Albert Lea school board approves revised FY2025 budget, projects 11% year-end fund balance

Albert Lea Public School District board members on Monday approved a revised fiscal year 2025 budget that projects $59,873,842 in general fund revenue and $60,869,523 in general fund expenditures, leaving a projected year-end fund balance of roughly $7.4 million, or about 11 percent of expenditures.

District finance staff presented highlights of a revised budget first discussed March 3 and asked the board to vote on the updated numbers. "This evening's discussion is regarding fiscal year 2025's budget," finance staff member Paul Durban said, summarizing changes since the district's adopted budget. Durban said most of the revenue increase — $1,711,576 — comes from a revised average daily membership projection that added about 141 students for the year, and that the district also saw an increase in federal grant funds this year.

Durban told the board that projected expenditures in the general fund rose by $2,372,337, driven in part by purchases using federal Elementary and Secondary School Emergency Relief (ESSER) funds and by increased staffing and contracted services. "We are in a healthy place financially as a district," he said, adding that the revised budget would result in an 11 percent fund balance "should nothing change from the trajectory we were on at that time." Durham also said the district expects to end the year possibly between 11 and 12 percent.

Board members asked questions about the mechanics of the revisions. Director Neil asked whether items newly shown in red on the spreadsheet increased the total budget and therefore reduced the percentage fund balance. Durban replied that some items merely reflect new fund-class codes (for example, QComp moved to code 437) while other fund classes (codes 456 and 457 created this year for Read Act one-time funds) were anticipated revenue and expenditure that were previously lumped elsewhere. "If you looked at the line items 456 and 457, and we removed those from this formula," Durban said, "you would see a different percentage."

Durban also described changes to the food service (fund 2) account. He said the district planned about $415,000 in additional food-service expenditures to buy cafeteria furniture and kitchen equipment to avoid entering an MDE (Minnesota Department of Education) spend-down review, which can occur when a school district's restricted food-service fund balance exceeds six months of operating costs. "A new allowable expense is cafeteria furniture," Durban said. He reported total food-service fund expenditures of $2,806,582 and an ending restricted fund balance of about $401,506.

Board members discussed whether the board's fund-balance policy (Policy 714) — which calls for a 12 percent target — needs review. Durban said he would include the fund-balance policy in the next board update and that discussion in finance committee would be appropriate. He also noted state legislative proposals under discussion that could allow more flexibility in use of restricted funds, but cautioned that federal rules tied to some programs could limit that flexibility.

A motion to approve the revised FY2025 budget was made and seconded; the board voted in favor and the motion passed. Chair Klotz called for the vote: "All those in favor signify by saying 'aye.'" The motion passed.

The revised budget document shown to the board lists audited June beginning balances, revised revenues and expenditures for fiscal 2024-25 by fund class and a projected ending general fund balance of $7,395,578.13. Finance staff noted QComp code changes and the creation of Read Act fund classes 456 and 457 as bookkeeping changes that reflect anticipated, restricted one-time dollars. The district also carries a third-party billing balance that Durham said typically ranges in the $700,000–$900,000 area; for conservatism the revised budget used $800,000 revenue for that line.

The board approved the revised budget and the district will continue working toward the final budget and further discussion in finance committee and future meetings.