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Board raises fund-balance target to 18% amid state and federal revenue uncertainty
Summary
After a detailed five-year forecast presentation, the North Kansas City Board of Education voted to increase its operating fund balance goal from 16% to 18% (plus or minus 2.5%), citing volatility in state foundation formula changes and federal funding levels.
The North Kansas City Board of Education on March 4 reviewed a five-year financial forecast and approved adjusting the district's operating fund-balance target from roughly 16% to 18% (plus or minus 2.5%).
Finance director Matt Fritz presented the forecast and described assumptions used for revenue and expenditure projections, highlighting uncertainty tied to state and federal revenues. Fritz said the forecast incorporates the governor's proposed budget, the state's foundation formula changes, and other assumptions on assessed valuation, enrollment and known cost increases.
Fritz told the board that the state foundation formula (including a governor-proposed $200 million increase to the formula) and an updated free-and-reduced-price lunch threshold would materially affect average daily attendance (ADA) calculations and state payments. He said the lowered threshold for free and reduced lunch in the current year added roughly 700 ADA to the district's formula in the forecast.
Board members discussed revenue volatility at the federal and state levels and noted that federal ESSER funds had temporarily inflated the district's federal revenue share in recent years. Citing that volatility and the need to maintain strong bond ratings during future capital planning, one board member proposed and moved to change the fund-balance guidance to 18% plus or minus 2.5%; a second supported the motion. "The volatility feels higher to me than it has been," a board member said while urging a higher reserve to provide cushion.
The motion to adopt the new fund-balance goal passed by voice vote. Fritz said that under the forecast assumptions the district would not need to make major program cuts before 2028-29 but that the increased reserve target would give the district more time to respond if revenues fall short.
The forecast presentation included line-item figures provided in the board packet: January operating receipts of $147.9 million and monthly operating expenditures of $27.6 million; fiscal-year-to-date operating revenue of $243.6 million representing 69.7% of total budgeted operating revenues; and a tax budget of $185.9 million with collections to date of $179.3 million (96.4%). Fritz said staff will continue refining ADA estimates and revenue projections ahead of the June budget and tax-rate-setting process.
Board members praised the forecast as a tool for long-range planning and thanked finance staff for preparing the materials. The board directed staff to use the new reserve guidance in upcoming budget and staffing decisions.
