Analyzing the claim that the BOE budget was 'relatively flat'

Holmdel School District (BOE) Budget Clarification

Given the election season, I noticed chatter on various forums where BOE folks, including its president, have made assertions that the school budget for 2020 has remained ‘relatively flat’ or that the budget has increased by only six-tenths of a percent this year.

My natural reaction to that statement was, if the budget was ‘relatively flat’ then why did the tax levy increase by 2% or by $1.1 Million? Clearly, if the revenue is increased by this amount, then there must be a corresponding increase on the expense side of the budget.

To understand this, we need to look at the BOE budget. According to the posted BOE presentation, the budget has two main categories: Current Expense and Capital Outlay. (See Table 1)

First, we can see that the General Fund Current Expense has increased by 2% or almost $1.3 Million. This line item is an accurate reflection of the increase in this year’s operating budget.

The second line item relates to Equipment charges and ‘Facilities Acquisition and Construction’ charges, which includes the total principal for Lease Agreements, assessment charges for debt service of SDA funding, and construction services charges. The reduction in this is likely related to the completion of the 2020 construction initiative.

The total of these two gives us the General Fund total, which increased by 0.6% that the BOE is asserting.

However, including the second line item to show a ‘relatively flat’ budget is not accurate and is misleading. The true budget comparison should only be a year-over-year comparison of the General Current Expense line item, which increased by 2.1% or $1.3 Million this year.

(Interestingly, the Township’s Municipal budget, excluding debt service cost, decreased by 0.65% from last year. The debt service cost rose because of various bonding initiatives during the past administration that we end up paying for now.)

In looking at the BOE revenue items (See Table 2), we can see that school tax levy increased by the maximum allowed 2%, and that the State aid by 17%.

The more interesting category is the ‘Fund Balance’. This refers to the surplus that all budgets are required to maintain. You can see that the surplus has dropped by 40% from 2019, which means that they have consumed future reserves to support a 2.1% increase in the operating budget. If the BOE had not increased our school taxes, then the Fund Balance would have dropped further by a shocking 77%.

The BOE clearly had two options: not increase the current operating expense by 2.1% or $1.3 Million, or increase expenses and increase our tax levy to the maximum allowed.

They chose the latter.

An increase of 2% in school tax levy combined with a significant drop in surplus -- 40% -- is
disconcerting, and it is supporting a 2.1% increase in the BOE’s operating budget.

Any claim that the school budget was ‘relatively flat this year’ is disingenuous.