Onsted school board passes resolution to allow fund balance to dip below 12%
- news655
- Nov 20
- 5 min read
By BRAD HEINEMAN
bradh@tecumsehherald.com
ONSTED — Citing such challenges as cuts in state funding, delays in the state budget’s approval, as well as rising costs, post-COVID staffing remaining unchanged and a trend of declining student enrollment, Onsted Community Schools is facing a budget crunch — to the tune of a projected deficit of $1.8 million.
The budgetary concerns opened the door for the district to hold a handful of finance committee meetings recently that registered plenty of public attendance and feedback. In those meetings, a review of the district’s finances were conducted and ideas were shared about how to potentially implement cost saving measures going forward.
Information from those meetings was brought to the Onsted Board of Education where, in the form of a resolution, the board unanimously approved at its Monday, Nov. 17 meeting to temporarily dip below the board-mandated 12% fund balance, which will allow Superintendent Jonathan Royce and the administrative team to take action on operational opportunities while minimizing student disruption.
School board Vice President Ray Tessier provided a full reading of the district’s fund balance resolution during Monday’s board meeting, which passed in a 7-0 roll call vote. Part of the resolution states Onsted schools has been impacted by state per-pupil funding and declining enrollment trends and because of that, the board is suspending the district’s 12% fund balance “until such time as the board completes the required two reading process to consider a temporary modification,” Tessier said.
During this “temporary modification” period, Royce will be authorized to manage district finances aligned to a minimum fund balance target of 5%, and to take any actions necessary to execute the district’s budgetary and operational plans consistent with the temporary suspension.
According to Onsted schools board policy No. 6220, titled “Budget Preparation,” the board must ensure that adequate funds are reserved for the general fund to maintain a secure, financial position “whereby the fund equity shall not fall below 12% of the preceding year’s audited expenditures of unrestricted revenues.”
According to school board President Jason Terakedis, funding uncertainty for Onsted and several other school districts in the state resulted because Michigan’s state budget was passed after an Oct. 1 deadline by state legislators.
“There’s no doubt, we have a math equation to solve,” Terakedis said. “There’s a number of reasons for it. We have the right approach and the right people doing it and we’re going to do it thoughtfully.”
The Michigan School Business Officials (MSBO) says a typical fund balance for a school district is composed of cash-on-hand, accounts receivable, and inventory and prepaid assets. As a general rule, MSBO recommends that districts have a fund balance of 15-20% of their budget as a financial cushion, allowing for a district to avoid drastic changes in educational programs and/or employee layoffs.
At this time, there are not any planned changes to the current learning structure at Onsted schools, although, “all options are on the table,” Terakedis said.
“We’re still looking at a lot of numbers and we haven’t made a final decision,” Terakedis said when responding to a staff member question about the possibility of closing the district’s administration building.
When taking that building and each district building into consideration for potential cost saving measures, Terakedis said the administration building requires things like constant electrical service, heating and cooling, and custodial services for cleaning and regular maintenance.
“I don’t even want to necessarily throw out a number, but it’s significant enough that when we talk about savings in other areas that are equivalent, you’re talking $10,000 or $20,000. A couple of times that adds up,” he said. “…It’s spending that could be redirected toward students. I don’t know the final number yet but we’re going to get to it.”
One of the more common questions fielded by Royce over the past couple of weeks was when did the district start to recognize issues with the budget? His response: during the first few months of the 2024-25 school year there were some early indicators from the finance committee and the finance office of budgetary concerns.
“There was delayed communication, there were reoccurring payroll issues and there were sporadic reports that I was getting from our financial system. I wasn’t getting consistent information and there was difficulty reconciling our accounts,” Royce, who has been Onsted schools’ superintendent since July 1, 2024, said.
Because of these issues, there was a change in the business office with an internal representative brought in who had a background in accounting and business, Royce said. A third-party independent audit was conducted and disclosed Onsted had “outdated processes,” “incomplete reconciliations,” “money leakage from inefficiencies” and “weak internal controls.”
To rebuild its financial operations, the district cleaned up and organized its accounts, streamlined payroll and accounts payable, standardized fundraising accounting, restored proper school accounting with accurate and categorical tracking, and reestablished compliance and internal controls for athletic and band fundraising.
Immediate savings came from within the board office where some roles were merged within human resources and finances, Royce added. Credit cards were frozen unless there was an emergency. Contracts with independent agencies — like those that perform district snow removal, for instance — were renegotiated in an effort to reach a better deal.
Onsted’s approved school budget in June was based on incomplete data as the student count was still uncertain, state aid was not finalized and audit corrections were still incoming, Royce said.
“We are a little bit clearer now with our revenue picture,” he said.
Onsted has a blended student count of 1,112 students; total revenues of $17,000,517; and total expenditures of $18,885,399 for an overspending amount of $1,884,882.
If the district didn’t do anything to rectify its budget deficit, the fund balance would be projected of 4.1%, which would result in operational cuts, large-scale personnel adjustments, program disruption and loss of stability within the community.
“All these things came together to influence the (fund balance) resolution,” Royce said.
The approved fund balance resolution will set the minimum fund balance temporarily to 5%, with a stretch goal of balancing the budget by 2026 and returning to a 12% fund balance by the 2027-28 school year.
With the resolution now being approved, it should provide some clarity as to the district’s next steps, Royce said.
“For me, we can start having conversations with staff about changes that need to be made and solutions that can be brought to the table,” he said. “Before I had the numbers, it didn’t make sense to bring (staff) in and have those conversations. Now we can start planning the next steps in a concrete fashion as opposed to a wishful thinking fashion. Hopefully, we can get things moving in the right direction sooner rather than later.”