Assistant Superintendent of Finance and Operations Cheryl Herrick Stella said Thursday at a joint School Committee and Finance Committee meeting that it is “very common for schools to have large balances in revolving funds.”

“A lot of schools have school choice revolving funds and have millions in them,” Herrick Stella said. “We don’t have school choice because we have Nahant, and it’s more beneficial for us to tuition students from Nahant as opposed to students from school choice. The reason schools carry large revolving funds for school choice is for a couple reasons: to help those budgetary asks year-over-year, it’s also as we talk about volatility and risk in the budget it helps with that volatility so that we’re not having to consistently come back to the town when things happen when we don’t predict or were maybe a bit risky with when we were making our budget and ask for additional appropriations.”

Public discussions of the Nahant Revolving Fund started in January when the Select Board, School Committee, and Finance Committee held a joint meeting. Massachusetts Association of School Committees Field Directors Tracy Novick and Alicia Mallon discussed the overall budget and revolving funds, which are regulated by state law and the Department of Revenue and allow school committees to spend certain revenues without appropriation for specific purposes tied to the programs or services that generated the funds.

Swampscott maintains a revolving fund tied to students attending the district from Nahant.

The Swampscott School Committee is currently negotiating an updated contract with the Nahant School Committee that could affect revolving funds and revenue from Nahant. Herrick Stella said on Thursday the Nahant Revolving Fund is a “basis dollar amount,” with the special education tuition being the “only real variable” – but that is based on projections similar to some items in the overall school budget. 

The current agreement between the Swampscott and Nahant School Committees ran from the 2023 fiscal year to 2027 fiscal year, for students in grades seven through twelve to enroll in Swampscott’s middle and high schools. 

“Nahant will pay an annual tuition rate for each student equal to the most current Swampscott Public Schools in district per pupil expenditure, as calculated by DESE, plus $1,000 per student high school assessment,” the contract reads, as reviewed by the Swampscott Tides. “The parties further agree that a special education student in pre-k through grade six that is eligible for enrollment in the Nahant Public Schools may attend the Swampscott Public Schools provided negotiations on a tuition rate based on the child’s needs as well as services provided can be reached between Nahant and Swampscott.”

The agreement started with a $1,607,137 tuition payment in the 2023 fiscal year, with a 2.5% increase each year, ending with a $1,773,978 tuition payment in the 2027 fiscal year, according to the documents. 

There was also a memorandum to the agreement, signed in July and August of 2023, for sixth graders to attend Swampscott’s middle school at a $16,897.70 rate per pupil, according to the documents reviewed by the Swampscott Tides.

“There’s rules for all revolving funds,” Herrick Stella said. “As far as what we can charge the Nahant Revolving Fund, it’s any educational expense related to Nahant students, so it’s a little bit more broad in what you’re allowed to charge. We charge middle school and high school teachers, middle school and high school psychologists, middle school and high school guidance counselors and educational materials at both the middle school and high school.”

Herrick Stella said both portions and complete expenses of full-time staffing position salaries can be charged to the Nahant Revolving Fund. Because there are no designated “Nahant teachers,” she said the budgeting process aims to distribute costs evenly across schools and comparable staff.

“It just has to be related effectively to education at both locations,” Herrick Stella said. 

School Committee Chair Glenn Paster noted that the funds are to “make sure nothing happens in the classroom.”

“We don’t have much flexibility – same as the town side as well – because there’s people costs,” Paster said.

The school district ended the 2025 fiscal year with a $574,000 balance in the Nahant Revolving Fund. The fund is projected to have $428,000 balance at the end of the 2026 fiscal year, which is on June 30. 

With budget projections for the 2027 fiscal year, the district is showing it will charge about $168,000 “more than the current year’s revenue,” Finance Committee Chair Eric Hartmann said. 

“You’ll be eating into that balance from the previous year,” Hartmann said. “You’ll end up with $261,000.” 

When asked by Hartmann, Herrick Stella agreed it “is a choice” to potentially zero out the account, but she noted there was a thought process behind leaving money within the Nahant Revolving Fund. 

“We thankfully had very positive budget results last cycle. We finished the year with 99.3% of the budget spent, so we had decisions that we could make at that point. We could spend it on things. We could spend it on pre-paid tuition. We could leave it unspent, which it would revolve into the reserve, or we could have spent less out of any of our revolving funds to be quite frank with you,” Herrick Stella said. “Our election was to spend less of the revolving fund because we knew that at that time we were entering into some tough financial years now. That would allow us some money going into the next couple budget cycles to be able to pull from to have a lower budget ask of the town.”

Herrick Stella added that within the upcoming budget cycle, “we’re seeing that happen,” as money will be pulled from the Nahant Revolving Fund to compensate for the lower budget ask.

If there was no balance, that would in turn “create an issue in FY28,” Herrick Stella said. 

“If you zero it out, we have nothing to offset our ask as we go into FY28,” Herrick Stella said.

Herrick Stella also pointed out that neighboring towns that are having budgetary issues this year first made cuts by relying on their revolving funds. She said Marblehead’s policy is to keep a full year of revenue in its revolving fund, similar to a circuit breaker. Another town Herrick Stella previously worked in, however, worked to keep 5 to 10% of its operating budget within the revolving fund.

“When towns get into really tough financial times, then they’ll start drawing on the revolving funds so that they’re not having to lay off 100 teachers but maybe just 10 teachers,” Herrick Stella said. “I think ideally if we could have somewhere around 5% of our operating budget in revolving funds, that is a fair amount.”

The district ended the 2025 fiscal year at 4% in all revolving funds overall, Herrick Stella said. 

“To me that is still small compared to other districts, but it is also allowing us that ability and to make sure that we’re not having to come back to the town, or we see all of these other communities that are suddenly $1.5 million in the hole in September and they’re doing layoffs in September,” Herrick Stella said.  

Hartmann agreed the town is facing a “tough year” financially.

“This is something that the Finance Committee feels that we really have to understand and be comfortable with the recommendation we would make within the overall budget,” Hartmann said. “Recognizing that it’s a future issue, if there’s money there that in theory we can say as much as we’d love to have 5% or 4% of these funds in reserve, if we’re going to have to use excess levy capacity, then there’s some logic to say why would we do that if we’re going to have to tax the tax payers more money when we could reduce that tax break.”

Select Board Member Mary Ellen Fletcher has raised concerns about the revolving fund balance at several budget meetings. Most recently, she spoke during the public comment section of the Finance Committee meeting on Monday to share that “we have never had a discussion about having a cushion in a revolving account, and this has to be addressed.”

“We all have to really focus on our fiduciary responsibilities,” Fletcher said. “It is in my opinion that that money needs to completely offset this year’s budget.”

Hartmann said later in the Monday night Finance Committee meeting that “we need to…develop a policy on whether it is acceptable to leave money in at the end or does the town is who collectively agree that they should not be used as a reserve fund, just a revolving fund that effectively gets spent down to zero at the end of each year.”

Hartmann did ask about the policy behind the Nahant Revolving Fund during Thursday’s meeting. Superintendent Jason Calichman shared that there is an understanding among those making the budget decisions within the district, but it was also agreed that the thinking behind the revolving fund and amount of money could be shared in detail with Town Administrator Nick Connors and the rest of the town side of the budget decisions. 

Herrick Stella reiterated at Thursday’s meeting that zeroing out the Nahant Revolving Fund account would be a “short term solution, not a long term solution.”

“We were trying to do what we could to build some levers to help as we go through some really tough financial times here in the community,” Herrick Stella said.