School board warned reserves could be exhausted in coming years as district weighs pay raises and budget choices

Ithaca City School District officials and board members spent the bulk of a recent meeting on a wide-ranging budget briefing that laid out the district’s fund-balance mix, short-term assumptions and a five-year projection showing potential depletion of one-time balances.

“It's a little over $31,500,000 in fund balance,” said Dr. Lisi, a member of the district’s executive team who led the financial briefing, adding that about $16,300,000 of that amount is in legally restricted reserves. The presentation separated reserves, unassigned fund balance (the state-limited “rainy day” funds) and assigned fund balance (one-time carryovers used to ease the following year’s budget).

The briefing included a five-year projection under a set of assumptions — notably a 3% annual increase in state aid, continuing inflationary pressure on nonlabor costs and a scenario that rolls in assumed compensation increases. That model showed that with the proposed 2025–26 budget and a baseline of continuing cost pressures, the district would: reduce assigned fund balance by roughly $2 million in 2026–27, reduce it further the next year, and risk exhausting both assigned and unassigned balances by 2028–29 unless adjustments are made.

Why it matters: the board’s business officials warned that dipping into reserves and fund balances to pay recurring costs would reduce the district’s credit strength and raise long-term borrowing costs. “If we use our fund balance, just the fund balance alone, it could have an impact of dropping our rate to A-plus,” said the district’s finance presenter, citing an example where a one-notch rating drop on a $120 million bond issuance could cost nearly $1.9 million in additional interest over the life of the bond. Larger rating downgrades would add still more long-term cost, the presentation said.

Board members and public speakers repeatedly connected the reserve discussion to teacher compensation talks. Board member Adam asked how a roughly $1.1 million difference between bargaining proposals would affect reserves; the administration replied that every 1% on the payroll for the Ithaca Teachers Association is approximately $415,000 and that multi-year settlement levels compound and quickly increase ongoing cost obligations.

Superintendent Dr. Brown and board members urged caution about using one-time funds to cover recurring salary costs. “Dipping into our fund balance at all for anything right now as a board feels fiscally irresponsible,” said one board member. Others called for a deliberate multi-year plan: run the RFP to find operational efficiencies, explore revenue options, and plan for a sustainable path to improve compensation without immediately exhausting reserves.

Board process and next steps: the district said an outside firm selected from a recent RFP will be asked to provide operational and long-range financial analysis; the administration also reported it had asked Cornell University to meet with district leadership in June to discuss voluntary contributions, but cautioned Cornell faces fiscal uncertainties of its own.

The board did not take a final vote on budget strategy that evening; members asked for more financial detail, discussion of tax-cap implications and time to review RFP responses before the district is asked to adopt a budget in a later public meeting.

Ending: Board members set a schedule to continue the conversation and asked staff to return with additional analyses and options before the board’s budget-adoption meeting in late April.