unpaid meal balances exceed $50,000.

No formal council action was taken at the hearing; the meeting served as the school department’s budget presentation and Q&A before the city council’s deliberation and any subsequent vote.

The council adjourned the budget hearing at 6:26 p.m.