And if we're not getting the help from our lovely legislature, if we're not having help from other departments, what are we going to do to increase that? And I think by expanding our transportation services, it expands parent choice as well. and that will retain or allow us to get more um students into the district and build that trust with families. So, that's the pro. Obviously, it's to me it's SOF um FG alignment in many of the guardrails. Um a con obviously to this is, you know, and you named it, we're going to have to have more money for bus drivers. We're going to have to ensure that we already have a shortage with the amount of buses routes that we have now. So, really get creative on recruitment and that might spend a little bit more dollars to begin with, but I think overall it would offset the overall goal that we're trying to get at.
I don't know if Katie wants to add anything to that. >> Thank you. >> This is theirs. Um, so we also we also talked about the expand transportation. So I'm just going to add on maybe a couple points to to what Sophia said. I think we've tried everything else. Um, I think districts I I think districts literally have tried everything else. This is the first time that I' that I've ever heard of the expand transportation. This is if if we're saying this is a one time $1 million, right? Like we do need funds to continue to come in and how do we do that? that we get more kids, right? >> Um and so, uh I think to get more kids, then you have the additional funds to then do the other things. Um I feel like I mean allocating reserves, I don't think that's going to do much right now.
Invest in staffing, sure, but who hasn't who hasn't done that? We all invest in staffing. People leave every year. People are leaving by the droves every year. like I want to leave because like literally this teaching is it gets harder every year. Um and we've seen like the data just overall that public teachers are feeling that because they feel disrespected. They feel underfunded and that has really nothing to do with the districts. Um because we would love to give them more money. we we just can't because of our legislation uh and what we have um additional coaches. I haven't I mean I I know that we've seen like some changes here but once again finding people finding the right people because it takes like a right person to be that coach and medical benefits. I mean, I would love to continue to pay medical benefits to people, but once again, I it's not going to I don't think it's going to keep us going in the long run.
>> Mr. Only thing I will add to my eloquent governing board's points on expand transportation is I'll throw a con out there which is um it can be challenging to then maintain that additional staff that you've added because of the dance of the drivers. So that would be a con that we'd have to keep an eye on because like you can build it but if you can't maintain it then you know you've kind of exposed everybody to look how wonderful this is and then but you've got to be making certain that you're bu structuring it in such a way that it's sustainable over time otherwise you'll have a broken promise to people. >> Exactly. Thank you. And um luckily >> luckily >> million dollars >> uh we we've got a little bit more um but these are all strategies that we use in Kraton uh to align our resources.
So um in the real world we don't have to pick just one >> right >> uh but these are all real strategies that we are um focused on discussing and planning for um but it does uh take some work when we're back there doing that to to look at each and every one of these and find the value and find the alignment. So, I kind of wanted to show you some of the conversations that happen when we discuss these areas uh and um as we move forward to make decisions on where are we going to uh support and and direct those resources and how how do we align it. Uh it's not an easy question. Um but I think that using layered approaches and having balanced um budgets that I I I don't I think I've said it before um but I am a conservative budget planner.
Um, so I tend to have a conservative view and I'm going to jump into the maybe the boring stuff now, which is the what happens behind the scenes to have make these things happen and how does that work in the budget process and how do we have the million dollars to be able to fund some of these um ideas that I think have been really good ideas that have come forward. So, let me get into that. >> That was a good activity. >> Yeah, >> that was fun. >> Yeah, that was good. That's way better than the hold one that AI told me I should try to do. >> Was it Texas Holdem? Because we would have needed to keep would have needed to keep Ben and Eden to help us with Texas >> Hold some kind of hold thing and I was like I can't find anything I like.
So I just made one up. >> I like a good one. >> So um but I wanted to use real world stuff. >> So I want to talk about >> Yeah. Actually I'll just stand. Okay. Um, so when we're talking about funds, we've talked about funds before in some of our budget update meetings. And we know that like maintenance and operations is one of our uh that's our general operating budget. It's our big budget that uh manages mostly salaries and benefits of our staff. It's the thing that makes everything go. Um we have capital budget sources that build things. You cannot interchange those. Uh so that means that they're slightly restrictive. So some of the strategies that we use in budget planning or that I use in budget planning is that I determine which of our funds are very very restrictive. They have a lot of legal guidelines.
They have a lot of compliance. They're harder to use. Those are the ones that take you time uh and thoughtfulness to ensure that you're structuring them to stay within all of those boundaries. Some examples of those funds are, and I'm going to go into these funds in a little more detail um in just a bit, but um an example of that is grants. A grant funding uh from the federal government has a lot of restrictions. As Jay was saying that or Mr. May was saying, a lot of um our FTE in the grants areas is just to manage and ensure that we stay in compliance and don't lose these funding sources. Um, our instructional improvement fund. Uh, that's another fund that has a a high regulation. It's very structured on what you can spend it on. Um, it also has a supplanting rule, meaning that you cannot replace anything that you're already paying for with it.
It has to be over and above new expenditures. Same thing with our classroom site fund. So, part of a a budgeting strategy is maximizing these first because they're not flexible. Um and then the other one is to create capacity in one-time use funds that align with our annual revenues. So an example of this is say um and when I'm looking at those funds uh let's say it's um Medicaid. So Medicaid is a funding source where we bill for uh services that are uh students receive like speech and OT and transportation. uh we we bill Medicaid for that and we receive some dollars in. Um there's an annual revenue cap that we get with that Medicaid. So since it's one-time monies and it it depends. It's very fluid. Sometimes we get more, sometimes we get less, you're never going to want to put an ongoing expense in a funding source that isn't going to support the ongoing expense.
Um and so you don't want to exceed, and I shouldn't put the word never because that's not true. you you uh typically don't want to exceed annual revenues. I don't know why, but never. Probably because it was like 1:00 in the morning when I wrote. Um and then these are really great funds when you need to fund a one-time expense or an emergency expense. Um or do something to help with your reserves and uh additional revenue inputs like uh prepaid medical. So, you know, I'm going to talk in deep deeper uh detail of some of the strategies, but then the other things that can't go off the radar is our custodial funds, and those are those student funds, tax credit, gifts, and donations. It's a very smaller bucket. It's it's intentional, but you want to keep an eye on those funds. You don't want to start accumulating dollars in those funds.
You get a student activities report monthly. Um, you want to make sure that the students who are raising those funds or who are benefiting from those funds. And you want to make sure that the donors from gifts and donations and tax credit that the monies are using uh being used as the way the donor indicated. So those aren't funds that we use in any strategic way. They're just as needed and as uh indicated. So we're not carrying balances there. Those are not funds that we would be able to use um in any emergency or any reserve um situation. >> Okay. And on this one, I got to reset up my notes. Okay, give me one second to do the technology part. So, we need to take the slideshow. Okay. So that is very very tiny. Um so there is a link there to the AFR.
Now this is the summary page that uh comes with the annual financial report. The annual financial report if you remember it looks very similar when you look at all the spreadsheets that I that we bring the packet uh to the budget. Um so when we bring in the budget to propose the budget and then the annual financial report is how did we spend that bud budget that is the the where did the actual dollars go. This is one of u my favorite pages in the AFR. I think I told you guys that when we presented to AFR this is a summary page. Um and this one just kind of gives a nice overview of all of the funds without getting into too much of the weeds. So, um, and you and you can't really see. So, that's why I gave you the AFR, um, link.
So, you can open the AFR and go, uh, on the tabs to the summary page, and that way you can kind of go along with the funds that we discuss. So, as we talked about, um, M Oh, where's my mouse? There it is. and and we're just going to talk about some strategies just so you have some basic foundational knowledge when I move into the budget update of where the the budget update is. And that really is just the M budget update. When I come and uh present that little slide to you guys of what is our M budget going to be next year, what are we projecting and how was it affected in this year? Um there is there are all those funds that are listed there and under the state and federal there's probably another I don't know 30 funds that we manage.
So those are the different types of funds that we manage that we have money in. Uh M's at main operating budget for the district. It is restrictive in that it is only for operating costs. You can't use these dollars for uh to go build a building. Um, we use these dollars to pay salaries and benefits, um, dues and fees, supplies, repairs. Um, the fund balance that you see there, it it looks pretty big. I think it says $16 million. Um, these are some of the problems that we that we're working through right now in school finance when it comes to dead cash. I know you guys have heard this before. Um so what dead cash equates to is um fixing where things have gone wrong usually not because of our making. Uh tax collections can affect uh dead cash and dead cash is uh about the allocation of that fund balance minus the carry forward from the year before.
Um, and I think our carry forward the year before was I 7 7 something million. So that means that there's about 9.1 million of allocated cash in that M. But what we found is four or five years ago, the county stopped allocating our cash into the proper buckets. So we get cash from taxpayers. It goes into our county bank and then it's supposed to go into the right buckets. They used to allocate that properly. Um and then at some point they stopped doing that. We didn't necessarily know that right away. Um our auditors had brought some of that to our attention. So we needed to create processes that allow us to allocate those funding sources into the right bucket. It's still not a great science. Uh because this is >> just the choice of a specific county treasur or is that just now a policy?
>> Yeah, it was the county upgrade >> update of their system financial system. So they they completely replaced their financial system. It's 6 years ago. >> Has it been like six? I found out in Paradise Valley when I tried to upload checks and they wouldn't go. >> Well, there were there were there were two years where they didn't make us aware that the new system didn't do that. They just didn't go >> and then the auditors figured it out and then there was a notice that went out from I think the county treasur's office or the H's office. So, it's only been about four years that we've been trying to correct for it, but I think the problem's been in place for about six, >> right? >> It predates the pandemic when it originally happened, as I recall. >> So, on on top of an accumulation happening of dead cash, which is um the timing of cash collection.
So, not every taxpayer pays their taxes on time. Um we don't get exactly what we need from the taxpayers. Uh and sometimes those dollars have dollars included in them that are from prior years where taxpayers are getting, you know, caught caught up. It's kind of like this moving target. We have to use ratios uh in order to determine how much of our revenue should be going into M and how much should be going into capital. So we're actually uh really close to a fix on this uh process because of the work of Mr. Ruth. He really dug in and wanted to make sure that we knew uh where our cash dollars should sit. He's reconciled the district. He's gone back and done some uh historic looks. So right now there's about 9.1 million of allocated capital cash that's sitting in the M fund balance. So that $16 million is $9 million overstated.
It needs to be in that other line which says unrestricted capital. And the the column we're looking at is the fund balance at the end. The fund balance is the beginning fund balance, revenues and transfers minus expenditures, and then that's your fund balance. Um, so what that means is that our capital cash is about $4.3 million short. Once that's cleared, uh, the district now has about 4 um 8 million of dead cash. There are some conversations going on out there with our uh, lobbyist groups on how to settle this dead cash issue. I will say that I was very grateful for the dead cash. That is how we paid our portion of the $1.6 million for the uh Kismmeer lawsuit uh that happened last year. And then we discussed um that we were going to utilize our dead cash, which was wonderful because we had dead cash.
Some districts have no dead cash. And uh oh, child abduction. >> I really did turn mine off apparently. Oh, never mind. >> And Aendale Um and so we are looking at uh some resolution. But another factor and something that uh I'm going to talk about just a couple slides is um setting the tax rates properly and ensuring that you have enough cash to cover your expenditures and your allocated budgets. So the way that we set those tax rates is with our adopted budget. And it's really important that you're very strategic when you set those budgets in order to create the scenario that we have enough cash collections, especially if not every taxpayer is paying their taxes. Um there's uh some districts that are short on cash collections even if they're setting their tax rate properly. Uh an example would be Isaac. Isaac went for many many years not bringing in the cash collections that they needed to support their their budget capacity.
Um so you know I I don't want to discuss what they should or shouldn't have done but it should have been very clear through the process if you're keeping an eye on your cash and keeping an eye on setting your tax rate um whether you have enough cash it's sustainable. There are actions that you can take to push those dollars around a little bit. We don't have a lot of effect on it. Um, but we do have some effect and we do our best to set that tax rate to be appropriate to our taxpayers of what we've told them we were going to do and to bring in enough cash uh for our district. So, that's one of the the more complicated funding sources that we're dealing with, which is the the M and capital. It seems pretty straightforward, but there's a lot that goes on in the background when we're planning.