The Merrimack Valley School District exceeded its approved budget by more than $2 million last school year, the superintendent acknowledged this week, more than two months after district administrators became aware of the full extent of the shortfall.

The overspending – which the district said was primarily driven by unforeseen out-of-district special education tuition and transportation expenses – has led the district to initiate a spending freeze and to retain an auditing firm to review its financial processes going forward as it seeks to absorb the deficit this school year, Superintendent Randy Wormald wrote in a statement.

“We understand that this situation may raise concerns, but we want to assure you that we are taking decisive and proactive steps to address the issue,” Superintendent Randy Wormald wrote in the statement. “… Our goal is to restore financial stability while continuing to provide the high-quality education that our students deserve.”

Wormald wrote in a follow-up email to the Monitor that the district spent $760,000 more than it budgeted on out-of-district tuition and $460,000 more on out-of-district transportation. Spending on facilities was also cited as a primary cause of the shortfall.

About $1 million of the $2.1 million deficit has already been covered by withdrawals in October from two trust funds the district maintains.

The remaining $1 million remains outstanding and the district plans to “absorb this deficit within the current school year through careful budgeting and targeted spending adjustments,” wrote Wormald, who said he was not available Friday for an interview.

Wormald did not respond to a question about how, if at all, educational experiences will be affected this year. He also didn’t say what will happen if the district is unable to absorb the full remainder of the shortfall.

School board Chair Tracy Bricchi also said she was unavailable for an interview Friday.

District administrators began to grow concerned about a significant potential shortfall last September, but the full extent of the deficit did not become clear until early November, according to the statement.

At an October meeting, the school board approved withdrawing a total of $1.1 million from two trust funds. At the time, district administrators said those withdrawals were primarily driven by higher-than-expected costs for out-of-district special education placements, transportation to those placements, as well as renovations of the Penacook Elementary School roof and the schools’ track.

The board moved approximately $500,000 from its special education expendable trust and $575,000 from its maintenance expendable trust.

“Both trusts are specifically set aside exactly for this purpose,” Wormald said. “They’re to ensure that the district can continue to provide the essential services, maintain facilities, improve facilities as things go without impacting current educational programming or operations. These funds were established to handle and smooth out the ups and downs that can sometimes occur.”

But less than a month later, Business Administrator Hilary Denoncourt informed Wormald of a “negative fund balance of slightly over $1 million” that still remained.

Denoncourt, who has not been present at recent board meetings, said in a brief interview that she will be resigning from the district for “personal reasons” at the end of February. She declined to answer specific questions about the overspending.

Wormald wrote that he implemented a district-wide budget freeze in September and has since engaged an auditor and accounting firm, as well as sought guidance from the state’s Department of Revenue Administration and from the Government Finance Officers Association. The audit is being conducted by the firm Roberge and Company and a report will be made available when it is complete, Wormald said.

“To strengthen our financial processes, we are enlisting external help to thoroughly analyze our budget and the missteps in the process this past fiscal year,” he wrote.

Wormald added in an email that the SAU – which also includes the Andover School District – has recently hired a director of student services.

“This position is and is going to be a huge improvement allowing us to improve services and save money,” he wrote.

Wormald provided a financial report to the SAU’s board in non-public session on Dec. 3. The district board then met in its own non-public session for roughly an hour on Monday, after which they voted to approve releasing the statement, which was also sent to district staff.

The financial challenges Merrimack Valley now faces come as school budgets across the state are setting their budgets for the following school year.

“The district budget is prepared a year and a half in advance, so it is always a challenge to calculate the appropriate amount of fund balance – we want to have enough, but not too much,” Wormald wrote in the statement.

Earlier this week, school board members voted to propose a $51.6 million budget at the district’s upcoming annual meeting in March, which would amount to a 7% increase from this school year.

Merrimack Valley spent $19,840 per student on average in 2023-2024, slightly below the state average of $21,545, according to data from the Department of Education.

Special education costs, which have been driving a significant portion of budget growth in many districts, are particularly hard to predict because services for one high-needs student can cost hundreds of thousands of dollars.

Last month, Wormald told the school board’s finance committee that the district will seek to retain a “10% fund balance” going forward, according to the meeting minutes.

District administrators also said at that meeting that six to eight positions will be eliminated next year.

Jeremy Margolis can be conta cted at jmargolis@cmonitor.com