After two strapped years working to overcome financial challenges, the Merrimack Valley School District has eliminated its budget deficit, a recovery administrators believed would happen but that arrived sooner than expected.
Property taxpayers also stand to benefit from the district’s financial rebound, with a portion of the current revenue surplus returning to them in the form of tax relief.
The district overspent by $2 million in the 2023-2024 school year, resulting in an immediate spending freeze and later cuts to teaching positions when taxpayers rejected the district’s proposed budget in 2025.
Since then, administrators have been looking carefully at the district’s finances to limit spending, and with the district restored to a stable position, they plan to continue implementing checks and balances to maintain it.
Business Administrator Sam York said the district saw its revenue sources, including state aid and special education tuition, grow by about $3.4 million last school year. It used this revenue to pay off its remaining deficit of about $890,000.
After allotting money for encumbrances, the leftover surplus amounted to over $2.3 million.
At its meeting this month, the Merrimack Valley School Board voted to keep $500,000 as a reserve and return the remaining $1.8 million to taxpayers. This means in December, Merrimack Valley taxpayers will receive the money through decreased tax rates on their fall bills.
Though the tax rate will be set by the Department of Revenue Administration, York loosely estimated taxpayers would receive a discount of between $115 and $406 on a property valued at $400,000.
The reduction will vary by town based on its tax burden. Penacook residents, who have the highest tax rate, will receive the biggest discount, while Webster residents, who have the lowest tax rate, will receive the smallest.
A public hearing would be required for the board to spend any of the $500,000 kept in its reserve.
Behind the deficit
The district entered a deficit after it unknowingly overspent roughly $2 million during the 2023-24 school year and did not have enough reserve funds set aside to cover the cost.
Former Superintendent Randy Wormald said more than half of the overspent money was for out-of-district special education tuition and transportation costs, services that school districts are legally mandated to provide.
These out-of-district expenses depend on student needs and can exceed $100,000 per student, making the expenses difficult for administrators to predict when the budget is set in March.
Typically, a district would draw on reserve funds to cover most or all of the overspending. However, Merrimack Valley had for years run a very lean budget and, in doing so, had not fully funded its trust funds or kept the recommended unassigned fund balance, creating little leeway in the budget.
Merrimack Valley’s special education trust fund, which Wormald later said should hold roughly $2 million, only contained $533,000 in the fall of 2023. The district’s unassigned fund balance had averaged 1% of the total budget for years. The state DRA recommends that school districts save between 5% and 17%.
At the time, Wormald said the district and school board’s desire to keep taxes low and minimize budget increases partly contributed to underfunding certain lines.
The district did not know it had overspent until months after the fiscal year ended, which Wormald had said was due to issues with “internal financial monitoring and reporting processes.”
The path to a positive balance
Immediately after district administrators realized they had overspent, the district entered a spending freeze.
In October 2024, the district withdrew from two of its trust funds to cover about $1 million of the $2.1 million deficit. That school year, the district generated a surplus of over $360,000 and was able to reduce the deficit to about $890,000 by July 2025.
Administrators also hired Julie Gaudette as director of student support services and Sam York as business administrator to take a closer look at ways to cut costs.
In March 2025, community members voted to reduce the district’s proposed budget by $2 million, forcing the district to cut teaching positions.
“When the budget was amended and $2 million were cut from it and people had to lose their jobs, that was excruciating,” said Superintendent Catherine Masterson, who was assistant superintendent at the time. “That was by far the hardest time throughout this process.”
York stepped into the business administrator position in July 2025 and asked for a “frost” on spending rather than a full freeze. Last school year, York said the district decreased its spending by around $110,000 compared to the year before.
The district ended the school year with a revenue increase of about $3.4 million, a combination of higher tax rates, revenue increases for special education tuition, state aid, special education aid and increased Medicare reimbursement.
Each year, the state gives an estimate for “adequacy funding,” which is the amount of money the state gives a district to provide an adequate education, using a set formula. The state’s recommendation is for districts to budget 95% of the estimated adequacy.
This year, the state’s estimate was over $290,000 less than what the district actually received.
York and Masterson both said they didn’t expect such a positive outcome so quickly. York said he was pretty confident the district would be able to get out of the deficit in a timely manner, but he didn’t foresee such a swift recovery.
“We were not anticipating having not only clearing the deficit, but having a fund balance this year,” Masterson said. “But we feel really positive about the track that we’re on.”
A team effort
Masterson said getting through the past two years was a team effort. Administrators worked together to look at spending, and district faculty and staff provided strong support.
Masterson remembers the solidarity among faculty members who showed up to speak at the final budget meeting before community members voted to adopt reductions. At that point, she said, all faculty members knew whose jobs were at risk.
“People that were in jeopardy of losing their jobs spoke in support of the SAU,” Masterson said. “That was really powerful. I think that sort of carried us through that whole time.”
She also credited Gaudette as student services director for auditing the district’s services and making sure the district was using the most efficient models to deliver them. At times when the district needed to contract services, she said Gaudette helped negotiate the best deals.
York said the facilities director also helped cut down on facilities costs by seeing which projects could wait and developing a capital improvement plan moving forward.
“I think it’s really a combination of everybody realizing sort of what got us there and rethinking how to approach it in a more fiscally responsible way,” York said.
During her time as the district’s assistant superintendent, Masterson worked with Wormald to look at spending and put a plan in place for fiscal responsibility.
Masterson credited Wormald with setting the district on its current trajectory. The former superintendent ended up taking on the responsibilities of business administrator while leading the district, she said.
“I don’t think he slept, to be perfectly honest,” Masterson said. “He did an amazing job at putting us on this path. I know that he received the lion’s share of the blame for the deficit. I hope he receives the lion’s share of the credit for this outcome.”
Moving forward
When Masterson was appointed as superintendent, she said the district’s financial wellbeing would be her main priority. She stepped into the role in July, after being a student, longtime teacher and administrator in the district.
Going forward, administrators plan to continue their checks and balances to make sure the district is spending responsibly.
Masterson said administrators will continue doing their due diligence to investigate different ways to provide services and bring all the options before the school board.
This year, the district explored the possibility of contracting its transportation services to cut costs. Although the board decided against doing so, Masterson said the process allowed the district to look at each department for cost-saving measures that administrators hadn’t yet considered or fully investigated.
Maintaining the budget and keeping the district financially stable can be a tough task for everyone, especially as the state passes legislation that is not favorable to school budgets. York said there is always a risk of the district slipping back into a deficit, but that administrators will make the board and public aware of any budget shortfalls as soon as they are discovered.
“It seemed last year, about once a month, a district would be in the news because something financial was happening,” York said. “So, I mean, there’s always a risk, whether it’s an expense to a particular building or an expense for a student.”
For now, administrators feel positive about where the district is financially, Masterson said. In terms of budgeting, she said administrators are committed to serving their students, first and foremost.
“We are wholeheartedly committed to doing what is right for our students. We want the very best, and we believe that they are capable of the best,” Masterson said. “And I feel really confident that in time, skeptics will come to know – they may not always agree – but come to know that they can trust us.”
