Call this meeting to order. Please rise for the pledge. I pledge allegiance to the flag of The United States Of America, Welcome to tonight's meeting. And, Tim Brown, it's all yours. Good evening, members of the board, Mr. Maves, and distinguished guests. Excited to hear that there's a lot of interest in the budget today. So we got a lot to talk about. And, we'll dive in and, kind of go through each of the items that we're gonna discuss. And if there are questions, ask them along the way. We'll try to keep it moving the best that we can. So the budget process is really a year long process,
as we're constantly evaluating and looking where things stand in the budget. But it really gets hot and heavy in June, July and August. And before I dive in too deep today, I especially want to thank our Director of Business, Cecily Nunn, who is here today for all her amazing work on the budget, so much work behind the scenes. There's no way this is ready to go today and in the shape it's in without her help. Also, many of you know Mike Reuter, our former CFO. He's a consultant as a as part of a long agreement, and he's had eyes on this budget for quite a while as well. So I just wanna publicly thank the two of them for all their work to
do what we're going to do today and present this, and I'm the lucky one that gets to present it, but their work is certainly valuable throughout the process. So back on September 2, we met with the finance committee and we took a high level picture of where the budget was going to be, gave some insight into where we thought things would land. Tonight, we're doing a board work session where we'll go in a little bit more detail and then we'll post everything as we're required to do on the website and through the DLGF. And then, we'll come back on the next board meeting on October 8 and, have a public hearing on the budget with ultimate goal of adoption on October 22.
So following all the statutory requirements to to make the budget happen. As we start to paint the picture for the budget, one of the most important things that we need to talk about is the net AV. And the net AV is, the total taxable property within our district boundaries, after, various deductions, come into play. And what I what I tried to do in this slide here is to kind of show you an eight year history of where AV is at this point. And and and the thing that you'll probably notice right away is we saw our lowest growth in 2026 than we have in the last eight years.
This is the first snapshot into the the ramifications of SEA one. In fact, we actually got AV that was quite a bit higher than this initially from the county, and they had made a mistake and not taken in one of the components of SEA one. And so we we firsthand saw one of the elements of SEA one in terms of moving our AV further down. I got a slide coming up on on this in just in in just a second. But the idea here is the gross value of property in our school district is
absolutely continuing to increase. All kinds of infrastructure increases throughout our district. The difference is those additional deductions and supplemental deductions that come off, they get to the net value that you see here. So again, the lowest growth that we've seen, in eight years. The other key lever, if you will, to the whole budget process is the number of students that we have enrolled in our district. You'll hear me talk about that as ADM tonight. And there are two counts for ADM by which we are funded,
the one coming up very soon, October 1, and the second on February 2. And there's an adjustment at that second one. If we have more students, we see an increase. If we have less students, we see a decrease. So here's a snapshot, really the detail of where we've been over the last ten years or so in terms of our enrollment. A couple of things I wanna point out that are important to level set here. The first is these are fall count days. So this is a comparison of September count days a few years ago that have now been moved to October dates, not spring count dates. And the and the column on the right purposefully in blue is is where we
stand as of Monday's enrollment. Obviously, that is ever fluid, and moves a couple students each week up and down, but this is the most current calculation that we have. And I would draw your attention to the increase decrease number in 2526. You see an increase there of 385 or excuse me, a decrease of 385 students. That is our our largest decrease until you go back to the 2021 school year. And, obviously, back then, even before, there were some increases involved.
Can you say that what year that was again? Yeah. You I think you see it up there. In 2021, the decrease was 408 students when you compare it to the twenty nineteen, twenty twenty school year. So what I'm looking at is this line right here. This is the overall increase decrease line. Yeah. This line right there. So this shows the minus three eighty five as of Monday. So the most we have lost, which is which is certainly impactful. The other thing that we often talk about that I would call your attention to that is just the new norm for us is kindergarten enrollment versus senior enrollment.
If you look, and we've talked about this through our demographer and other conversations, each cohort, for the most part, sees a little bit of an increase. In fact, of the 13 cohorts up here, meaning first graders this year, second graders next year, there's only two of them, I believe, that you see a drop in. But the the gains are minimal compared to the easy subtraction, unfortunately, of nearly 1,800 seniors and and near 1,200 kindergartners. Even if you see little increases, that's where you see the bulk of your, your drop.
So that's a that's a really important factor when it comes to, talking about our enrollment. The other thing I would say is this is quite a bit under what our demographer predicted, in in the tune of about 335 students this year. He he predicted us to go down by about 50, and and you see there we went down by three eighty five. Still subject to change to the official count day, but that's where it stands today. Can I ask a quick question? Sure. Does that include the new open enrollment Yes. The students coming from out of district? Yeah.
So I'm gonna talk about that in a later slide, but now is a perfect time. Of this number, there are 99 new transfers to the district that are included. 79 of them wouldn't have been allowed to attend before. 20 of them are employees' kids that were new. 79 have no connection to an employee that would allow them to have attended. And I'll talk about the financial impact on that in a minute. Same slide, but now let's talk about the dollars that go with each student. So, again, it's about number of students enrolled in our school district. Across the bottom, you see the support,
per student. And there's another factor called complexity that's a poverty index. This is not part of this. This is the base amount per student. So this is the same amount per student that you get in Muncie, in Gary, in Terre Haute, and in Fishers. It's the same. The difference is the complexity number that's not factored in. What's interesting here is you get to 2526 and we are in the first year of the biennium so we know the increase for next year unless the budgets reopen, and you see a big number there, a 4.28% increase and then another 1.49. The problem with that is for the very first time,
they embedded curricular materials in that. And for HSE, that's about $3,200,000. Said differently, $158 per student. So the real increase in tuition support is over here on the right where I backed out curricular materials. And and and that is a very appropriate and common practice and and actually not, it's it's it's the expectation is what I would say when it comes to looking at the real increase. So we saw a 1.9%, 1.92% increase and then we know next year it's gonna be 1.53.
That increase is great if the enrollment stays steady. You see an increase in in, in funds for sure. When your enrollment drops with that, therein lies the challenge. And we'll talk more about the finance behind it in just a moment. Providing a little bit of background, just a little bit of budgeting one zero one. We're gonna talk a lot tonight about tax rate. That is the percentage, used to determine how much property a taxpayer will pay, per $100 of of AV, that net AV amount that we talked about earlier. The tax levy, I'll talk about a lot tonight too. That's the actual dollar amount that you get in.
So a tax rate might be 1.14, a dollar 14, and the levy might be $20,000,000. It's the total amount versus the actual tax rate itself. And the way these formulas work, you see them at the bottom. To to determine the levy, you take the a v divided by a 100 and times the a 100 divided by the net AV. So just a little bit of an illustration here to talk about how AV really is impactful. So what you see on the top version is our actual debt service excuse me. Our actual operations tax rate in 2025,
that point three five five three. And the first multiplier is taking this year's, excuse me, that year's net AV. So the 2025 net assessed value times the operations rate in 2025 that produces a levy of about, almost $41,000,000. When the AV goes up like it is this year, again, not as much as it has in the last eight years, and you take that exact same rate, what you expect is an increase in the levy. That's been common practice for a while in growing communities.
The challenge is gonna be a preview to a slide coming up. When AV drops, it's gonna take a higher rate oops. It's gonna take a higher rate to even pull the same exact levy due to the AV going down, and I'll talk more about that in a minute. Now the bottom example. So let's say we just wanna maintain the same levy. So there's that same operations levy that we had in 2025. If you take twenty twenty five's AV, it took a tax rate of point three five five three to obtain that.
This year, to get that exact same levy, it would take a slightly lower tax rate. But again, a preview, if this AV drops like it's going to in 2027, it'll take a higher tax rate just to pull the same exact dollar amount that we would have pulled the previous year, let alone an increase. So can can we just kinda do a little bit of layman terms for a second? So basically, the assessed value, and we have tax that we're paying taxes. We have the tax rate. You're saying because of the amount of students we have and we'll be bringing in
those funds, because the tax rate changed or the assessed values changed. So let's talk about this in two different buckets. Thank you. Let's talk about the student bucket that has nothing to do with property taxes. So that is education fund dollars. That lives in this bucket over here. Correct. The bucket that is that is tied to tax rates are gonna be our operations, our debt service, and our referendum. Correct. And that has nothing to do with the number of students that we have attending. So two different buckets, two different revenue sources,
two different strategies to obtain funds. Okay. So let's talk about that. Perfect segue. Thank you. The education fund is is that fund that is based on essentially the number of students that we have enrolled in our district. There are some supplementary grants that go along that with, special education students, academic, achievement, English language learners, and career and tech ed. But the majority of the education fund is absolutely funded by the number of students in in in in your in your corporation. And that is used to pay for those things in the classroom, teachers, instructional support,
building principals, supplies, technology, things of that nature. The operations bucket, which is that property tax bucket, that's used to broadly pay for those non classroom expenditures. So you think about custodial, maintenance, transportation, anything not directly tied to the classroom, central office, property and casualty insurance, you know, anything not directly tied to the to the classroom. And that is funded through local property tax. Each year under the current legislation, we are held to a maximum amount. We talked about it last year, the maximum levy growth quotient. And that number for HSE this year is a little over $42,000,000
in the, operations fund. Then we have a referendum fund, which we, changed the rate two years ago, and that is exclusively now used for teacher salaries and benefits. There's a very small portion that pays for security, but essentially, the majority, if not all, of that fund pays for teacher salaries, wages, and benefits. We are held to the maximum levy that was approved by the voters excuse me. The maximum rate that was approved by the voters, point one nine nine five. And despite what, AV may do, we can never, without an adjustment to the referendum,
change that rate. The other funds that we'll talk about today, not as quite a detail on, is debt service. This this explains itself. This is the fund that pays for the debt to, renovate buildings, to keep up the operations of a lot of things through our geo bonds, the things that we're doing right now at Fishers Elementary and HIDGE and and, FCI, most of many of those things are coming out of debt service. We have two funds there. We have a debt service fund that is exempt, which, is approved by that means the debt was approved through a referendum. And then we have our traditional debt service that we we typically think about with
our geo bonds. Rainy day fund is just that. It is that emergency the dam broke bucket, if you will, that we go pull if we need anything, in terms of an absolute emergency. We have not, used that fund for a number of years, but there's no revenue for the rainy day. That has to be a transfer from one of the other funds. And so we have not put money in that fund for many years nor have we, pulled from that. Thank goodness. It does serve as a little internal cash flow for us. So at the beginning of the year, we will transfer money out of the rainy day fund to help with those property tax funds because we don't get those monthly.
And at the end of the year, we put it right back in rainy day just to help with cash flow. And then kind of a unique one that's not part of the budget order but is part of the budgeting process is our self insurance dental fund. This is only revenue from premiums paid by both employees and the district, and then claims that we have against, against that get paid out of the dental fund. And may I ask, if we use funds for some reason out of the debt service or rainy day fund, does that have any impact on, let's say, our corporate rating and our bonds that we use if we deplete fund from those?
Yeah. I mean, with without a doubt, having a, any kind of balance in rainy day is important. And so, a rating agency would absolutely look and say, you know, what happens in an emergency? There are no funds in rainy day. That is gonna be impactful. The future debt and our ability to pay that obviously is important as well. But I would say without a doubt, a a zero or a low rainy day balance would be impactful. And currently, we are at a stellar rating. Correct? We are. Yeah. We're one of, I think, four or five schools that have the highest rating in in the state of Indiana. Thank you. Jeff,
I don't know if you there's a little icon in the corner. Sorry. So let's talk a little bit about the impact of SEA one. So it hits us a couple different ways and I think it's very impactful for the budgeting process. Less important about the actual numbers because these are very fluid, more important about the concept, and this is what I was talking about earlier. The green line you see is the gross assessed value prior to any deductions for all the property in our school district. And as I said earlier, we're an affluent and growing school district,
and the infrastructure around us is growing like crazy. You see the green line is absolutely projected to continue to grow. The blue line is the net assessed value, and it would have grown prior to SEA one pretty parallel for the most part with the green line. So a steady increase in the AV. The problem is with the additional deductions that were added to SCA one, attempting to save the average taxpayer, which certainly has its value, it it crushes us from a school district's perspective because we don't regain the AV
that even we had in 2025 until almost 2035 before we're talking about the same AV. And back to my earlier present you know, presentation comment that if AV is gonna drop and you even just wanna get the exact same levy, you have to raise your tax rate. And that's just to skip the exact same. We know expenses go up in all areas and, the budget has always been based on the hope or the expectation that net a v would go along with it.
So the numbers aren't as important here as the idea that this is this is really a big deal. So there's that slide. If AV drops, which it's absolutely going to, and we just wanna get the exact same levy in those funds, it absolutely takes a higher tax rate. Or, you know, if we just wanna get our our available maximum operations levy, and we have to raise that with the declining AV, that absolutely raises that rate even more. So just to do the same type of business that we would have been doing
before is going to produce higher tax rates. And I do wanna mention that some of these slides do come from our friends at Policy Analytics. This is one of them. They partnered with us to do a parcel by parcel analysis of our district, which really helps to hone in on these numbers. So if the AV wasn't, you know, challenging enough, the next challenge is that new, homestead tax supplemental credit that most people in our district will see in the form of their taxes of a minus $300 which is after everything's done and the tax taxes
are figured, there'll be a minus $300 for most of our, patrons at the end of their tax bill. Certainly impactful, a couple grocery trips. But what does it do to our budget? In 2026, it's it's expected to be about $4,500,000. That's on top of the AV challenge. And my note at the bottom is important here as well. The expectation is this impact will continue to grow year on year on. One of the things that's unique about this is typically any kind of circuit breaker
or credit, for the most part, doesn't hit debt service. So whether it was on purpose or not, they did not protect debt service. So it will hit our cash balance in debt service this year in 2026. There's some conversation that suggests maybe this will move all to operations in the future. That would have to be a legislative, initiative. But if it did that, all of a sudden now our operations fund takes a full $4,500,000 hit and then higher amounts in the future after that.
So there's sort of prong two of the challenge. Prong one is the AV drops. Prong two is, the the credit cost us about $4,500,000. Prong two b is what happens to the referendum. So that referendum, which we're held at that point one nine nine five rate, we gain a little bit in 2026. And the dotted line is what would have happened if we would have not had the new legislative initiative. The the the solid line is showing what happens with these new drops in AV.
So starting in '27, we're gonna take in less money every year all the way out to to about 2,032 before we even get back, really 2033 to this year's number. That's a loss of about $2,200,000 every year from what we would have expected. So 2.2 here, and then 2.2 doubled here, and then 2.2 tripled here, and you can just see that fall all the way through. So a fund that funds five schools,
teachers, salaries, wages, and benefits, three elementaries, an intermediate, and a high school, starting in '27 is gonna take less money in every single year. And there's no other place to get that money. We're, we're obviously doing work to guard the education fund, and we're still spending down cash balances. And now we're taking a fund and we're going to start receiving less and less money every year. I'm going to stop you there, Tim. So when you approved your referendum two or three years ago, you had to put in a spending plan. That was based on that Hashmark line that we knew we would be getting those
dollars and that's the reason you put a rate at 0.1995 because it would be adequate to fund everything that we wanted to do through that process. Now since it's gone the other way, we're going to work to make a recommendation to the Board to go out for a referendum in 2026. We cannot wait, and now they've changed the law, you can only do a referendum on a general election year, so either '26, '28 or '30. The loss that we have, we cannot continue having enough money to actually operate the school district.
So we thought that we would be okay two months ago. But as this AV has come in and we then saw another cut that happened because they didn't apply SEA one correctly, this is just the situation that not just Hamilton Southeastern is in, school districts all over the state are in this now. And my colleagues in Hamilton County have told me that they all believe they're going out in 'twenty six as well because of the impact of SEA-one in their own school districts. So we just want to say that out loud tonight because we're starting to work
on this process. As you know, it is a long process. But the difference is with a fixed rate, you saw what we were going to get because the AV was going to go up. Now we're gonna have to ask for a higher rate, but we will not use that highest level of rate until the last year of the referendum. So for just numbers game, we may ask for 40¢, but the first year only need $22 and then the next year maybe only need $0.25 But because the AV keeps going the wrong direction,
we have to be able to generate enough dollars to fund everything that we had planned using referendum dollars. So that will be a big education piece for everyone because it's no longer just a fixed tax rate. And referendum is something we can control and work with to obviously, it has to be approved. But I mean, it's something that we as a board and with the administration have control over working to be work on those projections going forward,
if you will, correct? It's something because we can't control the assessed values. We can't control beds and seats. I mean, we can do all the great things. It makes our school district amazing so people come here, but we can't control that part. Referendum, we can, correct? Well, we can If it's a group project. If it's what I'm saying. We can project our spending plan. Correct. And, you know, just what mister Brown said, the last time it was 96% or so for teacher salaries and benefits and four percent for safety. You still have to outline what you're going to use those dollars for and how
many dollars you're going to bring in each year. And then follow-up with that. And I know it's easy to say woulda, coulda, shoulda, but we didn't have, of course, this information when the board and the administration worked to come up with that plan and have those savings. The whole laws changed. Right. That's what I'm trying to just make it point and clear that those were numbers that were made because we felt we were going to hit those points to make savings for the district and at the same time be able to budget for the
district. Correct. Okay. I just also want to clarify or add, even if the board approves the referendum, it doesn't mean that the voter, when at election time, is going to approve or allow it to pass. Absolutely. So we still need to plan for the pendulum to go either way. Correct? Yes, absolutely. Thank you. And I just the one final comment on that is the whole idea is just to slow this curve down and just try to get where we would have been, and under the new sort of hand we were dealt. Do we know if we put a referendum on the ballot,
if it were to not pass, does it negate the existing referendum? No. It would be written in a way that that would not, take place. Okay. So if it if it were on the ballot, it would be, in theory, a replacement or an addition to. But if it did not pass, it would revert to the point one nine nine five? That is correct. And go through 02/1931? That is correct. Thank you. To that point, just one other comment. If that happened and you wanted to re up your, referendum, you'd have to run it in 2030 because you gotta stay on the even years now under current legislation.
Thank you. So let's get to the budget story. If I didn't paint a, dreary enough picture, let's go a little bit more. So I told I told you a minute ago about the enrollment that was in place. So based on the drop in students, the estimated tuition support number for the twenty five, twenty six year based on Monday's enrollment is is minus a $172,000 and that is based on the 1.92% increase in the funding formula after curricular materials with the drop in the number of students. Important to mister Orr's point earlier, if we had not taken in those 79 new transfer students that are not eligible
without the new, policy that was passed by the board, that number would have been an additional $550,000 in the red. Not 550, an additional 550 into the red. We're 79 transfers that are not connected to a staff member. Could I interrupt and ask one question? Was 79 our cap? Do you recall? I can't recall. Or we could have accepted more than 79? Yeah. There were doctor Kaye, there were room in other schools. It was just based on our process of of what we took in and Okay. Thank you. And the criteria that were established, of course. In terms of staffing,
overall staffing positions remain relatively neutral in terms of cost for the year. There were some groups that there were some savings, some groups that was that were a little bit more expensive. Overall, those remain pretty neutral. One of the other challenges is, our medical insurance premiums. Our benefit trust is continuing to, cost a lot of money, just to be direct. And so we have already worked through our benefits committee and I appreciate the work of our team on that committee because those were some very difficult decisions, to raise plan one's cost by 10.5% and to raise plans two and three,
those are our high deductible plans at 16.8%. So there's no doubt from a budget perspective that this is gonna create an increase in both the district and the employee contributions. There are a lot of reasons and a lot of factors that go into this. We could really get in the weeds, but I I do think it's worthy of note prior to this year that the benefit trust went three years without taking any kind of premium increase. And so, that's one of the challenges and there are several others that are factoring in, to the increase in medical premiums for our self insurance fund. On a broad question,
broad question, can you say where we are and compare it to other school districts as what we offer as far as positive and average? Let me clarify your question. Are you talking about the deductible, the out of pocket, the premium cost of All the above. All the above. That's probably a presentation in in in amongst itself. I do think our benefits align well with many school districts' benefits. There are aspects of our benefits package that are more rich than others. There are aspects of our plan that you might find another school is is maybe
a little bit better in one or two areas. But I would say a general overview would be that we have very positive benefit offerings for our staff in the health space. And, obviously there are challenges that go along with that but, if we took a snapshot, we're we're we're a pretty good comparison. I would go one step further and say if we stepped out of the education field and compared it to the business world, you would find our benefits to be extremely, valuable, anecdotally just talking to business owners and folks of that nature. Thank you.
Tim, can you also tell us in the premium increases, how much of that is absorbed by the district and how much is absorbed by the employees? Yeah. That's a great question. That is a collective bargaining process. And so once that is determined, then we would come back to the board and make a recommendation on what the contributions would be part of the collecting bargaining process. And then for non collective bargaining folks, what we would recommend as an increase. And it would come back to you for a vote at that point. Continuing with the budget story,
some things that are gonna impact the education fund, really all funds, but in particular the education fund. In 2026, we are part of a mental health grant that we've had for a number of years. We're We're getting ready to start year four of that grant. Part of that grant makes some of those positions roll back to the education fund and not be grant funded. So we have predicted about nine total positions that are combined social workers and counselors that will move from the mental health grant to the HSE budget in the education fund. So obviously, there's a financial impact to that. One of our our real successes as we continue to have amazing academic,
progress and growth is the work of our literacy coaches. Through, initiative through the state of Indiana, we were part of the literacy cadre, which paid, $66,500 for the first year of salary, wages, and benefits for a literacy coach and $33,000 for the second year of a literacy coach in the cadre. As those coaches move off the cadre, those expenses do fall back to us. So that's a little over $400,000 in the 2526 school year. I already mentioned the referendum will have a projected one time increase, so that is a positive.
Unfortunately, that is sort of one time money as that goes away very quickly and drops in 2027 and in future years, pending any kind of movement in the idea of running a referendum. That can certainly switch that curve pretty quickly. Another success that I would bring to the group today is that our operations budget, you're going to see when we present the final budget here in a minute, is reduced by a little over $2,000,000 and that's due to some significant cost aversion strategies. Our operations team has has invested significantly in areas to make cuts and save the
district money. And we also continue to move some of those expenses to the geo bonds to protect the operations budget. So some positive movement in there for sure. Tim? Yeah? What is the cost of the nine positions that will be Yeah. I good question. You know, you think about what one of the things that's difficult in the average staff member. Right? If you if you took the starting salary of $48,500 and that person has family insurance, by the time you you calculate all the benefits that go along with it,
you're easily at $80,000 plus. When you look at social workers and counselors, they are paid on the, professional agreement scale. So if I just started at the beginning and said, gosh, maybe just through a round number of a $100,000, some will be more, some will be less, nine positions is $900,000. And that's a, a gross estimation, but I think it's appropriate to say that because everything comes along with that, salary benefits, insurance, all the things. And I was in a meeting today with Representative Behning and the expectation is that
once these are in place that the school districts keep them in place because the literacy initiative is not a one time thing. And then we followed up with whether or not there would be any funding in the next biennium to help support that And he thought that there would be a line item to help support it because of the success of it. And to clarify, if I didn't answer your question correctly, I was referring to the counselors and the social workers. Okay. I just want to make sure. And are we looking at any other grant writing strategies to kinda absorb some of this cost from there? Yeah. Part of the requirements,
and I'm gonna get into weeds just for a second, that mental health grant is that the district has to have a plan to absorb that. And we have had that plan. This is not a shock to us or anything like that. This has been built into the financial plan for years. To say that we are actively looking for any and every grant that makes sense to us is a 100% true. And there's no doubt the student support that these critical positions, provide. But if it's out there and it makes sense, we're going after it. There's no doubt about that. And I wasn't just talking about staffing positions. I'm talking about our full budget story. Are we looking at every grant that could help assist us with these losses?
One of my favorite lines, and my colleagues might laugh, is every bean every bean counts. And that's the philosophy we live by in the finance department that if we can find it, we're gonna and and I say finance department. It's all it's teaching and learning. It's operations. It's everybody. And absolutely, we're all doing that. So quick question too. In 2022, when all that came to us, one of the big things that some people on the board, I'll speak for myself, was the financial part of the mental health grant, not the mental health grant in itself, just the impact it would make over time and the uncertainty of where we would
be over the year's progress. So no one could predict if this was going to happen in happen in legislation to affect some of the things and where we were in costs. So my question going back, unfortunately, like you weren't here, Mr. Mapes wasn't here, but in 2022, we had an outlook of where we would be. Did any of those numbers change or go up or we still have those same numbers? I think the only one that would really know would be Doctor. Kegley. But when we had the numbers that we were predicting, are those numbers still flat of what we were predicting or have they gone up?
Numbers specifically referring to those staff positions. Correct. Mhmm. Because each year, there was staff coming on. Yeah. And so on. And it's possible for me to answer just because because I I don't know. But we obviously try to factor in an annual increase for those positions. To say every single detail predicted exactly what it was going to be, I think the best answer I would say is it was 100% built into our financial plan. And as a result, we knew this was coming. And I think we've worked hard to this point as challenging as some of these financial decisions are to protect some of our most critical positions.
I can say that if you had guesstimated about $900,000 and then there's a year left on that before it's fully absorbed. At the time, we predicted that when it was fully absorbed, it was gonna be about $1,100,000 So that sounds close within a couple of months. Yes. And I absolutely, off the top of my head, I'm curious. When we went through, we said once fully absorbed, that thing would cost about $1,100,000 a year. So we're if there's a year to go, that's probably close. I'd say we're somewhat on track. Probably not too far off. Alright. But also to Latricia's point on the question that she had,
which was good, that she brought it up, is the fact that we can't even though we have that plan and we budget for it, we don't know if that staff member had their whole family on the insurance plan or what their benefits were you know, transition there to your point. Exactly. Couple other items. You're gonna see and I think it's gonna be really important as I show the budget, actual comparison. The difference between revenue coming in and permission to spend or, appropriations. You're gonna see an addition in appropriations in several of these key areas. One of the areas that and and budgeting is not a science.
It's an art. It's it's not perfect when you're talking over $300,000,000 to predict exactly where everything fell or will fall. One of the areas that we needed to increase because we didn't get it right in in 2025 in terms of what we're seeing is the budget for substitute teachers. Absolutely, we're spending a whole lot more in the space of substitute teachers. And there's a couple of reasons for that. Absences are are are increasing a little bit, but we're doing a really good job of filling those. Our substitute teacher department, has recruited more and more. And so good news for everybody,
we're filling those at a at a more regular rate. But there's a cost with that. And so in the budget from twenty five million dollars to $26,000,000 there's an increase of about $1,500,000 Curricular materials, although we get $3,200,000 or that was our old number from the state, we're absolutely spending more than that every year. And so, we we overspent that line or are going to overspend that line in '25, so we increased that line by $500,000 Health care costs, I'm not suggesting the district's paying 4,400,000.0 more. What we are doing is we we under budgeted that a little bit in 2025.
And so since we under budgeted that, we gotta right size that in 2026. And then the budget for exceptional learners, not not a a bunch of new positions added in this space, just right sizing that that budget in '25. We're underspending or overspending there. We need to right size it in in 2026. This is not to say there's revenue to support this, and I'll talk more about that in a minute with the concept of cash balances versus, appropriations or permission to spend. But those are some of the big increases in the education fund. Due to the fact that our AV didn't grow near as much as we thought
and didn't even grow to the 4% that allows us to go grab the the maximum amount in the operations fund, I had previously stood up here and said that the plan was not to increase the tax rate in 2026. That curve ball of, the AV dropping on us really within the last two weeks made me adjust that just slightly. And so my recommendation for the budget in terms of the presentation today, and certainly we'll go through the process of future meetings, is to raise it by, less than a penny,
so point zero zero four three, and this is only in the operations fund to go get that maximum 4% growth that the state allows us to get. So we would move the operations rate from point three five five three to point three five nine six. In a minute, you'll see we're gonna keep debt service the same. It's only the operations rate just to get that MLGQ. And I've got a slide that compares past tax rates and information related to that coming up. Couple little, budgetary processes. We've got to stick to our timelines.
We've got to publicly advertise everything. That'll all start tomorrow, after this presentation. To protect ourselves, we always advertise a higher tax rate and a higher budget in some cases and lower AV. That way, if there's some sort of calculation error, the DLGF can go in and raise that for us if they wanted to back to the amount that we advertised. But they could never, if we tried to nail it with our advertisement right on the money and we made a mistake, they never can say, oh, you made a mistake. We're willing to go above what you advertised. Our advertise is the absolute max.
So that's that concept of you're gonna see an advertisement a little higher than what'll actually happen because they can never raise the figures if there's ever a mistake. And, Tim, can you clarify, you said it but say it one more time, that that's been traditional. That's not just the last couple years. That's been going on for years. That better be the process for every entity in the state of Indiana k. For just that reason. Thank you. You either are very, very overconfident and know that you're perfect or you protect yourself a little bit. I'm not perfect. So here's the 2026 proposed advertised budget versus what really we predict we think will
happen. So on the left, you will see that education fund. You see the budget is a $170,000,000. Again, this is not saying we're getting a 170,000,000 in revenue. This is permission to spend. This is what we believe is necessary to support the education portion of the budget in 2026. You see referendum there the same way. We're again, that's the one that we know what we know, which is the max rate is point one nine nine five. There's no reason to advertise any higher than that. We'll advertise a lower AV to protect ourselves.
Debt service, you see the the advertised amount is a little higher. That's just that protection idea. We think the real budget will be a little over almost 66,000,000. Debt service exempt, we think that's gonna be spot on. You see the rate there, will come in a little lower than what we're advertising. There's operations. We'll advertise a little higher than what it is. We do advertise a rainy day budget with the intent that we hope that we never need that. And then that self insurance dental fund, that's just kind of that unique little arm to the budgeting process. You'll see a little bit of an increase there. Let me go to another slide and give you a little comparison.
So '25 to '26. Let's look at what the actual budget order is versus what we predict it will be in 2026. Again, you see this big increase of 159,000,000 to a 170,000,000. You say, oh my gosh, we got all this new revenue coming in. No. What we're saying is to pay the expenses that we're projected to pay, we're gonna have to use cash balance to to in order to fund the education, fund budget. And and you see that in the tune of about $10,000,000. And most of those big items, there's some add additions and subtractions. Most of those big items were on that slide where I talked about,
substitute teachers and, exceptional learners and health benefits, those things. You see referendum, again, we get a little over $1,000,000 more. Hopefully, that turns out and the, AV doesn't drop because it's still not official yet. Debt service, you see, the budget does increase. We're trying to protect that cash balance in our debt service fund. You see debt service exempt, that budget is actually a little bit lower. If you take what the rate is in debt service and debt service exempt and you look at what it's gonna be predicted to be in '26, they're exactly the same if you add them together. So no increase to the to the tax rate there.
Operations, there's that little bit of increase. It's going from point three five five three to three five nine six. So overall, that tax rate, which was point one one point one four three three goes to 1.1476. Here's the history of our tax rate over the last six years. So you can see that rate of 1.1433, which we held in or established in 'twenty four and held in 'twenty five is still quite a bit lower than the tax rate that we had in 'twenty one, 'twenty two, 'twenty three. Obviously, any increase in the tax rate is is substantial.
I think this is is pretty small in the grand scope of things in order to maintain that full 4%, levy growth in the operations fund. Couple other assumptions that are important. Part of the budgetary process is that we transfer funds from the education fund to the operations fund. You'll have a resolution before you, the night of budget approval that keeps that at $15,000,000 But transparently, the budget projections are based on the potential of transferring less due to the constraints in place that we already have talked about tonight.
So we'll have the same resolution in front of you, but the budget is based on a slightly lower number. Interest will be continued to continue to be deposited into the education fund in 2026. We estimated about a $500,000 drop. It's absolutely connected to that federal, interest rate, and we recently saw a drop. Experts in that space say we're gonna see another one or two drops in 2025 and maybe more in '26. So we, we downplayed that just a little bit in terms of the the revenue that we would expect in terms of interest. So looking ahead, education operations and referendum continue to have budget structural deficits,
meaning, we're gonna spend more cash in those funds than we have revenue coming in in 2026. In the short term, what's this do? It spends cash balances. The 2026 budget is absolutely developed in a way that has flexibility. I would much rather budget a little higher. I don't think it's a lot high. I wanna be very clear, A little higher and know that we come in slightly under budget than to come back to you in November or December and say, hey. I need permission to spend even more cash than what we projected in the budget. So absolutely, that's a budgeting strategy.
There is not a lot of fluff built into this, though. So those increases are real. We we continue to wanna take steps in the right direction to try to correct this. That's gonna take multiple years. And as we talked about before, although there's a slight recommendation for a tax increase in 2026, we're gonna see significant recommendation increased recommendations starting in 'twenty seven just to pull the exact same levies in those funds that we were able to pull in prior years. So that is a very, sort of budgetary philosophical difference where a lot of districts,
including ours, would say, hey, we're gonna work to the same tax rate. We're now gonna start in '27 saying we're gonna just try to maintain the same levy, and that's gonna require a much higher tax rate in order to do that. Can you can you tell us a little bit more about using the cash balances? That makes me nervous, spending that down. Where do we stand now? What's common practice? Yep. If we use what you're planning on now, what position does that put us in? Or how do we get it back? Yeah. Couldn't have set up a better segue myself. Thank you. So projected cash balances. So what you see in 2025 is the actual budget order.
Those are the same numbers that you saw earlier. And the the second column is where we project or excuse me, where cash balances were in each of those funds at the beginning of the calendar year 2025. So that's a very different mindset of permission to spend but cash. Right? Because education, we get a monthly deposit and the money's in and the money's out. Referendum, we get property tax draws that come in May and June and November and December. Operations, we get property tax draws that come in in May and June and November and
December. And so you you were constantly monitoring both of those areas. Based on the the established in play 2025 budget, this is what we expect the cash balance to do at the end of the year. Education, right now, we're trending a slight bit better than that, but but not by a lot. So it's possible that cash balance ends a little better than that, but we 100% will spend a significant amount of this cash balance by the 2025. Referendum is trending right on the money, in terms of where the budget's gonna be, so I'm confident that this is gonna be darn near close to where the cash
balance will end. And then operations, you see a dip there and that is actually underspending the budget by a little over $2,000,000. So we would have spent about 5,000,000 in cash. We were able to, through some of those cost aversion strategies, save a little bit, but that's already factored in here. And so, again, spending cash in all three. The budget that's before you today that's based on actual expenses with some projections projects that cash balance to be down to a little over 11,000,000, 7.4, and 5.6. To mister Orr's point,
average month of expenses here, dollars 14,000,000. So even just budgeting at home, two months is a good benchmark. One month is desperation. Maybe too strong of a word. One month is good practice. The budget is projected, cash balance to be under one month's, expenses in the education fund. Now again, when we talked about this, the idea is you budget for what we think could happen. It would be great to underspend this by 2,000,000, which would be a really big ask, and we're still spending cash balance to do that. That answer your question?
So if I'm if I'm reading that right, we're starting cash balance 11 or $1.01 25, It's about $20.25, 26,000,000. Yep. I'm just on the top line there. If you move them across, we drop by 5,000,000 by 01/01 of '26. Yep. And then it's essentially cut in half the next year. So you can't do it again. I mean, if that goes up looking ahead from '27 to '28 Yeah. You take the projections absolutely. You take the projections that are in place and you you move them out to '28 and '29 You can't run a That that's a negative at that time.
Yep. That It's either increase our revenue or drop our spending. Those are the only two options. You got it. And we unfortunately know what the revenue is here. Right. And that, at this point, is a negative number for for the base, amount per student. We absolutely think there's gonna be a little bump due to those supplemental grants, like I mentioned, special ed, CTE, those types of things. But it it absolutely is not enough. That's a good Let's say we'd even if we bring in outside students and all that, it's not even close to making up the difference. So I Yeah. And one item I didn't actually put on the slide deck,
and I thought I did, is we also got an unfortunate curveball related to, teacher retirement. And teacher retirement's the term. It's any certified employee that has a teacher's license. Administrators have them, teachers have them. That the teacher retirement district requirement went up by six tenths of a percent. And that has an impact of over $600,000 that we just have to pay. And you may remember I was here last year saying the same thing at half a percent. That was over $500,000 at that point. And so yet another cost that is factored in that we really had no control
over, and just it's absolutely just something that we have to do. Tim, so are we looking at both sides? As to Tiffany's point earlier, it sounds like there's going to be a recommendation for another referendum. We have to plan for the downside of that. How does that process begin? How do we see that? I mean, we're looking at what $10,000,000 really $14,000,000 from start to finish to come up with here to get back just even. If we can't increase revenue, we would have to cut that much. Tim, do these balances include the referendum that we're trying to get,
or is this based on our current Based on current. That's what I thought. Yep. And I wanted to go into a segue of what you kind of said too, either we have to cut spending. And without getting into the weeds of what that is, I know that there's, as you sowed, several different buckets. And how and when and, Mr. Mabes, you might need to explain it. I'm asking from my layman brain, what are we doing to go in to cut spending? Like, is there what is that plan that we are doing our part as well as a district instead of just reaching out to the community and just reaching out to
other entities to say, Here's what we have to add, ask for more money. We have to do What are we doing as an administration and as a district to also be mindful and make cuts, whether it's, you know, a half a percent and every single department has to cut their department funds. I mean, we know there's athletics. We know there's education. We know there's, you know, operation funds. We have all these areas that we're spending money in. What are we doing as a district to show that we are making cuts,
I guess? We're trying to find efficiencies, right? That's why we're looking at redistricting because we have some facilities that just kind of underutilized. And at the same time, that would help with transportation because we might be able to eliminate some routes. What Tim has already talked about with cost aversion things that we've done, refunding bonds, negotiating pricing down, from the beginning we said the thing we don't want to cut is our programs because academically our programs are the top notch in the state, and that's why people come here. Right. We will ask the board this spring to extend the out of district transfer date
up to October 1 because we think There was I know there were some people I had parents call me who said, hey. We'd like to apply to come to your school, and it was past our deadline. And so that would be another thing. We're we're really getting I feel more aggressive in what we're marketing, so people close by understand the opportunities educationally that you have if your child attends Hambleton Southeastern Schools. Right. The academic performance that we have is probably the greatest attraction that we can show anyone. 96% of our third grade kids pass an IRE three. I AP scores going up.
I learned scores going up. I mean, if you're close by and your school districts aren't providing those things, if you can provide transportation, your son or daughter can come here. So that's another way that the Education Fund gets healthy. And literally, we're looking at programs in health care to try to make things more efficient and save costs for ourselves as well as the employees. There's everything is going to be on the table, and including cutting down expenses in every area. The problem we run into is just with the 2% of of the turf that
Tim just talked about. When that happened four or five years ago, they said, hey. We're gonna take care and pay that 2% for all you schools. Take those dollars and invest them in salary and benefits for your employees. Well, we did that. Right. And now they've taken that back. But the expense that we had stays. Correct. Okay. And so those are some of the difficult challenges that and once again, it's just not hamilton Southeastern schools that all schools are facing right now to try to figure this out. And I think it's just so very important that and I appreciate you saying all those things because this is something that our community will ask,
especially going into referendum. Like, okay, you need money, but what are you doing to cut? And I think those words right there, thank you very much for sharing that, and thank you for the hard work of our administration and the work that we're doing. And we are doing some great things. Thank you to all the teachers that are here and all the programs that we do. We have top notch school districts, so I just want to put that out there. And that's why I wanted to make that clear is we're not this didn't happen because we chose to just make these financial mistakes or errors or anything.
It wasn't that. It was certain legislation things that happened that put curve balls into the way that we are allowed to be spending or input or, excuse me, receive funding. So I just want to say thank you for the hard work that you guys are doing to show that we're working hard to be efficient in the district. This really ends I ended with the same slide that we had before, just showing where we think the budget will be in 2026 once we start this advertising process, which begins tomorrow. Budget order in 'twenty five, predicted in 'twenty six. And remember,
this is not revenue. This is permission to spend, permission to spend cash that we have on hand. And as we talked about, that is shown on the previous slide. I'd only ask one more question and it's kind of one that I probably know the answer on, but more for the community than anything because I think it's one of the easiest that as I drive around and talk to people is, to Suzanne's point, what can you guys cut, what can you do less with? We are really starting to get our facilities back online. There's been I've been on the Facilities Committee, and things are improving. We have a beautiful new building we're about to open.
We're making renovations in other places. We're doing athletics fields. We're really proud of our soccer and lacrosse facilities. Can you explain how when someone says, you know, oh, well, if you if you didn't have such a big scoreboard at the football stadium or wherever, that that doesn't really translate into operational cost and save us. Yeah. Yeah. So that's that's debt service. Right? And that's part of the tax rate. Unfortunately, there is there's no vehicle whatsoever to take debt service dollars and put them on, like, salaries and and and wages and benefits and things like that.
Really, truly a separate bucket. And you're right. For the average person, that is a little bit of a, you know, gosh. How can we do this? But we're we're struggling here. They they really do work independent of each other. And to your point, any maintenance that we push on and don't take care of now just compounds itself in the future. And and you can say that with everything. And so there's a fine line between, doing the right thing now or paying for it a lot later. And, I I it's not my position to say but our team has done an amazing job in that. Thank you. Anyone else? All right.
Thank you very much. All right. We are adjourned. Thank you very much.