Superintendent explains how Hannibal School District wound up with $3.3 million budget deficit

HANNIBAL, Mo. — Hannibal School Superintendent Susan Johnson said the district’s $3.3 million shortfall is a result of less-than-expected revenue and higher-than-expected expenditures on the preliminary budget, which was presented in July.

The deficit was further brought to light through a resignation letter sent Thursday by Roy Webb to Hannibal School Board members. Webb reneged on a signed contract to take over as superintendent in June when Johnson was set to retire. Johnson now will stay in her position through the 2024-25 school year. 

Webb cited one of the reasons for his decision to walk away from the position as “inaccurate” finances within the school district, which he said was “facing serious financial needs” with a “risk of running out of funds.” 

The school district reports its current revenues are on pace to come in at $47,674,135 — $979,642 less than the $48,653,777 it anticipated when the School Board passed the budget in July. Current expenditures are on pace to come in at $51,108,261 — $2,358,154 more than the $48,750,107 it anticipated.

This results in the $3,337,796 deficit.

Johnson said they are in the preliminary stages of navigating this situation and looking at cost-saving efforts. The district wanted to provide as in-depth of a report as possible to the district employees and the community.

She said anyone with questions can contact her at the Hannibal Board of Education, 4650 McMasters, or call 573-221-1258.

Information on the Hannibal School District budget below is provided by the district.

Johnson listed reasons for the lower-than-expected revenues as:

Assessed valuation did not increase at predicted level

The school’s operating budget is divided three ways — 45.09 percent from the local tax base, 38.07 percent from state funding and 16.84 percent from federal funding.

Johnson said the numbers in the July budget are predictions based on numbers from previous years. 

“Our revenues in particular really fall under local tax dollars, and we can only predict that on the preliminary budget based on what it has been before,” Johnson said.

Johnson said the district’s assessed valuation typically increases anywhere from three to five percent. The assessed valuation increase from the 2021-22 school year to 2022-23 school year was 4.4 percent, but the increase from 2022-23 school year to the 2023-24 school year was less than one percent.

“Since we base the preliminary budget on past amounts by looking at historical data, the three or four percent increase on the local tax would usually be pretty close,” Johnson said. “Then when we replaced it with the actual data, there was a notable difference.”

Closure of local businesses

Johnson said tax revenue was decreased through the closure of local businesses and less construction because of inflated prices of materials and supplies, along with long wait times to receive materials.

Fewer students

Student enrollment decreased by 46 students last year, which Johnson said led to a loss of nearly $300,000. Johnson said the district is tasked with estimating student enrollment and student attendance when planning a proposed budget and can only go by numbers and factors from previous years. 

Increase in number of student absences

The district receives $6,375 annually in federal funds for those students who maintain an attendance rate of 90 percent, which goes by the number of hours rather than days. Students who come in late or leave early also count toward that 90 percent. Kids who are absent for more than 90 percent of school hours are an additional loss to federal funding.

Johnson said enrollment is down around the state. The Show-Me Institute reports that Missouri public school enrollments have lost 30,000 students in the last decade to other methods of learning. Johnson said some Hannibal families have opted for homeschooling, private school or virtual options. Many of those virtual options became available during or after the COVID pandemic.

Johnson said kids have many reasons not to be at school, and many of them are good reasons such as illness, injury, deaths in the family, etc. She said other children have a pattern of missing school, and the district continues to work with families to help get them there.

“We know these things happen and that they can’t be here sometimes, but we are penalized when they are at school less than 90 percent of school hours. It doesn’t matter the reason,” Johnson said. “I know sometimes people get frustrated with our school system because we track attendance, but it’s what we are required to do.”

Loss of ESSER funds

Johnson said the federal Elementary and Secondary School Emergency Relief (ESSER) funds were a temporary revenue boost — but only for specific areas. ESSER funding, created under the CARES Act to assist schools during COVID, totaled $13.3 million for the Hannibal School District since the 2020-21 school year.

Johnson said examples of the use of ESSER funds were providing each student in the school district with a laptop and an HVAC system at Hannibal Middle School.

Below is an information sheet on federal COVID funds, provided by school officials.

Johnson reported the 2021-22 school year ESSER report shows a reduction in funds used because HVAC bills were not received yet.

Johnson listed the higher-than-expected expenditures as:

Additional staffing and equipment

Johnson said despite lower enrollment numbers, the district has had an increase in students with special needs since the pandemic. The school accommodates students who need a special curriculum or equipment to assist with disabilities of all kinds. According to Johnson, some of those items have been a communication board, Braille and American Sign Language curriculum.

This also required adding staff members certified in certain areas such as Braille and sign language or areas of mental health, along with paraprofessionals who provide help in learning and throughout the day. The district reported 18 certified staff have been added since 2020. The district also reported it does not have a number for the non-certified employees added because many people in those positions come and go more frequently and do not finish their contract year.

“We want (students with special needs) to have the same opportunities that any student would have,” Johnson said. “That requires supplies, learning instructional supplies, sometimes assistive technology … a lot of different things like that.”

While ESSER funds contributed to the initial hires and additional equipment, Johnson said those funds have now stopped. Salaries still need to be paid, and equipment still must be updated or replaced.

Capital projects coming in over budget

Johnson said on top of a new heating ventilation and air conditioning system, new roofing was needed in several places after a storm last spring. Insurance did not cover the full amount.

Johnson also said the home built by the building trades class brought in more than $400,000. However, with the rising cost of building materials and a long wait time for items to arrive, expenses went over what they planned.

“The kids did a phenomenal job. It was late on getting sold because of cost and inflation,” Johnson said. “The timing of getting supplies was due to some of the workforce needs in the nation, and we don’t have a lot of control over that. And obviously, if we’re doing something, we want to make sure we do it right to make sure it lasts for a long time.”

 Johnson said the capital expenses are still being evaluated on how they contributed to the deficit.

Increased cost of supplies

Johnson said the district utilizes its government commodities “to the hilt because that’s being efficient, effective and what we should do.” 

“But we can’t get everything through commodities, so we have to purchase those and they are costing more than ever before. I am not complaining, but there are guidelines we have to follow,” she said.

Just like families are experiencing at home, the price of everything the school purchases to operate costs more.

“You can’t go to the grocery store without paying a lot more than what you once did,” Johnson said.

Johnson said additional supplies that continue to raise in price include maintenance, cleaning supplies and fuel costs. She said many school supplies are provided to kids by the school that parents typically provide in elementary school.

Salary and benefit increases

The Hannibal School District has paid $895,020 more this year than last year for employee salaries, including certified and non-certified employees and benefits. The cost of salaries has risen by $9.32 million since the 2018-19 school year.

Johnson said the cost of insurance continues to rise, which is out of their control. The school district provides free insurance for each employee, including health, vision, and dental.   Family members can also be added, they would cover these insurance premiums.

2022-23 salaries

• Certified staff: $21,227,458
• Non-certified staff: $6,212,492
• Employee Benefits: $9,808,979
• Total: $37,248,929

2023-24 salaries

• Certified staff: $21,427,341
• Non-certified staff: $6,769,890
• Employee Benefits: $9,946,718
• Total: $38,143,949

Specific salary numbers for each school year can be found on page 2 of the PDF of the budget packet published earlier in this story.

Johnson said educators are among the lowest-paid professions in the nation, and the Hannibal School District falls in the middle of that. She said the baseline salary for Missouri teachers is $38,000, and Hannibal Public School’s baseline salary for certified teachers is $40,400.

“We don’t have the highest salary. Teachers in Hannibal aren’t making the highest, and they’re not making the lowest,” Johnson said. “And we have more students and are larger than all of them.”

Johnson said there are a “plethora of jobs out there,” and the district wants to retain the teachers and staff it has. 

“You’ve got to make ends meet, and they’ve got to take care of their families,” she said. “Most important, we want to support our teachers. We have great teachers and … I don’t mean just classroom teachers. I mean cooks, bus drivers, custodians, clerical staff — you know, all of us. It takes all of us to make this work for our kids and everybody has an equal impact.

Johnson mentioned several recovery efforts for the deficit.

Watching expenditures for the remainder of the year

Johnson said her goal for the rest of this school year is to avoid dipping into reserve funds any more than necessary. Johnson explained the reserve fund acts as the district’s savings account or “rainy day fund” to cover unexpected expenses if revenues are lower than expenses. She said maintaining the reserve fund is cited as a priority so it does not drop lower than necessary to balance the budget for the current year.

District officials, however, did not provide a dollar figure for how much money is in the “rainy day fund.”

Efforts to avoid using that fund will include avoiding out-of-town field trips, unnecessary purchases and other methods of tightening their belts. Johnson said the district is evaluating all expenditures and how much they can save.

“This may include specific supplies or resources. For example, we may have subscriptions for an instructional resource that is not being utilized enough to justify purchasing next year. We will not be completing summer painting that we have in the past, as painting will not impact the quality of student instruction,” she said. 

“There are some things we have to continue to do. We have to pay staff. We have to pay our utilities. If we have a new student who comes in that has to have a certain curriculum, we have to do that. Those are non-negotiable, but at the end of the day, it’s about staying in our means,” Johnson said.

Evaluating the operating levy rollback

Johnson said the Hannibal School Board has not set the operation levy at the full amount approved by voters for more than 15 years. The operation fund levy was set at 3.0499 during the August tax rate meeting. Had the district not rolled back the levy for the last two years, Johnson said it would have produced approximately an additional $2.5 million in revenue.

Reductions of staff through attrition

The district also will reduce the number of employees by not filling certain positions that will be left open by retirement or resignation. Johnson said they are evaluating every open position to determine if it needs to be filled and determine the amount of money to be saved. The district did not provide a preliminary figure for the number of staff members expected to retire or resign.

Evaluate enrollment and attendance

The district will continue to look at ways to increase enrollment and attendance for the remainder of the year. Johnson said federal funding for attendance and enrollment is expected to steadily rise in future years, adding to future revenue. The current $6,375 in federal funds for students who attend more than 90 percent of the time will go up to $6,760 in the 2024-25 school year and $7,145 for 2025-26.

Finances ‘have been inaccurate for years‘

In his resignation letter, Webb claimed the Hannibal School District’s finances “have been inaccurate for years.” Webb did not elaborate on how he came to that conclusion.

Ted Sampson, chief operating officer for the school district, told Muddy River News that Webb’s comment stems from Webb’s inexperience with Missouri law and finance.

Webb shared that sentiment in his resignation letter.

“Unfortunately, (the district) may need someone with much more Missouri law and school finance knowledge than I possess,” Webb wrote.

Sampson said Webb asked many clarifying questions in recent conversations about processes relating to the MOHEFA (Missouri Health and Educational Facilities Authority) direct deposit program that many Missouri public school districts participate in. Sampson said school districts are required to transfer funds between the operational and debt service fund. Financial summary reports submitted each month to the school board reflect these transfers that take place.

“Mr. Webb was having difficulty tracking the reasons behind the large transfers that take place periodically throughout the year,” Sampson said. “Through this process, the state makes the payment for the district by intercepting funds from the foundation formula dollars paid to the district each month. The district then later transfers the money that it did not receive from the state from the debt service fund. These processes are tracked and evaluated by our auditor each year, and they ensure journal entries are accurately created to reflect these transfers.”

Sampson said corrections to the budget were necessary due to rising expenses caused by inflation, decreasing enrollment and the exhaustion of one-time federal funds.

“However, a portion of (Webb’s) evaluation stems from an unclear understanding of Missouri School finance, as he himself alluded,” Sampson said.

EDITOR’S NOTE: Below is an explanation of each of the seven funds listed in the Hannibal School District budget:

• 010 – General (Incidental) Fund: The fund accounts for all transactions having to do with the operations of the school district’s/charter schools’ regular programs, except those required to be accounted for in another fund.
• 020 – Special Revenue (Teachers) Fund: The fund accounts for revenue sources legally restricted for expenditures for salaries and benefits for teachers and tuition payments to other districts/charter schools/private schools, etc.
• 030 – Debt Service Fund: The fund accounts for all transactions affecting the value of the unpaid principal of bond issues, value of cash on deposit in the fund, the value of any temporary investments, the amount of current interest and principal requirements of long-term debt and paying agent fees.
• 040 – Capital Projects Fund: The fund accounts for all facility acquisition, construction, lease purchase principal and interest payments and all other capital outlay expenditures.
• 050 – Food Service/Enterprise Fund: This an interim fund for districts/charter schools operating a federally funded school lunch program consisting of local meal receipts, state matching money and federal food service funds. This is an enterprise activity with a set of general ledger accounts designed to determine profit and loss in a manner similar to commercial enterprises.  This fund may require support from the General (Incidental) Fund. This fund will be merged with the General (Incidental) Fund for state reporting purposes.
• 060 – Student Activities/Trust Fund: This is interim fund includes all student activity transactions not identified in other funds and all athletic activities that are not a part of the regular instructional program. This fund must be merged with the General (Incidental) Fund for final state reports.
• 070 – Internal Service Fund: This fund is used only by certain large school districts/charter schools to accomplish intradistrict billing of common services.