St. Joseph School District projects $3.7 million shortfall after state underfunds foundation formula

Staff member presented a preliminary budget forecast saying the St. Joseph School District expects to close the current year with a modest operating surplus but faces an estimated $3.7 million deficit next year after the state underfunded the foundation formula and reduced several state grants.

The presenter said the legislature met its constitutional deadline to pass a budget but “did not fund the foundation formula, either for this year or next year,” and cited an aggregate underfunding figure the district is tracking. For planning, staff said they used an SAT per‑pupil assumption of 6,800; the presenter added that the budget currently funds roughly $69.50 per SAT while Senate Bill 727 had set $71.45 in statute.

That shortfall, combined with the loss of one‑time federal reimbursements the district received this year and declining enrollment, drives the projected drop in total revenues from about $174 million this year to roughly $158 million next year, staff said. “We’re still looking at about $3,700,000 deficit for next year,” the presenter said.

To narrow gaps, staff highlighted savings already realized through district consolidation and vacancy management: "between certified and classified, we're about 5,300,000 in savings" from not backfilling positions and reducing building footprints, the presenter said.

Staff also described Fund 4 capital spending and a near‑term administrative step the board must approve: the district sold a $20 million bond and received a premium and interest on the sale; the presenter said interest earnings must be spent within two years or the district could be required to return roughly $200,000 to the IRS. To meet tax‑law timing rules, staff recommended coding completed HVAC projects and other eligible items to the bond rather than leaving interest unspent. “If we don't spend it all by June 3, we have to pay over $200,000 in interest back to the IRS,” the presenter said.

Board members asked where the additional HVAC work had been coded and whether the projects had already been paid; the presenter confirmed the projects were completed and asked the board to designate eligible projects so the district can re‑code expenditures and remain compliant.

The presenter and board members also discussed the career ladder program, which the presenter said the legislature reduced by $15 million in conference committee. Staff cautioned that the ultimate funding available to each district will depend on how many districts participate and submit career‑ladder plans. “By cutting this $15,000,000, I also believe they're gonna underfund for your [district],” the presenter said, noting the state match for the district would tighten if fewer state dollars are available.

On special education staffing, a board member asked about a contracted teacher of the visually impaired charging $150 an hour; the presenter said the district contracts third parties only when it cannot recruit qualified applicants. The presenter noted the district is implementing a requisition process to control rehiring: open positions must pass through district leads and HR before refilling to avoid untracked staff growth.

Staff walked the board through a redesigned budget document due in June that embeds the budget message throughout, shows revenues and expenditures by fund and object, adds personnel detail (personnel accounts for about 75% of expenses) and provides a four‑year forecast to improve oversight. The presenter said the June submission will include final figures and that the governor can line‑item veto budget items through June 30, which could further change available funding.

Next steps: staff will present a June budget amendment and the preliminary budget to the board for approval, continue modeling different scenarios (including assessed‑valuation and sales‑tax sensitivity), and ask the board to identify capital projects eligible to be funded from bond premium/interest so the district avoids the IRS repayment. The board did not take a formal vote during the workshop.