Muncie Community Schools flag funding squeeze as operations fund relies on transfers, contract reviews and short-term bonds

Muncie Community Schools finance staff told the board that the district's operations fund will face sustained pressure over the next five years after two one-time revenue sources expired after 2022.

At a work session presentation, Mr. Derome, who led the briefing, said the district previously relied on a transfer tied to a waiver for "protected taxes" and incremental financing that provided roughly $3.2 million in 2021 and $2.6 million in 2022. "Those revenue sources expired after 2022," he said, adding the district now largely depends on transfers from the education fund and a portion of property-tax revenue. "We transfer up to 15% of that total revenue every year," Mr. Derome said, referring to the state rule that limits such transfers.

Why it matters: consultant Baker Tilly's five-year look and the presentation flagged that a state loan payoff in 2028 opens short-term capacity to issue debt, but ongoing circuit-breaker losses and rising operating costs could deplete rainy-day reserves if the district does not identify sustainable revenue or recurring savings.

The presentation quantified the property-tax cap impact: "If we're supposed to get $22 million in property taxes, we collect about $10.8 million," Mr. Derome said, a gap the consultant and staff attributed to circuit-breaker (tax-cap) losses of roughly 48% to 50% for the district. Baker Tilly's fiscal-health "stoplight" analysis showed several green indicators but flagged fund balances and circuit-breaker losses as yellow/red concerns.

Where cuts could come from: staff pointed to three large operational categories in the district's pie chart. The maintenance/custodial contract with SSC represents roughly 32% of the operations budget and has annual escalator clauses; the contract expires July 1, giving the board an upcoming decision point on scope and cost. Transportation and utilities were named the other top targets for efficiency work. Transportation staff reported initial savings from route consolidations and midday-route changes, which were described as maintaining services while reducing cost.

Insurance and one-time shocks: Mr. Derome emphasized the impact of insurance costs, noting a $320,000 increase in property-and-casualty and workers-comp coverage earlier in the year, which was paid from the operations fund and substantially affected projections.

Capital and borrowing options: consultants and staff discussed leveraging short-term bond capacity to fund facility improvements that could reduce operating costs (for example, LED lighting or HVAC work), while cautioning that capital solutions require upfront funding and careful structuring. "We're doing short-term bond projects and looking at projects like finishing the heating and cooling at the Fieldhouse," the presentation said.

Enrollment and revenue context: staff and the consultant also noted enrollment stabilization at about 4,908 students but pointed out that about 2,500 resident students attend schools outside the district, limiting the district's state-aid and enrollment-driven revenue.

What's next: presenters said Baker Tilly will continue to model budget levers and that staff will return to the board with options, including renegotiating contracts, soliciting multiple insurance quotes, pursuing targeted transportation efficiencies and, if appropriate, proposing short-term bonds for projects that improve long-term operating costs.

The board did not take a final vote on any of the recommendations during the work session; the briefing concluded with an agreement to continue analysis and bring proposals to future meetings.