District projects short-term surplus but warns of multi-year deficit without revenue changes

District finance staff told the Board of Education the district expects a near‑term operating surplus largely driven by reserve interest, but long‑range projections show recurring deficits that will require program and staffing reductions unless revenue assumptions improve.

Cynthia Wandold, presenting the district’s long-range projection, said the district expects an operating surplus of about $1 million for the current year after removing a $24 million interfund transfer tied to the Roosevelt capital project. Wandold explained the district’s audited financials will show a large operating loss because of that transfer, but the district’s underlying operating performance is positive when the capital transfer is excluded.

Wandold presented a projected general fund balance of roughly $33.4 million at year end, with approximately $23 million in restricted reserves and an unassigned fund balance near the district’s 4% threshold (about $6.2 million). She outlined five categories of fund balance, and walked through eight restricted reserves (including retirement contribution reserves and a health-insurance reserve). She said interest earnings boosted this year’s operating picture — the district expects about $1.5 million in interest income, of which $1.2 million is tied to reserves and must remain restricted.

Assumptions behind the five‑year projection include a 2.64% increase in Foundation Aid for the next fiscal year (based on the governor’s executive proposal), a tax‑levy estimate of 3.26% for 2025–26, a 7% annual increase for health‑insurance costs, and modest increases in other expense‑driven aids. Wandold said future years were modeled with 2% Foundation Aid increases as a conservative outer‑year assumption.

Jennifer Duff and other staff outlined several expenditure pressures: rising transportation costs (a 25% one‑year increase for contract transportation), volatility in health‑insurance costs, contractual salary obligations, and higher special‑education and alternative‑placement costs. Dr. Thompson and other board members flagged federal funding risk: one board member said elimination of federal Title funding (about $8 million in the district budget) would be “devastating” and would force major reductions.

Wandold’s five‑year scenario showed a growing deficit in later years. With current assumptions, the projection showed an operating shortfall approaching $3 million in 2026–27 unless the district reduces expenses or secures higher revenue. Wandold and board members discussed prudent use of specific reserves and the legal limits on reserve categories such as the Teacher Retirement System reserve.

Board members and administrators said next steps will include more detailed budget drafts in March and April, a budget hearing in May and a public vote on May 20. Staff emphasized they will prioritize attrition and program adjustments that minimize layoffs when possible, and will continue advocacy at state and federal levels for aid.