Appleton Area School District warns of multiyear structural deficit; board favors debt plan that preserves referendum flexibility

The Appleton Area School District board heard a financial update and directed staff to pursue a debt issuance structure that would preserve levy capacity for a possible operational referendum while increasing long‑term interest costs.

The district’s director of business services, Holly Byrne, told the board the district began the 2024–25 fiscal year with an unassigned fund balance of about $15.3 million and a current-year budgeted deficit of about $10.9 million. Byrne said that, using current budget assumptions but excluding planned compensation or staffing changes, the district would end 2024–25 with roughly $4.4 million in unassigned funds and face a projected structural deficit of roughly $9.0 million heading into 2025–26. “We would end the year with a negative $3.5 million in our unassigned funds” under the worst‑case assumptions shown for 2025–26, Byrne said.

The update framed 2026–27 as a target year to correct the structural deficit. Byrne and superintendent Mr. Hartjes said the district is pressing state legislators for higher per‑pupil aid (the current statutory minimum increase of $325 per pupil was included in staff projections) and watching potential changes to special‑education reimbursement.

Why it matters: the board must balance cutting operations, seeking additional state aid, or asking voters for more revenue. Board members and staff discussed timing and design of an operational referendum so that, if needed, new levy authority could take effect in fiscal year 2026–27.

Debt issuance options tied to referendum planning

The board also heard a presentation from Eric Kass, director of public finance at PMA, on options for the remaining $25 million of capital referendum debt tied to the November 2022 capital referendum. Kass laid out two general scenarios: a short amortization (four years) that minimizes long‑term interest cost but creates only a modest levy “ledge” beginning in 2026, and a longer (10‑year) amortization that increases total interest expense but creates a larger near‑term levy reduction that the district could use to make space for an operational referendum.

Kass summarized the tradeoff: the short amortization produced an illustrative additional interest cost of about $3.1 million for the $25 million issuance; the 10‑year variant raised illustrative additional interest to about $8.4 million but would create roughly $8 million of levy capacity beginning in 2026. “One easy comparison is the $3.1 million of interest expense on scenario 1 versus the $8.4 million on scenario 2,” Kass said.

Board direction and next steps

After discussion of likely referendum timing and the district’s limited revenue levers, the board expressed a preference for the scenario that provides more short‑term levy capacity (the longer amortization) to preserve flexibility for a potential operational referendum. The board asked staff and the district’s financial adviser to prepare the paperwork and return the matter for a formal vote on the March 31 meeting agenda. Administration noted the board can still prepay or restructure debt in future years if revenue conditions change.

Clarifying details and numbers mentioned at the meeting: Byrne said the district currently projects approximately $15.3 million unassigned fund balance at the start of 2024–25, a 2024–25 budgeted deficit near $10.9 million, about $4.4 million projected unassigned at year end under current assumptions, and a structural deficit near $9.0 million going into 2025–26. The board was told the district currently has about 55 staff vacancies for the upcoming school year and that special‑education reimbursement is effectively funded at about 30% under current state practice; board members said raising that to 60% at the state level would materially change the district’s outlook.

The board will revisit a final motion on the debt issuance structure at its March 31 meeting and continue budget scenario planning over the coming months.