Legislative session leaves LCSD1 financial questions unanswered | Local News

“One thing that’s notably absent from some of these slides, that you typically don’t get from me, is the lack of numbers,” Cicarelli said.

The bill is the most significant update to school funding in years, Cicarelli told the board and changes the funding calculation and compliance requirements that the district has become familiar with in budgeting. 

Cicarelli presented a broader overview of the legislature’s impact on the district, with limited numbers. This was partially due to limited budgetary tools for forecasting and making budgetary assumptions, and partially due to how much still has to be sorted. 

“It’s a bit like you have 48 business managers learning a new board game, and we’re missing the last two pages of the instructions,” Cicarelli said. “And everybody has an opinion on what is probably in those last two pages. And so as we fill in those details, we’ll definitely have updates.”

Senate file 81, the school finance bill, modified the education resource block grant model. It also implemented some, but not all, elements as recommended in the 2025 Cost of Education Study, Cicarelli said. 

“There are definitely some advantages to even the operational side of how this bill is being implemented,” Cicarelli said. “Things like bus purchases, we won’t have to wait five years for the school district to receive those funds. Special Education placements, we’ll be able to receive those reimbursements in a more timely manner.” 

Cicareli said these benefits will help lessen some of the impact on the district’s cash reserves. 

That said, Cicarelli said it would be an understatement to describe the bill as “a complex overhaul.”

“About 55 to 60% of the funding that we received, which used to be part of the block grants, is now in some way categorical or restricted,” Cicarelli said. “So that’s a big portion of the resources we receive as a school district.” 

That, coupled with extensive compliance requirements, will impact everything from budgeting and staffing decisions to cash flow and program planning, Cicarelli said. 

Cicarelli also noted that the bill sets new staffing ratios for teachers, clerical staff, technology, support staff, administrators and other paid positions in the district. 

It introduces new formulas for counselors, librarians, aides, core and elective teachers, and includes sweeping changes to “model salaries.”

“It’s important to note that these are not uniform,” Cicarelli said, referring to model salaries. “There’s certain model categories that will show very big increases, while others reflect lower model salaries, even to what was currently in law.”

Cicarelli described to trustees the new restriction on what districts can spend for instructional purposes, which he referred to as the “Instructional Silo.”

“It’s like the school finance version of the Hotel California, right?” Cicarelli said. “You can step outside the silo, but the money can never leave.” 

Districts can create instructional reserve accounts. If a district doesn’t fully expend the “instructional silo” allocation, then that would carry over in a restricted or categorized funding amount, which would roll from year to year, Cicarelli said.  

“Now, there are a lot of questions that we don’t have answers to about how that will look,” Cicarelli said.

Some questions, however, have been answered. Funds do not lapse at year-end and they are excluded from operating balance/cash reserves calculations. 

Funds can also be used for instructional purposes, including mitigating declining enrollment or to recruit, hire or retain instructional staff.

The funds do require annual reporting to WDE on balance and general expenditures, Cicarelli said. 

“The big one that I would tell you that I’m tracking is how do things like health insurance and retirement reimbursements fit in that equation?” Cicarelli said. “And those are all questions that we just don’t have answers for at this point.” 

Cicarelli preempted his review of the legislative impact with an overview of the district’s Fiscal Year 2025-26 General Fund Revenue, looking at current revenue and expenditure projections going into the fourth quarter. This year, Cicarelli told the board that the district expects to collect $248.9 million, approximately $1.2 million less than the approximately $250 million originally budgeted.

“I would caveat that with a lot of things happen when it comes to revenue in the last quarter of the fiscal year,” Cicarelli said, referring to the impact of tax collections and state entitlements.

Cicarelli also noted that his previous advice to the board to expect lower earnings from interest on the district’s investments this year, in part due to interest rates and market conditions, seemed to be proving correct. 

So far, the district has earned approximately $2 million from interest, with four months left in the fiscal year. Cicarelli added that this will be impacted by a part of the recalibration bill that presents a real liability for the district. 

“(Of) that $2 million that we’ve earned so far, a million of that will be captured by the state next fiscal year,” Cicarelli said. “And it’ll always be kind of on that look back calculation where half of our interest earnings will be collected by the state.”

On the expenditure side, the district is on track to come in a bit under budget at $253.6 million, approximately $1.9 million under the original $255.5 million budget. 

“Roughly about 99% of our budget is assumed to be expended here,” Cicarelli said. “We typically come in about 97%, and that’s really good financial practice. I think the last thing you, as a board, want is for us to be right up against that maximum appropriation every year.”

A major change as a result of this bill was that foundation program funds transferred to a special reserve fund can no longer be used on major facility repair/replacement and certain facility project types. 

“I think the easiest example that I can point to in this is that things like the ag center that we invested in would not be allowable under this law going forward,” Cicarrelli said, referring to the Clark Allen Agricultural Education Center. 

Another change for LCSD1 is that the district will no longer be able to use general fund reserves that predate the major Campbell decision in 1997 to cash flow operations.

LCSD1 was tracking the proposal to move districts to the State Health plan, which was ultimately struck from the bill, as were the ongoing studies surrounding the proposal.

Still, changes will impact the district when it comes to reimbursement for health insurance. SF81 will reduce LCSD1 funding for health insurance by about $9 million. 

“It’s almost a third of the funding that we get for health insurance for the district as a whole,” Cicarelli said. “This is one of the harder pieces of this legislation to navigate, and we’re working to put those pieces into place.” 

Model-funded participants, or anybody funded out of LCSD1’s block grant allocation, will be calculated using a state contribution rate, creating a ceiling, Cicarelli said. 

“The amount that’s resourced in our school district cannot exceed what the state provides per state employee,” Cicarelli said. “But there’s also a downward reconciliation. So if we have a plan that’s less than the state plan, there’ll be an adjustment in the preceding year where they’ll look back and say, ‘OK, how much did you spend under the allocation?’ And that will be reduced from future allocations to the school district as well.” 

Several other bills that made their way to law this past session will further impact the district. 

The district is paying attention to changes to K-12 facilities appropriations, particularly a $10 million allocation for a safety and security grant, which the district could potentially qualify for. 

The district is also looking at changes to its allocation for major maintenance. 

“About this time last year, I said, ‘Hey, we’re looking at the potential of an additional $4-5 million dollars in our major maintenance allocation,” Cicarelli said. “And I caution it with ‘it’s probably going to be temporary,’ and that was certainly the case.” 

The district’s major maintenance allocation will likely return to about $11 million per year, about a $4-5 million decrease in the current year.

Changes to charter school applications, participation in school activities, attendance of students, and school facilities use fees will also have to be discussed for financial impact. 

“The next major milestone would be the preliminary budget that is due to you in about eight weeks,” Cicarelli concluded. “And hopefully in those next eight weeks, we’ll be able to fill in the blanks on a lot of these pieces that we just don’t have that information.”