Reserve funds, eliminating positions help school district balance 2025-26 budget

LACONIA — Despite making adjustments including pulling from reserve funds and cutting five positions, Laconia School District leaders expressed concern over funding difficulties in presenting their budget to the city council at a meeting on Monday night.

According to a presentation given Monday night, the school district’s general fund will increase 2.6%, from $43.2 million to $44.3 million, but state revenue will decrease by $1.2 million, from $15.7 million down to $14.5 million.

Overall, district leaders are dealing with a roughly $2.4 million budget deficit. That deficit is offset by increases in local taxes, equalizing out to a deficit of about $1.8 million. To address that deficit, the district is eliminating five positions — two of which are filled and the other threes vacant.

The elimination of five positions saves the district $562,352, and some financial finagling using existing fund balances helps district leaders come up with $1.8 million, enough to cover the deficit. 

School Board Vice Chair Jennifer Anderson told councilors the district faced significant cuts to the budget, but they’ve successfully mitigated the situation in such a way as not to negatively impact students. 

“Our funding challenge for the next year is great, and we’ve worked hard to make adjustments and still continue to do great things for our students,” Business Administrator Diane Clary said Monday night. “The biggest hurdle to overcome for [the 2025-26 fiscal year] is the reduction in state funding for Laconia. State funding includes adequacy, special education and building aid — these were reduced by approximately $1.2 million.”

The state funding matrix includes many metrics, but the two main aspects impacting Laconia’s funding are the number of free and reduced food program-eligible families, and the equalized valuation of the City of Laconia, Clary explained. About 50% of Laconia School District students participate in the free and reduced lunch program, meaning at least 50% of students in Laconia are at or below the poverty line.

“As you know, there have been several building projects for the city in the last couple of years, and that has added to the valuation, which is great for the City of Laconia, but it negatively impacts education funding,” Clary said. 

High-value properties increase the city’s tax base, but don’t generally bring families eligible for free and reduced lunch into the district. Those monies are great for the city, but because property values increase, the level of poverty assessed in the state’s funding matrix decreases, which impacts school funding. 

The number of parents filling out an application for free and reduced lunch has declined since the COVID pandemic, and now the district struggles to get families to complete the paperwork. Staff are working to increase the number of applications received, but that won’t help their funding challenge for next year. 

Additionally, contractual obligations for salary and benefits — including a health insurance increase of nearly 10% for the second year in a row — and other fixed costs, necessitated cuts, adjustments and the use of reserve accounts to come up with almost $3 million.

“That’s why I color my hair every four weeks,” Clary said.

Their remedy to close the gap: using fund balances to help with next year’s supplies, cutting the wants to supply the needs.

“We cut five positions that were not going to directly impact students, saving $562,000 by cutting those salaries and benefits. We plan to replace retirees and resignations with a lower-cost, newer teacher, so that would be an estimated savings of about $100,000,” Clary said. “We’re pre-buying supplies for next year, this year.”

Each school is pre-buying $20,000 worth of supplies this year to use for next year’s school year using fund balance monies. They’re also using funding from a stabilization reserve account to offset salaries from collective bargaining agreements that they’re obligated to fulfill, and from a special education reserve account, bringing their net budget to within a few dollars of this year's, a 2.6% increase overall.

“We’re fortunate that Laconia has healthy reserve accounts that we can lean on — unfortunately, they won’t last forever and education funding will continue to be a challenge for us,” Clary said. “We hope that you see that our budget is thoughtful and tax cap-compliant while providing our students with an excellent education.”

Ward 3 Councilor Eric Hoffman asked Clary what effect Education Freedom Accounts have had on district funding, and she said the district loses students in theory, but that it hasn’t affected the local district much, because only a few students have taken advantage of that program.

“Right now, we’re at a 50% free and reduced lunch in the City of Laconia, and you think that might be higher if everybody took advantage of filling out the application?” Mayor Andrew Hosmer asked. 

“Absolutely. The other part is that as a school district, we do not deny a child to eat whether they owe $1 or $100. Parents know that we’re always going to feed their children, which we should — that’s important because children learn better when they’ve been fed — but it’s a double-edged sword because there’s no teeth that say, ‘You’ve got to pay your balance,'” Clary said. “Our balance owed is over $50,000 this year.”

Clary said she’s not sure how education funding will change in coming years at the state level, but using fund balance reserves — one-time funds going into reserves instead going toward operations — won’t be sustainable long-term, calling it a “stop-gap for some time but not forever” and noting dipping into reserves each year will eventually deplete them, which could result in staff cuts.

“I know that next year, in my heart, our adequacy isn’t going to increase, it’s going to decrease again, and then maybe it’s more breathing people that we have to cut at that point, because we can’t sustain our fixed costs and our [collective bargaining agreements] if we can’t correct this education funding snafu that we’re in,” she said.

Hosmer described the budget-making process as presently exists as the “penultimate of local control” and said HB 675, which seeks to limit the authority of school districts to make certain appropriations, threatens that process. 

“This was people in Concord who said they know better than you, and your school board, and your parents and guardians, and your students, and that, to some extent, your ‘out-of-control spending’ needs to be pulled in hard,” Hosmer said. “I trust you to get it right — I don’t trust people in Concord to tell you how to spend the money that you have taken a commitment to, to spend wisely and prudently as good stewards and educators of our students.”