Salem BOE Confronts $2 Million Budget Gap
SALEM — The Salem Central School Board of Education held a budget workshop on Monday evening, where they heard from financial analyst Dr. Rick Timbs, who presented a comprehensive and data-driven analysis of the district’s financial situation and future outlook.
The meeting came on the heels of recent announcements that the district is facing a projected $2 million budget gap for the 2025-26 school year. The district has been grappling with rising costs, including a 15% increase in insurance expenses, contractual salary hikes, and inflationary pressures on utilities, services, and supplies. Superintendent Julie A. Adams previously stated that the district would continue exploring fiscal responsibility while striving to maintain academic and extracurricular programs.
In a letter to parents and residents dated March 28, 2025, Superintendent Adams addressed the financial challenges, emphasizing the district’s commitment to preserving educational programs despite the fiscal difficulties. She outlined that the district has historically relied on grants and other temporary funding sources to minimize the tax burden on residents, but this approach has now led to compounded financial challenges. The district acknowledged that avoiding tax levy increases in the past has resulted in a loss of potential revenue amounting to over $6 million in the last decade.
The letter also stated that the district is focusing on streamlined processes, restructuring, and creating efficiencies to maintain educational quality while reducing expenses. Superintendent Adams stressed the importance of careful planning to ensure that academic programs remain intact and that staff retention is prioritized despite the budget shortfall.
Dr. Timbs began his presentation by providing a detailed breakdown of the district’s reserve funds, which he noted are crucial for maintaining financial stability. Among the reserves discussed were the workers' compensation reserve, unemployment reserve, Employee Retirement System (ERS) and Teacher Retirement System (TRS) reserves, and the capital projects reserve. Timbs praised the district for properly funding the workers' compensation reserve and noted that the unemployment reserve had recently been funded for the first time in many years. However, he also pointed out that the TRS reserve was underfunded compared to the ERS reserve, suggesting that the district had been slower to develop a fund balance for certified staff pensions.
A significant point of discussion was the capital projects reserve, which contains approximately $1.5 million. Dr. Timbs emphasized that while having this reserve demonstrates foresight and planning, it also represents a substantial portion—over 40%—of the district’s total reserves, which total $3.7 million. He noted that once the funds in the capital reserve are utilized, the district would face increased financial strain. Timbs also recommended reviewing the district’s repair reserve, questioning whether the current amount allocated was appropriate given other funding needs.
Timbs addressed the complexities of state aid, noting that the district remains heavily reliant on foundation aid, which is calculated using a complex formula based on enrollment, poverty rates, and other factors. He highlighted that Salem Central received a 14.7% increase in foundation aid during the 2023-2024 school year, which amounted to $868,000. However, the subsequent increase for the next year was just 0.4%, which Timbs described as insufficient to cover rising costs. The district’s foundation aid increase for the upcoming year is projected to be around 5.2%, driven by updates to demographic data and poverty measures. Timbs warned that assuming similar increases in future years would be a mistake.
The most pressing issue discussed was the projected financial gap between revenue and expenses. Timbs presented several scenarios, emphasizing that the district could face significant budget deficits starting as early as the 2026-2027 school year. Rising costs in health insurance, transportation, and employee benefits were identified as major factors, alongside the impact of losing federal ARPA grant funds. Timbs estimated that by 2030, the district could be facing a deficit of nearly $1 million if revenue growth remains sluggish.
Timbs also underscored the importance of maintaining cash flow, particularly during the summer months when the district incurs substantial expenses while awaiting tax revenues that do not arrive until November. He stressed that building a fund balance of at least $1 million would be crucial to avoid borrowing through revenue anticipation notes (RANs) or tax anticipation notes (TANs).
Another key focus was long-term planning for capital projects. Timbs advised that, given the rising costs of buses, vehicles, and infrastructure, the district should establish a dedicated plan for future capital expenditures. He also highlighted the tax cap formula, explaining that declining debt service payments could lower state building aid, increasing the district’s reliance on local tax revenues.
Superintendent Julie Adams and the Business Manager expressed their appreciation for Dr. Timbs’ thorough and insightful presentation, noting that the district will take his recommendations into consideration as they move forward with budget planning. Board members acknowledged the challenges ahead and agreed that careful financial planning will be essential to maintaining the district’s fiscal health.
The workshop concluded with a discussion on potential advocacy efforts to lobby for increased state aid, with Timbs encouraging the district to actively engage with regional school board associations to build support for equitable funding policies.