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The Dunkirk City School district faces financial peril from surging expenses and revenues that aren't expected to keep up, according to its financial adviser, Richard Timbs.
A former school superintendent, principal and teacher, Timbs is now a financial consultant for school districts across the state and offered his annual presentation to the Dunkirk Board of Education recently.
Timbs first went over the various categories of state aid given to the district. The bulk of it is called "foundation aid." The district saw a nice jump in 2023-24, with $32,205,790 appropriated, a $5,255,838 increase from 2022-23. However, Timbs warned not to expect such sizable increases in the future.
"This last year you were actually sent to what was called full funding. The state has owned the city of Dunkirk, school district for many many years and finally they paid what was due to you," he said.
"This is a big increase, it looks good, it looks like a nice chunk of change there. But I don't think you're going to see that kind of increase, I don't think ever, ever, ever, ever again," Timbs continued, emphasizing the final "ever" to nervous laughter from board members.
"I think the state has financial problems and I don't think they wanna do this again. As a matter of fact, the increase that they're actually budgeting for you next year, $1.5 million, they're actually changed part of the formula so that this number is actually lower than it would have been."
Timbs predicted, "I think they're going to try to continue to shortchange districts like yours across the state. Your rate of increase will decrease. ... I think this is going to put a big crimp on your revenues, I think you're going to be very strapped for revenue in the future, in large part due to this."
The comptroller reported to the state a projected $4.3 to $4.4 billion deficit next year, $7 billion in 2026 and $9 billion in 2027, he said.
Timbs complimented the district on its sizable cash reserves. "You've got some serious money in here because the district has done an excellent job of trying to save ahead as if it has rainy days coming. And the district will have rainy days coming," he said.
With a little over $9 million earmarked for a capital project, overall district cash reserves will go down to about $10.5 million. "The use of these reserves will save you a ton of money and financing for that capital project, so that's a good idea," Timbs said.
The consultant went over scenarios that contained three key assumptions: a tax increase of at least 2% for each of the next few years, lower increases in state aid after this year, and inflationary costs escalating expenditures.
"You're going to need to use some of those reserves, I'm afraid, if we keep the tax levy the way it is and we keep expenses the way we're going," he said.
Much of the reserves were built through grants, but those will be ending. "I believe the district will struggle to come up with $2.4 million in fund balance every year. It's possible ... but the district will have to be very frugal," Timbs said.
He warned that the district could be on track to need its cash reserves to operate by 2028-29. That's even with 2% tax increases every year. Going to the 3.31% tax cap in 2025 "hardly moves the needle" in terms of revenue, he added.
"Your problem isn't just revenues, your problem is simultaneously expenditures," Timbs continued. Showing a $1.5 million cut of expenses in 2024-26 including salaries, health insurance and pensions, "now you're right back almost where you are now" on the balance sheet.
"That's the only way I can keep you low," Timbs said. "What has happened is, while you have been austere, your costs have accelerated rapidly, so much that they're eating up your fund balances."
He added, "I think it's real important for you to understand what's been going on. While the district and the board has tried hard to help the population of the city of Dunkirk by...increasing (taxes) at a lower amount than they could have, and all that type of thing, what it has done is, it has basically helped cripple the finances of the district."
Timbs went over a series of hypothetical numbers showing the bad long-term financial consequences of never taxing to the cap.
He warned, "I think what you got to do is, start to look at programs -- if they're not working, abandon them. You're going to have to look at class sizes (and) course offerings, you're going to have to look at a lot of stuff. You're going to have to look at maintenance people, and transportation, and everything."
Timbs again suggested the district has kept taxes low over the years but added, "The truth is, you need the money back."