001Hello everyone. Thank you for joining us. Today is Tuesday, June 24th, 2025, and this is a special meeting of the Lichfield Elementary School District governing board. I hereby call this meeting to order. The first item on the agenda is going to be a public hearing. So, if someone would like to make a motion, I move to convene the public hearing. Second. Having a motion for Miss Moran and a second for Mr. Mike. I'll call for the vote. Miss Moran, yay. Mr. Mike, yay. Mr. Owens, yay. Miss Wallace, yay. I'm also yay. Motion passes. Uh, for this public hearing, we're going to have information presented about the budget for next year. This is going to be by CFO. Madame President, members of the governing board, uh colleagues, community, thank you for joining me today to discuss
002the proposed district budget for fiscal year 2026. Today's presentation aligns with the district's strategic keystones of resources, but also has broad implications across readiness and relationships as well. State statute requires that school districts propose an annual budget by July 5th each year and hold a public hearing and adopt that budget no later than July 15th. First, I will cover some general budget highlights. The district uses fund accounting and adopts a budget for many different funds. Each fund has unique revenue sources and allowable uses. The district's largest funds are maintenance and operations or M which support daily operating costs, people and programs, and unrestricted capital outlay which supports buildings improvements, furniture, equipment, technology, and other items that will be in use longer than a year. Arizona school district's M budget is set by statutory formula that
003uh regularly updated through the state's budgeting process. The formula is driven in large part by weighted student count, which considers average daily membership or the number of full-time equivalent students served by the district and student characteristics such as special education status to determine how much funding will be made available to the district to serve its students. Funding is also made available for transportation, which considers daily route miles driven to transport students to and from school. On this slide, you can see a year-over-year comparison of the budget available in M and its various sources. The proposed budget for fiscal year 2026 is based on a slight increase in student enrollment um supported by the analysis provided by applied economics and the increase in per people funding anticipated through the state budget. Those factors are are driving
004the $ 1.3 million increase in the revenue control limit from the last revised budget from last year. The revenue control limit is the funding provided from the funding formula I described on the previous slide. It is the ongoing funding generated to support the district's students. We'll see in future budget revisions throughout the year that our revenue control limit estimates or estimates are updated with changes in student enrollment. This year, we'll also see potential changes uh in per people funding amounts due to the state budget not being finalized in time to be fully utilized in this proposed budget. The district is also seeing an increase in the value of the district's voter approved M override. This is being driven in large part by the additional per pupil funding uh in expected to be passed by the
005state uh this coming year. These increases are being partially offset by the increased resources being shifted to the energy and water savings fund. This is being driven by the district's work with Varigy in the coming year and a reduction in resources we anticipate carrying over into fiscal year 2026 compared to what we carried over into fisc year 2025 because we do anticipate uh spending more uh this year than our reoccurring revenues. It is important to note that while M overrides and funding made available through the funding formula are ongoing, the budget balance carried forward as part of the district's rainy day fund. It is only replenished by spending less than the district receives in an ongoing in ongoing funding and is not an ongoing annual revenue source. The district's M budget was developed considering guidance
006provided by the governing board at the March 6 governing board meeting where the projected budget for fiscal year 2026 was approved. In fact, this proposed budget is simply reflecting that previous governing board direction on legal budget forms. This slide shows some of the major uh budget initiatives that have already been board approved to utilize that additional funding that we saw on that previous slide. This slide shows the high-level overview of the M budget by functional program areas such as general education and special education and also highlights the budgeted classroom spending percentage of 71.4% of dollars spent in the classroom. Looking at the M budget by type of spending, you can see that a great majority of the budget is between salaries, benefits, and purchase professional services, which includes contracted staffing. This slide shows the M
007budget being proposed compared to the projected budget approved on March 6th. Most of the change is driven by an updated estimate uh for carryover going into fiscal year 2026. As a reminder, the unrestricted capital outlay fund supports construction, remodels of facilities, equipment, textbooks, and other items that will last the district longer than a year. Similar to the M fund, unrestricted capital outlay resources are provided to the district via a statutory formula that considers average daily membership or full-time equivalent students served by the district and a funding amount per student. Unrestricted capital outlay considers a prior year student count when determining funding, unlike M, which considers current year membership. Here you can see a year-over-year comparison of unrestricted capital outlay budget limit. Most of the increase in the fund is being caused by the one-time funding
008we received late during fiscal year 2025 and are carrying over into 2026. This is the funding that we'd previously talked about uh utilizing for some of the Palm Valley uh modular classroom buildout. We anticipate at this time that Prop 123 funding may continue into 2026 due to it being in the JBC baseline budget, but at this time due to the state budget not being finalized and legislative discretion, we're unsure and we're unable to include it uh into the formal budget forms. the auditor general's office who uh creates these budget forms that we then have to fill out didn't give us the option to to uh show that funding. So you you see that difference on the slide. Any changes caused by the state budget adoption will be reflected on our December budget revision. The unrestricted
009capital outlay budget is split fairly evenly between furniture, equipment, vehicles, and textbooks, library books, and software. The remainder of the budget will be available for facility improvements and replacements. The classroom site fund was originally created due to voter approved sales tax for education in the early 2000s. After 20 years as a voter approved initiative, the state legislature took action to continue the classroom site fund as opposed to let it expire. The revenue districts receive from the classroom site fund is driven by sales tax and state uh collections related to certain uh state land trust transactions. Each year the joint legislative budget committee publishes a per per student allocation for the classroom site fund. Districts receive classroom site fund on prior year student counts. Similar to unrestricted capital outlay, you can see the district is allocated
010to receive approximately 9.7 million in the classroom site fund revenues for fiscal year 2026. This slide shows the specific ways the district utilizes the classroom site fund for salary and benefits, including base pay increases, performance pay for classroom teachers, and instructional aids for schools. and our new longevity statement. The district has a number of other funds that are included in the budget. I've highlighted a couple on the slide along with the district's plans for fiscal year 2026. The district's M unrestricted capital outlay and adjacent budgets discussed today are funded in part by local property taxes. The state funding formula for education includes a qual qualifying tax rate which sets a consistent starting point for the ex expected community support of school districts across the state. From that starting point, the levy or total dollar amount
011expected to be collected in taxes from the primary tax rate is adjusted based on certain local factors. Secondary tax rates are set to support voter approved initiatives such as the district's M override and bond programs. These two amounts along with the community's assessed valuation or the value of the taxable property in the district set the tax rate. In total, the district's combined tax rate declined as shown on the slide. For tax purposes, the state limits the increase individual homeowners experience in their valuation to 5% a year. Based on that capped increased in valuation and the decline in tax rate, we estimate an average individual taxpayer will see a 2% increase in their property taxes from the district entirely driven by uh the increased assessed valuation since the tax rate uh is declining. This is just
012an estimate and could change based on property tax judgments that are pending at the county level and are outside this control of the district. Also, this includes the adjacent ways levy the district is proposing to assist in construction of Troy Gilbert Elementary. We had a dis we had discussed the adjacent ways levy during the Troy Gilbert update at the March 25th board meeting. We presently anticipate levying $2 million of adjacent ways resources next year to support the project, including the improvement of a half street coming up to the property. The district has advertised this tax levy and will hold a truth and taxation hearing in July to further discuss the adjacent ws levy. At this time, I'm available to answer any questions you may have on the district's budget for fiscal year 2026. Miss Moran,
013do you have any questions? I do. Okay. So, I'm going to go in order here. Um, first I want to say thank you for all your hard work. I know this is a long arduous process of getting us to this point. Lots of conversations, lots of decisions that have to be made up to this point. So most of my questions are to not only provide clarity for myself, but also potentially for anyone who might be paying attention to this, which is a really big part of what we do. So my first question is on slide seven, which is where we do the year-over-year comparison. I see the budget carry forward is going to be going down and I know that that is within our guidelines um that we've set as a board and as a
014district but I wanted to know what your overall feeling is about that number going in the next year. Honestly, uh as we had discussed during the earlier budget process uh because as you've mentioned before the budget process never never fully ends. Um there's still quite a bit of uncertainty uh in that number. That is our best estimate right now of where it will land. Um, us dipping into reserves by half a million dollars does not concern me because we do have uh healthy reserves and we do have um, you know, we do have policy that will actually be in effect come July 1st in a couple of days that guide us on where we want our reserves to be. And our reserves are very healthy and within those limits. And so, uh, it it it
015doesn't concern me at all that we might be dipping into the reserves. Uh, but at this point, there's still a good deal of uncertainty in that number. We won't have the the true solid number until our December budget revision because it will get um it will get finalized as we do our annual financial report, which the board will see in October, but the results of that will hit the budget in December. Um, and so it it's an estimate even if it comes to fruition, it's it's not a bad number for us to be hitting uh because our reserves are are healthy. Okay, great. And then in your presentation, you said that the only way to impact the budget carry forward or really increase that number would be to spend less than our recurring revenues. In
016the uh DAA carry forward number, it says that it includes interest. So the M budget carry forward does not include interest. There's no way that we're like making anything on that or because that the state keeps those monies or tell me more about that. That's actually a fascinating school finance question. Um so um we do earn interest in M. the way the state uh budgeting system works for school districts, we're not allowed to access those monies and so they sit in our account at the county and it's what's known as dead cash. Uh so we have no ability to actually uh get them into the into the budget formulas that you see here for Mino. Let me get to the slide. It's it's basically exactly what you're pointing out is we have no mechanism to
017get the interest we earn in M uh into our revenue control limit which means we have no ability to access those monies to spend them. There are really limited opportunities to uh to access dead cash. So, for example, if my estimate for the M override was too low and I didn't levy enough taxes to to capture the full override, I could dip into that dead cash to to still have access to it. Like, that's one potential uh use for dead cash. Um, many districts also used dead cash this past year to help pay for the uh tax judgments that were happening at the county through the uh quas mayor uh tax judgment. Um, but one of the strategic things we do every year that I don't talk about because it's it's really deep into the
018weeds is we we try to transfer as much cash actual cash as we can into the capital fund because we can capture the interest that we earn there. Whereas we can't capture the interest that we earn in M. We still earn it. If you look at our audited financial statements, you'll see it. But the way the budget formulas work for school districts, because M is not a cash fund, it's a levy fund, we're only able to spend what we can show in these budget formulas, not not the cash we have on hand. Okay, great. That makes total sense to me. So basically M is like a non-interestbearing account but capital is interestbearing. How much is in our dead cash? Uh we have I think a little bit over a million dollars of dead cash. And
019so another that one thing that's helpful with that is you might have heard in the news that the that the state or maybe you haven't heard it in the news, but the state uh AD will potentially be reducing our May payment and some school districts are worried about a cash flow. with that dead cash, we don't have to be as worried between our between our carryover and our dead cash. We don't have to be as worried because we do have cash in the bank that the that the county can uh utilize to pay our bills. Um, so would you say the dead cash is like an extra extra rainy day fund? Like we would use our reserves, but if we needed it, we couldn't get to that dead. It's a cash rainy day fund. Okay.
020So, I can use it essentially to give us an advance on what these formulas say we will receive, but I can't access them to spend them to spend above and beyond what the formulas say we can spend. Okay? I I can access the cash to to spend the what the formula says we get before we would otherwise have the cash to spend the the formula monies, but I don't have the ability to access it to spend it above and beyond the formula. Okay. And would we want to strategically levy less to utilize? Like is there a number that we wouldn't want to get over in this dead cash? like do you want to keep it more at 500 and now we're at a million or so the the issue with um working the tax rate
021in that way where you allow it to drop is it would be an artificial one-time drop which would then cause an artificial one-time catchup. Uh and so it would cause this kind of bullhip effect in the in the tax rate that most people don't appreciate. you know, they they typically appreciate a more stable uh tax rate, which is why when we get into our bond work, you you see so much conversation around what potentially can we ask for the community while maintaining that tax rate that's associated with the bond because no one's all that interested in seeing their tax rate increase. But people also don't really like if you have it dip and then go back up because they might appreciate the decline, but they still see that going back up as their taxes increasing.
022So we do a lot of work to try to maintain a stable tax rate which is why on the last side slide you see we've worked to have the tax rate decline a little bit and the uh and the um increase in taxes people will see is only driven by the assessed valuation. And and what's nice about this is this even includes the $2 million levy that we're proposing uh for adjacent ways. Yeah, agreed. Then we don't have to explain that separately because that is always part of our messaging when we talk about our bonds and overrides is that it's not a tax rate increase. And so, you know, this slide definitely provides evidence of that, that the tax rate is going down, but your bill may increase, but that's because your home value has
023increased. So, um I like this and that we're having that conversation as well for transparency because that is evidence that we are doing in fact what we said we were going to do um when it comes to managing the tax rate for um our taxpayers and our voters in our district. Okay. So my next question is on slide nine which is the class um which is the M budget spending but on that slide is where you highlight the classroom spending which is 71.4% and I believe we're our last revised budget for 2025. That number was slightly higher at 71.8. Um again just want to get your your feel for your you know comfort level. Obviously I want to see that number as high as possible. Um, but tell me more about, you know, is that
024close enough that you're like, "Yeah, it's it's in the range." So, yeah, these are all estimates, as you know, and so when it comes down to it, I I expect it not to change much because if you think if you think about what we passed in this p in this budget, um, it's not like we passed a lot of non-instructional or non-classroom spending. Um in fact as far as M is concerned we actually had a effort to not not touch M. We we actually added most of our things to the classroom site fund through the longevity bonus and additional hours for the attendance clerks. We we did a lot more work on the classroom site fund in this budget than we than we really did in M because we were trying to uh stabilize the
025M fund um to to really see where we were landing. Uh so the the slight variation I think is primarily just caused by by the estimates and and I suspect we won't see much actual movement um in in the rate when it when next March we we get that same report from the AG's office. Okay. Thank you. My last question actually is on this slide here and the slide right before that. So when I look at the classroom site funds, I see that our allocation is expected to be 9.7 million, but we're expecting to only spend about 8.2 8.3 million. So tell me about the thought process behind spending less than our projected allocation. Sure. Um what's fun about the classroom site fund is the timing at the state level um doesn't align well with
026our budgeting process. And so because we made a concerted effort this year to have our employees know exactly what their compensation would be prior to um prior to contracts going out. We didn't have the finalized number from um from the JBC as to what we would be receiving per student. And so to a certain extent, if that is to remain our practice that we want our employees to have that full transparency, we'll always be kind of working a year behind because I have to estimate what the JBC is going to say and parts of that formula are somewhat um estimatable and then parts of that formula are are bit like a black box um because you've got sales tax which the JBC gives gives some reporting throughout the year of uh where that's trending. And
027so that's what I use to try to estimate uh where we'll land. But there's also the the classroom site fund gets a a decent chunk of revenue from the sales from the uh land trust from the state and there's a lot less transparency at least that I've been able to find around those transactions. And so when we were budgeting for the classroom site fund this year, I anticipated that the per pupil um amount we would be receiving would not move much at all. And it actually did. And I think that was largely due to the land trust transactions. And so we're we're a we're always going to be about a year behind in trying to target target that revenue. Okay, that makes sense. I just didn't know if we were trying to build up our
028carry forward in there for some reason. I know in the past we've talked about the fact that that carry forward does seem high, but it's because we always feel like we never know if they're actually going to give us this money or not. So, we want to be able to smooth that out if we need to with our employees if they were to pull the plug on the entire thing. I'm actually pretty happy with where our reserves are in this fund. Um it does seem high uh looked at in isolation, but due to the nature of the fund, I I like having a a decent balance there and some of the other things that we're that we're building in that fund, right? Like the longevity site, we want to make certain that there's money there
029to continue that because we we don't want that to be a one-time thing. We want that to be an ongoing program. Uh but the the difference you're seeing here is is really due to that timing. I I wasn't thinking we would see an increase in revenue and we did. Um and we won't ever have full clarity so long as we want uh our budget to be approved um along our timeline which I do think is important for our employees. Yeah. And I think it's fine as long as we're always knowing that we're going to be a year in a rears and we're going to make the best decisions knowing what that process looks like then I'm completely fine with that. And then, you know, like you're saying, being able to know that we have the
030funds to continue these because that was one of the issues with the ESRE funds, right? Like we did a lot of stipens and one-time allocations and that was great, but we knew we couldn't continue that. And I know that some of our employees have been disappointed that we couldn't continue those things. So, I'm glad that we are now making sure that the especially the attract, recruit, retain incentives that we're putting in place that we're hoping are going to be effective. We're setting up the process that those will be in place long term. So, I really like that. That is all my questions. All right. Mr. Mike, did you have any questions? I don't have any questions. Mr. Owens, did you have any questions? Um, yeah. I think we all appreciate board member Moran going first.
031So, thank you. I I also had some questions about the carryover and the the um carry forward and just the amount that is there. But thanks to the questions and the answers you provided, they they helped answer my questions as well. Just to know that obviously we don't want an inflated number that's money just sitting there, but knowing that it's there for a reason and amounts for a reason um with plans um is reassuring. So, thank you. Miss Wallace, did you have any questions or comments? I do not have any questions. Thank you for all of your hard work and thank you, Miss Moran, for all of your diligent questions. No, we had her go first so that she could get all the questions out of the way and then you didn't have to get
032any more questions. Um, I don't have any questions either. Um, thank you for the work. Uh, I understand that this is difficult to have to come up with these numbers when we don't know at all what the state's going to do and we just kind of hope that we make the best guess as we can. Um, so I'm totally comfortable with this, but thank you very much for getting this together for us and presenting it. So, uh, understandably for the community. Uh, with that, if somebody would like to make a motion to adjourn the I'll move to adjourn the public hearing. Second. Having a motion for Mr. Owens and a second for Mr. Mike, I'll call for the vote. Miss Moran, yay. Mr. Mike, yay. Mr. Owens, yay. Miss Wallace, yay. I'm also yay. Motion
033passes. The public hearing is now adjourned. So now we'll move on to our the rest of our regular meeting. So if everybody could please join me in standing for the pledge of allegiance. Thank you. Next, we're going to take a moment of silent reflection. Okay. Next, we have no public comment. So, we will move on to our action items, which is to for the approval of the proposed fiscal year 2526 expenditure budget, which is based on the presentation that we just had. So, um did anyone have any further questions? Miss Moran, none. Mr. Mik, none for me. Mr. Owens, no. Ma'am. Miss Wallace? No. No more questions. I have no questions. If someone would like to make a motion. I move to approve the proposed fiscal year 2526 expenditure budget as presented. A second. Having
034a motion from Miss Moran and a second for Mr. Mike. I'll call for the vote. Miss Moran. Yay. Mr. Mikes. Yay. Mr. Owens. Yay. Miss Wallace. Yay. I'm also yay. Motion passes. Okay. Somebody would like to make a motion to move to adjourn the meeting. I'll second. Having a motion for Mr. Mike and a second for Mr. Owens. I'll call for the vote. Miss Moran. Yay. Mr. Mike. Yay. Mr. Owens. Yay. Miss Wallace. Yay. I'm also a yay. Motion passes. Thank you for joining us. This meeting is adjourned.