For years, the New Prague School District maintained a healthy fund balance, money maintained in reserves to pay its day-to-day operating costs, expected and unexpected, between receiving state aid and property tax revenue.
It was likely easier to accomplish during a time of higher enrollment and available income, both from the state and locally. But as we all know, things change.
During the levy referendum campaign earlier this fall, some folks questioned the need for additional revenue – the district asked for $2 million more over the next 10 years – at a time when income exceeded expenses. The district receives property tax income twice annually. Per-student state aid, the lion’s share of its income, comes in monthly, according to Brian Fell, the district’s director of Business Services.
The district has a policy of maintaining an 8% fund balance – an amount equal to just over $4 million of its current $51 million general fund. In recent history, the district’s fund balance has been as high as 26.58% in 2015 and as low as 6.58% in 2023. It has been rebuilt to 14.59% in 2025. An 8.33% level is enough to cover about one month’s expenses should the flow of revenue be interrupted. The district’s monthly payroll is between $3.9 and $4 million.
While some might say there’s no need to adjust the policy since the flow of revenue will not likely be interrupted longer than a month, others will point to the record 43 days the federal government was shut down over our elected leaders in both parties’ unwillingness to consider a compromise in the best interest of the American people and not their own egos and political parties’ interest in a win. Unlike the federal government, its unfathomable to think school district staff would be required to work without compensation.
With the state projecting a $6 billion deficit for 2028- 2029 and some form of reduction in state spending likely, the need for the school district to at least consider an increase to the fund balance policy makes some sense. A change is in order, but to what level?
A robust fund balance is smart. Raising it to a ridiculous amount is not such a good idea. The key will be determining the difference between robust and ridiculous.
But what is a reasonable increase? And how should the district reach the desired level for its fund balance? Few would argue New Prague could increase its fund balance with reasonable reductions in spending, especially since the district’s largest employee contract is settled at a favorable level. But there are other labor contracts to be settled, other looming expenses out there.
Even with the work of a dedicated facilities staff, the school district has been fortunate none of the major elements of its building maintenance have gone out sooner than expected. But the clock is ticking.
Increasing the fund balance methodically seems a reasonable idea. This is a situation years in the making. Trying to fix it in one year seems unwise.
Shakopee maintains a range from 8% to 12% while Tri-City United has its fund balance at 9% while working to raising it to 17%. Belle Plaine maintains a 10% minimum for its school district. Jordan keeps its fund balance at a minimum of 12% while Northfield maintains a minimum fund balance of 14% (excluding restricted account fund balances: operating capital, capital projects levy, long-term facilities maintenance, student activities and scholarships).
A plan to potentially increase the district’s fund balance will be discussed in an upcoming non-televised committee meeting. This school board will eventually OK a proposal to adjust the policy or maintain the status quo, hopefully following a thorough public discussion at a school board meeting.
With the potential looming storm, incrementally increasing the fund balance toward a robust 16% seems wise idea.