MMSD staff outline 2025–26 budget drivers: enrollment, state aid, insurance and referendum revenue

Bob Solner, district finance staff, gave the Operations Work Group an update on preliminary planning for the 2025–26 ("25/26") budget and identified the principal drivers the district expects to shape next year’s operating plan.

Solner said the budget process will follow the district’s strategic goals and equity guidance and highlighted three major cost pressures: salaries, health-care benefits and staffing to meet school-level allocations. "The impact on salary by fund for that 2.95% raise" (the CPI figure cited for 25/26) will be modeled for the March meeting, he said. He added the district will also produce estimates of step-and-lane increases that apply under existing agreements with employees. "Our starting point is CPI... we know CPI for 2526 is gonna be 2.95%." (Bob Solner.)

On revenue, Solner noted the operating referendum approved by voters last fall provides $30,000,000 for the current year and another $30,000,000 in the following year, then $20,000,000 in subsequent years. He said the referendum “really helps us with an ongoing base building system of revenue” but emphasized that state-level changes could alter that baseline. Solner described the three principal unknowns that will be clearer after the state budget process: enrollment projections, the legislature’s biennial appropriations and whether (and how) recent litigation over the governor’s vetoes affects the revenue-limit treatment the district expects to receive.

Solner reported enrollment trends the district will use in revenue forecasting: the third-Friday-in-September 2024 count yielded 25,667 (a net increase of 102 FTE over the prior year), and the second-Friday-in-January count (Jan. 10) was up 87 FTE compared with September. "That's a very positive news," he said, adding that birth-rate-based projection models still show long-term decline in some grades but that in-migration and development are changing the near-term trend.

He warned of continued health-insurance cost pressure: Solner said the district anticipates double-digit percentage increases in health-care costs and estimated $12–15 million would be needed to cover health-insurance cost increases into 25/26 if the current plan remains unchanged. He said last year the district budgeted about $12 million for increases and that the district expects similar upward pressure.

Solner also reviewed state aid and revenue-limit mechanics. He noted that fiscal 24/25 district state aid rose to about $61.3 million under the current formula and that, barring statutory change, the district expects roughly 85% of that amount in 25/26 as a "hold harmless" calculation used in the current law. He cautioned, however, that final figures depend on the legislature’s appropriation and any court rulings about the governor’s vetoes.

Board members and staff asked about the use of Department of Public Instruction and governor’s recommended budgets as forecasting tools and raised questions about fund-balance policy and the possible fiscal impact of a proposed charter school. Solner said more detailed salary and health-insurance estimates will be presented at the March operations work group.

Why it matters: MMSD’s operating budget funds personnel (about 81% of current expenditures), school allocations, and health and benefit plans. The combination of referendum revenue, state aid, enrollment changes, and health-care inflation will shape whether the district must use fund balance or propose additional local revenue in future years.

What was not decided: the meeting provided an informational update; no formal budget adoption or directive was recorded. The board requested a follow-up budget presentation in March with updated projections.