School district’s new financial advisor presents thorough analysis of district finances to board
by Dan McClelland
In what was perhaps the longest and most comprehensive financial public presentation to the Tupper Lake Board of Education in decades, the district’s new financial advisor, Rick Timbs wowed elected officials with his detailed analysis of district finances. His presentation, via computer at the March regular board meeting, lasted nearly an hour and a half. When he finished, by the looks on their faces, board members appeared both impressed and stunned.
Mr. Timbs, a retired superintendent of schools and district business manager, now has his own financial consulting firm whose clients are some 70 school districts all across New York State.
One of the first things Superintendent of Schools Jaycee Welsh did when she became the school district’s new chief administrator last August was to recommend to the board that it switch financial advisors and hire Mr. Timbs firm, R.G.T. Inc. The board followed her advice. The district has had the same financial advisor for years, until the change last year.
His summary, entitled “The financial status of the district is strong...and should remain very strong through 2026-27,” included the following recommendations.
1) Strategically and operationally examine long range budget implications. Maintain a stable budget by tracking expenses and revenues:
a) re-examine the 2024-25 budget (current budget) for any fund balances (carry overs and reallocations).
b) Budget process is always difficult due to the number of assumptions (extrapolate cost estimates). Update estimates as much as possible for both revenues and expenses.
c) Attempts for cost reductions should be examined (those away from student programs first) to mitigate escalation of expenses. School inflation costs, such things as supplies, materials, equipment is a concern.
d) Evaluate purchases and staff needs. Examine the possibilities of attrition and breakage, where possible, but monitor certain labor scarcity issues.
e) Monitor long-term expenditures to the financial plan and limitations on revenues. Salaries and benefits are overwhelming the district’s finances versus any potential gains.
f) Develop a long-range thoughtful plan to prepare for a possible what is being called a “state fiscal funding cliff’ in 2026-27 and beyond.
2) Annually re-evaluate reserve and fund balance amounts for sustainability and liabilities.
3) The lack of a long-range financial and capital plan for the civic center has been and will continue to be problematic.
a) Recent needed renovations (chiller vessel/ ice making replacements) reduced the district’s fund balances.
b) If these issues persist to any significant magnitude and are borne by the district, they may jeopardize the basic mission of the school district to provide a sound education for all.
4) The longevity of the new federal grants are problematic.
a) Maintenance of staffing levels with reduced enrollment without federal grants as large as in the past will be financial prohibitive.
b) The ability to generate fund balances to offset expense increases is largely stagnant.
5) State Aid: The foundation aid the district is currently slated to receive for 2025-26 will increase by two percent. In subsequent school years, “Save Harmless” status increases are unknown; expense-driven aid continues in current (education) law.
6. The costs associated with the “Zero Emissions” bus mandate are expensive. Develop a plan and lobby hard!
7. Monitor the state tax cap. Note, the growing use of appropriated fund balance and be aware of “Super Majority Tax Levy Limit” implications.
He began his presentation at the March school board meeting by explaining his presentation to them would be “a preliminary report on our long-range planning efforts.” He left open the opportunity for questions from the board at the end of his presentation, but there were none. Several board members did note, however, they needed time to mull over all that he reported that evening and their questions would come at a later time.
“This is like a teaching moment this evening...we are going to go through a lot of information,” he forewarned them.
He told them his analysis of district finances comes at the same time the new budget is being prepared, but has not yet been finalized by the bnoard.
Mr. Timbs said too his firm’s report that evening involved the use of what he called “real data,” not made-up material.
He listed many of those sources, which included the district’s submissions to the State Education Department on the Form ST-3 for the past five years, the SED’s website financial calculations, school district external auditor reports and recommendations, documents of capital expenses and debt, transportation and capital projects data (bond and bond anticipation notes, use of capital reserves and debt service schedules), examinations of tax implications, use of debt service funds and reserves and reports from the New York State Comptroller’s office.
Mr. Timbs told the board he was now a financial advisor, after working in schools for over 40 years. “My purpose is to make sure schools can survive and children thrive- which is basically the mission of every board of education. The board is actually the board for students...that’s what you are there for, to maintain your school district, because you have a constitutional obligation to provide a sound, basic education for all children, according to the New York State constitution.
“The state comptroller, of course, looks back to insure you cross all the t’s and dot all the I’s...and sometimes that’s not always convenient because some of the rules from New York State really don’t make a lot of sense!”
He said other sources for his report that night also included all use of funds, including appropriated fund balances and unappropriated fund balances. “The appropriated fund balance is the difference between your budgeted revenues and your budgeted expenses. Sometimes districts try to supplement these, and I’ll point out where you have done that. The unappropriated fund balance is the amount of cash a district must have on hand to operate.
“We also took into consideration a whole bunch of expenses, one of which is the projected teacher retirement system rates and staff retirement system rates. These rates are not moving very much these days, but next year the employee rate is going up 16%. That will have an impact on your budget next year.” He explained these rates are multiplied by salaries and so when salaries increase, retirement rates do too. “They can be a big ticket item!”
“We’ll also be talking tonight about the implications of loss of federal grants (CFFSA and ARPA). During COVID those grants were provided to your district in millions of dollars, and the district chose the ways to spend this money, based on options that were provided.”
He said some districts used it to increase fund balances while others used it to provide services.
“We are going to talk about what is going to happen now that these federal grants are gone!”
He said that loss will put “a lot of pressure on your school district because you used these grants to supplement your budget!”
Other sources for his analysis were determinations of future expense escalations. “We are going to try to project out where we are seeing some of these costs going to the year 2029-2030. I think we will be able to make some assumptions” that are going to be pretty correct.”
Another data source were interviews with the business manager and superintendent of schools.
“I’d like to thank them both for numerous interviews by me.” He apologized to both Business Manager Jessica Rivers and Superintendent Jaycee Welsh “for peppering them with millions of questions.”
He said they are both brand new to the district, in their first year here, “and are trying to work through a budget they inherited for the 2024-2025 school year. “So kudos to both of them for being real troopers. I know it was a stretch and their work with me took a lot of time. So I thank them publicly for all of their help to me!”
“So let’s dig into the data. The first thing we’ll take a look at is the analysis of fund balance and reserves.
He showed a chart of the reserves of what this district could “possibly be eligible to create.”
The first one was the “workers compensation reserve,” he began. “Reserves are part of the general fund and are restricted in use. They are established for a purpose because you have a liability for in the future. You start a reserve for a future expense to offset that expense when it comes!
“You don’t have any money in the workers compensation reserve.” He said the state law permits districts to have between three to five years of money in them to pay for future premiums.
Mr. Timbs said it wasn’t necessarily bad this district has no money in that reserve fund, providing there is money somewhere in the general budget to make those premium payments when they are due.
“You do have an unemployment insurance reserve fund which has been moved up a little in recent years.” It currently stands at $203,153 and it is intended to remain at that sum for the next five budget years. Before this school year there was only $2,912 in that reserve fund.
He said he liked to see districts have such a reserve “because at any board meeting, should an emergency arise- say a roof leak that needs $50,000 to repair it, the money could come from that reserve.”
He noted the district has at the present time no other uncommitted reserve fund to take it from.
“The board has the right to move money around, should the district need it!”
He conjectured that the state comptroller may not like to see that reserve as much as $203,153. It might prefer something more like $20,000- but not $203,153. He said the board could reduce that reserve by $180,000 and instead place that money in any number of other reserve funds that are empty right now. “It’s something you as a board might want to consider doing in the future!”
For example, according to his list of possible reserves, there is a reserve for repairs, currently empty.
He said this district currently has two reserves set aside for faculty and employees retirement contributions. Both were started in 2024 and amount to $320,137 and $115,159 each school year through 2029-30.
He admitted he was perplexed by that. “I’m working with perhaps 70 school districts on this type of thing and I never saw a district that never had any money” in those reserves. “You are the first district I’ve seen this with,” referring to those two empty reserve funds before 2024.
“Usually a district your size probably had a million dollars (in the faculty retirement one) and $600,000 in the other. Both of these are very under-funded,” he told the school leaders.
“-And these can both be volatile at times.”
He said that the state comptroller’s office would likely like those sums in the two retirement reserves. “The TRS (faculty) reserve is actually for the pension system costs that exceed your annual budget, to be used when the costs go up higher than what you budget.”
“These amounts don’t give you much of a cushion” in that event.
He called teacher and staff pension costs “big ticket items” in any school budget.
Mr. Timbs said if additional fund balances occurred in the future, some of that money probably should go into those two pension reserve funds. “That’s because some of the new pension systems coming are more costly and robust as the state legislature changes them and enhances them and makes them more expensive” for school districts, which are not currently prepared for that.
He listed four other possible reserves that this district doesn’t use. They include reserves for property loss, liability claims, insurance and tax centiorari.
“Property loss reserves are typically a few tens of thousands of dollars” and are designed to cover relatively small property losses, rather than make an insurance claim and see premiums increase.”
“Liability claims reserves may address, for example, if a past employee brings a claim against the district that they were sexually assaulted or molested by a staff member and is trying to sue the district for liability.
“Some districts that are seeing these claims are putting money aside, if they lose the suit, and they are losing them.” The alternative is to have to go out and borrow the money to settle a claim, “and that can become costly for a district.”
“Since this district has no such claim at this time, I see no reason you should have money in this reserve.”
He said the insurance reserve fund would be needed if there were several outstanding insurance claims against the district, not covered by normal property, casualty or insurance insurance policies.
“-Or if you were self-funded in health insurance, that would be a place to put some money to eliminate your potential liabilities.”
“You have no such insurances, so I see no reason you need to put money aside there.”
On the fourth reserve, for tax certiorari, if a school district, town or village is a claimant in a suit where a taxpayer is claiming that have overpaid their taxes because their assessment was done erroneously, capriciously and arbitrarily too high, they can actually bring suit against the district and the municipalities as a result of what they believe is the higher assessment.
He said any successful claim in court could be paid from that reserve.
“If the person wins that claim, you have between 45 and 90 days to pay back the sum, and it has to be paid in cash.”
“I am not aware of any tax or short claim by the district at this time, so there is no need for that reserve.”
Another reserve is one for employee benefits and accred liabilities. “This reserve is adequately funded here...it looks great to me.” It is for (payment) to employees when they leave the district for things like unused sick and vacation days. The total in that reserve currently stands at $471,494.
“So if you had a number of employees leaving all at once for retirement, quitting, moving on...whatever, you have adequate funding in that reserve so it wouldn’t impact your annual budget.
“Right now we’re seeing large numbers of retirement...people who are aging out all across the state, so adequate money in this reserve fund becomes very important.”
In the possible reserve funds a district can create in its budgets are four involving capital projects like the one soon to start here.
They include reserves for capital projects, technology, classroom furniture and transportation vehicles. The local school has never budgeted amounts in any of those four or has plans to in the immediate future.
“Capital projects are actually my favorite reserve as a district financial analyst,” he told the board members. They are a gift that keeps on giving!”
“You can have capital reserves for many, many different purposes. You can start a capital reserve for a capital project which I know the district is interested in doing right now. You can start a capital reserve fund for your technology purchases- because they are becoming expensive.
“You remember during COVID during the 2020-21 school year you sent the entire school student population home with their own laptop. Probably before that you probably had a laptop computer for every four or five kids, and every teacher had one. During COVID you sent everyone home with their own!”
“This was a huge technology purchase. Now all those laptops are going to wear out and you are going to have to repair them soon, rather than later. -And that’s going to cost some money!”
“Right now you have a good plan to use some ‘Smart Schools’ grant money to do that, so you are on board. Some school districts which have already exhausted their ‘Smart Schools’ money, need a technology plan. They can create a technology equipment reserve to help pay for it.”
He said capital reserves to help districts purchase classroom furniture also come in handy. “I’m sure you are aware of this when you do a capital project, 90% of the time the classroom furniture that is purchased are non-aid-able” by the state in a capital project.
Mr. Timbs said that because some of the capital project expense will be financed through bond over a 15-year period perhaps, it makes no sense to finance desks and chairs and other classroom furniture over that length of time. He suggested setting money aside in a furniture reserve from the district’s fund balance to pay for those things.
He said capital reserves can also be used to buy buses or other school vehicles.
He also noted some of these special capital reserve funds can be “mixed and matched” to fund numerous district purchases.
For districts to create special reserve funds requires the approval of the majority of school district votes at an annual or special school district vote, he emphasized.
“I like these reserves because they are completely transparent to the community, because you must ask the community to create them!”
“It shows trust and keeps faith. It also shows you are going to save up for an expense later on so don’t have to have a big tax increase later on!”
Another requirement of creating a reserve is a resolution from a board to put the question to a community vote. That resolution, he stressed, must detail where the funds to create the reserve are coming from. For example, state aid or from a fund balance left over at the end of a school year. Those funds for the new reserve can also come from a transfer from other existing reserve funds.
“The other thing I love about capital reserves that other don’t, is that a board can’t spend money from a capital reserve unless voters approve of it.
“That helps keep faith and transparency with the public any time you ask them to release reserve funds for a capital project!”
“It also keeps the money safe. So you can’t just, at some board meeting, transfer the money somewhere else” for another purpose, he told the elected officials.
Mr. Timbs said district officials haven’t had any money set aside in any capital reserve for most of this past decade “and so that makes more difficult to do capital projects. Otherwise you eat up your fund balance. So funding these capital reserves might be something you look to do in the future if you have money in your fund balance, and the wherewithal to create them.”
“You should always have a plan to create and use them!”
He also suggested a repair reserve should be created soon and funded to the tune of about $50,000- to fund normal repairs which arise. It is not that important to place large sums of money in it, if the district is keeping up with its capital projects, he told the board members.
He said a repair reserve could be helpful to a district because repairs to school buildings doesn’t generate state education aid.
Mr. Timbs said in most cases capital projects generate state aid- but not every building the district owns is aid-eligible for capital project aid.
“For example, your civic center, although it would have been state aid-eligible to build it,” it hasn’t been state aided since then under district ownership for the numerous capital projects that helped improve it, because it is not student occupied instructional space. No press box, no concession stand, no maintenance building are aid-eligible either. Those are all done on the district’s dime.”
In recent decades the district included arena improvements like improved change rooms with showers, heating and electric improvements, the Phil Edwards Memorial viewing gallery and others in capital project packages.
Since 2019 the total money in district reserve funds was in the mid-$400,000 range, but took a big jump to $1.109 million in 2024 when the retirement reserves were established.
He admitted he was a little perplexed by that “bump” in the total (placing about $640,000 in unemployment insurance and both retirement reserves last year) because of the federal COVID grants in 2021, 2022 and 2023. “Most of the districts that were my clients during that period of time, when you were not, now have between $3 million and $4 million in those reserves because they used those federal monies to build their reserves.”
He explained that by placing those grants in reserves, rather than spend the money like Tupper did, those other districts now have the means to “buffer” escalating costs in years to come and not raise taxes.
“I don’t know what your plan was in those days- and your current business manager and superintendents weren’t there”- the key things I would have hoped there would have been money saved those years to make your reserve funds now total $3 million or $4 million so you could buffer those expenses that will rise in the years to come.
“Your costs are going to escalate and you have nothing in your savings accounts!” he warned the elected school leaders. “This is going to be problematic to you long-term!”
“So let’s take a look at your state aid revenues,” Rick Timbs said to the Tupper Lake Board of Education members at their March meeting, moving his long and very detailed presentation to another Power Point slide.
He said the district’s state foundation aid, the largest of the state aid monies, “is bopping around a little bit and I don’t like the way it’s moving!”
“For instance your foundation aid between the 2022-23 and 2023-24 years went up $220,000. This is what they called the full-funding year when the governor agreed to pay the districts all the monies that was owed them at that moment in time. Your district was under-funded prior to that and only in that single year you got the money you were owed.” He said the aid hike only came that one school year.
“This school year the state froze your aid. You’ll note (foundation aid) is the biggest number on this page (at $7.58 million).
“You are heavily dependent on” state foundation aid. “You had $21 million in revenue that year and this is $7.6 million of it, or one-third of all revenue coming to the school district.”
There was no increase in state foundation aid to this district this current school year (2024-25).
Mr. Timbs said in the governor’s budget proposal released earlier this year “you are getting a two percent increase because the governor...is hoping the legislature passes it, because this is an election year. The year after this is not an election year for the governor, and I have put in a gentle increase of one percent, hoping you’ll get more than that. “But there is no guarantee you’ll get any more state aid!”
The reason for that, he told the board, is that your enrollment is not stable, but is declining and has been for some years.
His projection for foundation aid this coming school year if up by $151,605 to $7.73 million.
This community’s demographics and median income all hurts state aid to Tupper Lake.
“There is data out there that says your property values and income values are increasing. Therefore you need less support, compared with the rest of the state.”
“So here’s what’s happening. You live near a lake, where property values tend to be higher on average compared with other districts that don’t live on or near a lake!”
“So the state is actually penalizing districts with higher property values, saying we’d rather spend the money on more needy districts!”
“My big worry for your finances is no matter what happened in the previous year’s budget, I wish someone was looking ahead to one of your major resources and going back a page and look at what they were doing with your reserves (which could have been boosted by the federal COVID grants) because you need all the money you can get there because your costs will be increasing rapidly!”
He listed all the other varieties of state aid the district receives, including transportation and summer school aid, building aid, BOCES aid, public high cost aid, private excess cost aid, software aid, library materials aid, textbook aid, hardware and technology aid and universal Pre-K aid.
He went step by step through each aid type and how the funding of them was faring.
Transportation aid this year- funded by the state at $580,595 was up by $69,000. Next year he expects that aid to drop by about $41,000 to $539,840.
“Some years you might buy two buses. Some years you might buy three buses. The aid starts coming the year after you buy the bus and it continues for five years” with fluctuations. He said figured in too is the miles driven, how many bus runs there were that school year, how many buses were purchased.
Building aid this current school year was $608,049- down by $3,493 from the previous year. Next year he expects it to drop by $25,000 to $582,140. Those sums are state payments for previous capital projects in the districts.
He noted that building aid follows the year after a capital project is completed. So by his calculations if the $20.4 million construction project set to begin is “completed on time,” the district will see a windfall in building aid of $1.659 million, starting in the 2026-27 school year and continuing for years at a slightly decreasing pace until the bond note is paid off.
“The building aid can’t start until 18 months after the approval of the state education commissioner, which allows the start of the building project. The district is currently waiting for that approval.”
“This will be a big boost for you, possibly in 2026-27, but it’s not helpful right now!”
About BOCES aid which this school year is $1.465 million and which he figures it will be up by $38,000 or $1.5 million next school year, “tends to fluctuate with the things you do” between the district and BOCES.
It comes a year after the expense, he explained.
He told officials that in almost every state aid category, the education aid comes in the years following the year the expense was made.
“So districts always have to front the money and wait for reimbursement of some of it from the state. Some types like transportation aid is spread over five years. Building aid can be spread over 15 to 20 years.
“I do believe your district is investigating using reserves one way or another.”
By his calculations BOCES aid will stay flat in coming years- if the district continues to use the same level of BOCES services it currently does. If more programs are run not by BOCES but the district itself the aid will decrease in coming years.
“But it’s a double edged blade. Maybe you can bring the program back and decrease the cost overall. But that action will also decrease the long-term BOCES aid.”
“Some districts are willing to lose that aid, providing they save on the expense” of a particular program.
Another type of state aid is public high cost aid. This year was the first year in a while Tupper received any of this aid, currently funded at $116,720. He expects it to increase to $120,000 in the school year which begins in September.
“There were no high cost aid kids here which is pretty good, but rare. Most districts have one or two of these kids. These are kids with very special needs who are in highly costly programs. But they are probably the neediest students in the entire school district!”
He predicted the state aid would likely continue at the same level, providing it’s the same number of children with special needs enrolled here. Despite the $120,000 in aid from the state, he estimated their educational costs could be $150,000 or $175,000 in order to receive the $120,000 and so the local budget would be impacted.
Private excess cost aid helps the district educate disabled students, who might otherwise attend the state school for the deaf or the state school for the blind. That aid dropped from $15,000 last year to $1,868 this year, but is expected to grow to $34,802 next year and for the next five years, according to Mr. Timbs’ estimates.
There is federal funding too to help educate these special needs children. State and federal funds do not cover all the costs of their education, he reminded the school leaders.
He said software, library and textbook aid each year from the state vacillates from year to year and together amounts to about $60,000 a year to the district.
“While $60,000 is important and a lot can be done with that money, it pales by comparison to the district’s $7.5 million in foundation aid received this year.”
Another piece of the aid pie is universal pre-kindergarten aid which is $243,910 this year and isn’t expected to increase in the years ahead, by the consultants calculations.
“New York State is trying to get you more and more into Pre-K, which educationally to can’t find a better way to spend money. As far as I’m concerned, you could probably cut a lot of costs long-term if you can get these youngster into school early, get them educated as soon as possible and help them as much as possible- guiding them with many resources.”
He said the aid depends on how many student slots can be filled and the cost of hiring the faculty for those classrooms of pre-Ki kids.
“In most school districts in New York, but not all of them, the costs of these programs exceeds the $243,910 you will be receiving. The aid is not supposed to pay for the program, but to help districts pay for them. Having these programs is good educationally, he stressed.
He warned the school leaders here there will be local costs associated with the pre-K offerings, and it is important “to fill all the slots.”
He noted too the pre-K aid goes into a special fund, not into the district’s general fund, as all the other varieties of state aid do.
Total state aid to this district this year was $10.6 million- up by $297,213 from 2023-24. Mr. Timbs projections showed it will increase by $137,395 this coming school year to $10.82 million. His estimates show an increase to $11.98 million in 2026-2027. Five years from now it could reach $12.2 million.
“Unfortunately this $10.8 million, which represents half of your revenues, isn’t moving much, according to my calculations. “This will put pressure on your budgets!”
His next slide showed five years of financial projections for the district.
His assumptions were based revenue-wise on a 3.08% state tax levy cap, only marginal increases in the next five year in foundation aid, stable transportation aid and building tied to the capital project’s debt repayment schedule.
Expense-wise would see salary increases tied to current and future contract negotiations, no notable changes in staff patterns in coming years and stable retirement cost contributions.
His graph showed real property taxes increasing from $10.4 million this year to $11.7 million five years from now- up by $1.5 million or by 14.3%.
This year’s budget (2024-25) saw an increase in property taxes from $9.5 million to $10.4 million and a heavy tax levy increase of 8.7%.
Projected tax levy hikes in the next five years would be an estimated 3.08% for this coming year followed by increases of 2.94%, 2.5%, 2.5% and 2.5%, respectively.
Total revenues, according to his calculations, will rise from $22.3 million last year to $21.9 million this current year and eventually rising to $24.27 million in 2029-30 or up $2.3 million or 10.7%.
He said if a tax levy cap percentage of 3.08% was used for this new budget still to be finalized, and then tailored to 2.95% the next year and then moved to a cap of only 2.5% the rest of the years, “the district won’t bring in enough money in terms of taxation and other revenues to run this district!”
His revenue chart also listed the other revenues the district receives.
A payment in lieu of taxes line shows an amount of $30,377 this school years will drop to $17,687 in five year
His projections show state aid totals dropping from $9.3 million this year to just $9.5 million five years from now in 2029-30.
Building aid, by his calculations, would go from $611,542 this current school year, to $606,969 this coming school year to $1.63 million in 2029-30, with the capital project state reimbursement funding in full swing.
Smaller aid categories were plugged in as flat in the five-year comparison.
His graph also showed revenue difference percentages of between minus 2.1% this current year to 1.1% increase in year five.
On the expense side of his chart, salaries of support staff, professional staff (including several hired during the COVID years) would go from $1.78 million last year to $898,151 this year to $978,540 in year five- up $80,000 or 9%. Other general support expenses will go from $1.35 million last year to $2.47 million this year (2024-25) to $2.86 million in 2029-30- up by 15.4%.
Faculty salaries will grow from $6.578 million this year to $8.558 million in the school year 2029-30- up by $1.979 million of 30.1%.
Other instructional-related costs, in Mr.Timbs analysis, will go from $4 million last year to $2.7 million this year to $2.56 million in year five, which is down by 4.1%.
The salaries of people in the transportation department are expected to go from $374,256 this year to $639,505 in 2029-30- up by $265,249 or by a whopping 70.9%.
Other transportation costs could increase from $292,200 this school year to $500,000 this coming school year to $837,965 in five years, which is up by over a half a million dollars or 186.8%.
Total employee benefits including retirement, social security, workers’ compensation and health insurance will go from $6.5 million this school year to $9.41 million- an increase of nearly $3 million or up by 44%.
continued next week….