A lack of adequate state funding has left Elkhorn and nearly all of our neighboring school districts with growing budget deficits. Without a drastic increase in state funding, the Elkhorn Area School District is looking at a projected $8.7 million budget deficit by the 2027-28 school year. The district needs to take decisive measures to address this budget shortfall.
In September 2023, the Elkhorn Area School District Board of Education (School Board) formed the Financial Stability Ad Hoc Advisory Committee, composed of district staff, parents, School Board representatives, and community members, to examine the school district’s budget and financial needs. The committee met twice monthly between September and December 2023.
The committee’s goal was for various stakeholders to examine the school district’s budget and present their recommendations to the School Board as they develop a plan for financial stability.
Committee members learned about the funding and expenditures that affect the budget, the history of school finance in Wisconsin, and what factors will affect the budget now and in the future.
Funding
A school district budget is funded by three primary sources: state aid, the local tax levy (property taxes), and federal aid. Roughly 45% of the EASD budget comes from the state, 34% from local taxes, and 7% from the federal government. An additional 14% of the budget is funded through open enrollment (state dollars) when non-residents choose to attend school in Elkhorn.
Expenditures
Over 75% of the district’s expenditures are personnel costs. The remaining portion of our expenses are student transportation, utilities and maintenance, capital and non-capital purchases—for example, instructional materials, textbooks, and paper, and open enrollment-out dollars. As inflation increases and the cost of living for all Americans rises, our expenditures grow year after year despite having the lowest per-pupil spending rate in our area. Elkhorn’s per-pupil spending rate is $2,404 below the state average.
History of School Finance
In 1993, Governor Thompson ratified, through Act 16, revenue cap restrictions for K-12 funding. The revenue cap is a state restriction that limits the amount of revenue (money) a school district can raise from the tax levy (property taxes) and state equalization aid. The revenue cap formula uses resident student enrollment multiplied by an allowable per pupil amount to determine the annual revenue cap amount.
For 16 years, Wisconsin legislators increased school funding in alignment with the Consumer Price Index (inflation). In 2009, that practice ceased, and schools have not had adequate state funding since, forcing school districts to go to referendums to close the gaps. In addition, the 2021-23 state budget froze the annual per-pupil revenue cap amount for two years, putting additional strain on school finances when inflation was increasing rapidly.
It is important to note that due to the revenue cap formula, per-student funding varies from district to district. The difference in per-pupil funding is related to district spending when revenue caps were first imposed in 1993 (Act 16). Elkhorn has always been a very frugal school district. When Act 16 was passed, our spending limits, and the spending limits of every school district in the state, were fixed in place. Presently, the Elkhorn Area School District has one of the lowest per-pupil spending rates in the state.
Inflation
Like most Wisconsin school districts, Elkhorn is now facing a budget shortfall. Over 90 school districts in the state had a referendum on the April 2 ballot. Despite the district’s careful planning and conservative budgeting, state funding for K-12 education has not kept up with inflation since 2009.
Cutting Costs
To cut costs to help offset the looming fiscal cliff, in the 2023-24 school year, the district limited wage increases for teachers and support staff. When many of our neighboring districts offered staff 4-8% raises, Elkhorn limited increases to 1.4-1.5%. Elkhorn administrator salaries were frozen, and the district changed employee health plans, projecting over $1.2 million in savings. The district also deferred the purchase of instructional materials, supplies, and equipment. Over the years, the district has also relied on attrition (not re-hiring vacant positions) to help offset costs.
Financial Stability Ad Hoc Committee Recommendations
After four months of budget review and study, the Financial Stability Ad Hoc Committee made the following recommendations to the School Board on December 18, 2023:
Closing the Budget Gap—The School Board and administration should search for budget reductions and additional revenue sources of $1.25 million during the 2024-25 school year and an extra $500,000 by the 2025-26 school year, for a total of $1.75 million and continuing each year.
Recurring Operational Referendum—The Ad Hoc Committee recommended a phased approach, different dollar amounts over a set number of years, minimizing the impact on taxpayers. A four-year phase-in schedule would reflect only the dollar amount needed each year.
Debt Service Prepayment—The Ad Hoc Committee suggested focusing on debt service and paying off existing debt early—doing so will reduce interest costs for our taxpayers and lower the per-household tax impact of an operational referendum.
Maintain Adequate Fund Balance Liquidity—Maintaining our fund balance will minimize the need for short-term borrowing and the associated interest costs. A fund balance is like a rainy-day fund. For example, if a boiler goes out in one of our buildings, having an adequate fund balance means we can replace that boiler without borrowing money. The Elkhorn Area School District maintains a strong Aa2 rating from Moody’s Investor Service. EASD is one of only 60 school districts in Wisconsin rated Aa2 or higher. This means if we ever need to borrow funds, we get better interest rates, which lowers the cost of borrowing for our taxpayers.
A “minority report” was also presented to the school board by a member of the Financial Stability Ad Hoc Committee. That report and the full Ad Hoc Committee presentation can be viewed on this webpage.
Putting Recommendations Into Practice
The School Board will determine this spring or summer whether the district will ask our community to support a Recurring Operational Referendum in November.
In addition, the budget planning process will address staff retention and recruitment by maintaining market competitiveness in all our positions. The district will utilize a formalized review of all vacant positions before posting and recruiting and utilize staff attrition strategies to identify reduction of staff positions or restructuring staffing where possible. 
Our community also has a role to play. With an estimated $4 billion surplus at the state level, reach out to your legislators and advocate for our schools, ask them to increase funding for public education. A quality educational system strengthens our community. We are stronger together.
Visit this webpage to view larger versions of the graphs and charts included in this article and the entire Financial Stability Ad Hoc Advisory Committee report and recommendations to the School Board. A video of the presentation can be found on the website as well.