School board OK’s $22 million budget

A budget of $22,391,253 for Fiscal Year (FY) 2026 was approved by the Custer School District (CSD) Board of Education at the meeting Sept. 8 at the Custer School District Administrative Building. 
Superintendent of schools Dr. Tim Frederick explained that putting together a budget is not as simple as punching numbers into a template. It requires looking at all the different programs, understanding what funding is out there and what funding might not be available in the future. 
In total, the general fund budget for FY26 is $11,543,406, which is a $3,811 increase from the proposed budget presented in May. The changes were made primarily due to adjusted revenues, updated information received, added positions and increased expenses projected. 
Frederick said the majority of the general funds go to offering competitive wages to attract the best educators for the school system. 
“That is one thing that will continue to grow, and we’re going to have to watch that expense and see what we can do to continue to allow salaries to grow so we are competitive, but also stay within a budget that can be obviously impacted by revenue resources that we have coming forward,” said Frederick. 
The district also has a high number of service contracts, according to Frederick. He said the board will have to figure out how to balance and prioritize them through strategic planning in the future. 
Since FY23, the district has seen an average annual increase of 12.4 percent in the general fund. Salaries and benefits have increased by $1,689,821, or 25.9 percent. 
“So we have to look at that. We have to understand that we do have a state funding formula that’s based off of enrollment. So as we look at our enrollment, we have to also be looking at how we can become highly efficient, but also not sacrifice that quality of a great educational experience that our kids are getting,” said Frederick.
Another major increase in the general fund is the property and liability insurance for the district facilities. Since FY22, the district has seen a 63 percent or $220,799 increase in insurance expenses. That was without the Career and Technical Education (CTE) building. 
Frederick said, “We (the finance committee) had some conversations to look at property liability in the future to see if there are different things that we can implement to hopefully at least slow down that growth.”
Workman’s compensation has also increased by 75 percent since FY22. 
Professional development and travel expenses have increased by 90 percent since FY22 as well. Frederick said high-quality professional development helps teachers grow within their disciplines, but the board could look at doing training locally instead of having teachers travel or training a few people within the district who can then train others. 
Providing activity opportunities for the students to compete against similarly sized schools also requires a great deal of traveling. Since FY22, the district has seen a 60 percent or $71,402 increase in travel costs. 
“We need to start looking at ways in which we, as a school district, can slow down that increase in cost,” said Frederick. “The funding formula that the state has right now is not a funding formula necessarily good for the CSD. Obviously, because of high evaluations in Custer County and Pennington, we are a school district that funds ourselves.”
In FY26, the general fund revenues include $750,000 from impact aid and $700,000 from capital outlay. All told, 71.5 percent of the general fund is going toward salaries and benefits. 
CSD is receiving $770.159 less from taxes levied in FY25 due to enrollment and possible valuation fluctuation, $40,000 less in federal dollars from FY25 and no money from state aid in supporting the general fund. 
“We all know what the administration in D.C. is looking at doing with dollars coming into public school systems. It’s going to be a challenge that we’re going to have, not only at the federal level, but also the state level, because they’re going to start looking at directing dollars also to voucher schools. Then, there’s also going to be legislation we’ve already heard, like there was last year, where the dollars will travel with the kids,” said Frederick. 
To cover the required revenue, the general fund used $1,297.049 in reserves. 
For capital outlay expenditures, the budget is $7,892.400, which is an increase of $954,600. This is primarily due to an increase in the building budget due to costs for the CTE building being shifted over from FY25.
“We believe that once the CTE building is done at the end of the 25-26 school year we will hopefully have some additional capital outlay to look at that may help us long-term-wise become more efficient. Instead of paying for something year- in and year-out that’s high, instead we pay for it one time and figure out how to do it really well here on our own,” said Frederick. 
To cover the required revenue, capital outlay used $237,382 in reserves. Frederick said the district is not taking the maximum levy for capital outlay.
For special education, the budget is $2,863,701, which is a decrease of $345,296 from the proposed budget made based on updated information. To meet the budget, the district will use $643,293 in reserves, which Frederick said needs to be spent because there is too much in reserves.
“With our school district, we’ve done a very good job with obviously meeting the needs of our students, and we are also doing it in an efficient manner,” said Frederick. 
With this plan, the district does not need to take the full 1.42 levy for special education funding. 
“This is a pretty good break for our public,” said Frederick. 
The preschool fund is $91,745, which is a decrease of $44,682 from the proposed budget. This change was due to a combined junior kindergarten and preschool class in Hermosa and an increase in tuition rates. 
“It’s a great program to have in our school district. It is one that I think we can build on and improve. We can start doing more advertising out there that we have this great preschool. In the meantime, we need to get busy and look at possible foundations that will support preschools. It’s the one thing that is a big push across the country is to provide that free, appropriate preschool to get our kids having the right pathway so we don’t have to deal with things later on with those kids when we’re moving through K-12 education,” said Frederick. 
All together, the CSD budget for FY26 came to $22,391,253. 
“It’s obviously a big budget. There’s a lot of things in here that we will dive much deeper into during the 2026-27 year as we prepare for that budget. But at this time, there are some factors that I want everybody to make sure you all know about. The one is the history of the state aid fall enrollment. What we have to watch for in our district is that our expenses do not continue to build higher,” Frederick said. “If those enrollment numbers do this, we can’t have a knee-jerk reaction just because we have a year where our enrollment jumps, where all of a sudden you think you’re going to start spending extra dollars. Those are the years that you have to obviously save up for when that enrollment might drop again.” 
The board will also need to watch property tax levies and capital outlay funds going forward. The previous fall enrollment of 871.4 students will be used to determine the maximum capital outlay for FY26. Currently, 852 students are enrolled for the 2025-26 school year. The district has a 1:11 certified teacher to student ratio in the Custer Elementary School and a 1:9.5 ratio in Hermosa School.
“Something I think we have to look at, and I think it’s something you guys should be extremely proud of is the fact that our kids go to really nice schools. The environment is safe, and it’s also allowing them to grow within that and providing the things that they need,” said Frederick. 
School board member Larry Baker pointed out that the budget compared to enrollment was around $26,000 per student and asked questions about the funding formula. 
The board voted to approve the budget. Jeff Barnes, Travis Hartshorn, Brandy Tarap, Sara Barrick, Heath Reindl and Corey Virtue voted in favor. Baker voted in opposition. 
The next meeting of the CSD Board of Education is Oct. 13 at 6 p.m. at Hermosa School.