Arlington board adopts 2025–26 budget after public hearing; directors warn fund balance recovery remains fragile

The Arlington Public Schools Board of Directors adopted the district's 2025'1026 annual budget Tuesday night, approving Resolution 25-10 after a public hearing and a detailed presentation from the district's finance director. The measure passed on a roll-call vote with directors Kelly, Watts and Knapp voting yes.

Gina Zutenhorst, the district's executive director of financial services, opened the public hearing and summarized the proposed F195 budget format required by the Office of the Superintendent of Public Instruction. "When we're talking about budget, we're just talking about the numbers even though that is my expertise," Zutenhorst told the board, emphasizing the budget's alignment with the district strategic plan and the board's resource-stewardship goals.

Zutenhorst said the district's budget package includes five principal funds: the general operating fund, capital projects fund, debt service fund, associated student body (ASB) fund and transportation vehicle fund. The general fund, she said, remains the largest and most constrained piece of the budget. She summarized revenue sources as roughly 80% state funding, 13% local levy, about 4% federal funds and a small share of local non-tax revenues. Local levy totals cited in the presentation were $13,796,000 for the general levy and $6,492,000 for the voter-approved capital levy.

The budget documents included a multiyear forecast. Zutenhorst noted the district expects to begin the 2025'1026 fiscal year with a projected beginning fund balance of about $2.4 million and to end the year with roughly $3.1 million, but she warned the board that cash-flow pressures remain. "Interfund loans are likely still gonna be necessary for 25-26, primarily in June," she said, describing the district's practice of short-term internal transfers to manage low-cash months and adding that previous interfund loans from November through February (about $1.5 million) were repaid with interest.

Board members pressed for clarity on several issues. Director Kelly asked why the budgeted beginning and ending fund balances for successive years do not perfectly match; Zutenhorst explained that budgeted figures differ from final actuals because plans change after budget adoption and estimates are adjusted as actual-year results become available. Director Namm asked about enrollment and demography; staff said they plan to accelerate a demographer study this fall to update projections used in longer-range forecasting. Zutenhorst reiterated the board's goal to rebuild a fund balance sufficient to avoid recurring interfund loans.

On expenditures, Zutenhorst said roughly 86% of district costs are salaries and benefits and highlighted the largest program categories: regular instruction (about 52% of general fund expenditures), special education (19%) and support services (18%). She flagged rising insurance and special-education costs as pressure points the state funding formula does not fully cover.

After the public hearing closed (no public testimony was offered at the hearing itself), Director Kelly moved to adopt Resolution 25-10, the 2025'1026 Arlington School District annual budget, and Director Watts seconded. The board approved the resolution by voice/roll-call vote; recorded responses included Director Kelly: Yes; Director Watts: Yes; President Levett: Yes; Director Knapp: Yes.

Board members were also presented with a separate monthly financial highlights report that described current-year fund balance trends, transportation safety-net and special-education safety-net receipts the district expects to receive (staff estimated special-education safety-net funds between $700,000 and $1 million), and the district's OSPI financial indicators status. Zutenhorst and staff reiterated that multi-year forecasts are sensitive to assumptions about enrollment, levy authority and state funding changes.

The board adopted the budget to meet the statutory deadline for school district appropriations and to transmit the F195 package to OSPI for review and public posting.

Looking ahead, Zutenhorst told the board the district will continue monitoring cash flow, anticipate using short-term interfund borrowing only as necessary, and pursue the demographer update this fall. The board directed staff to continue regular monthly financial reporting.

Less critical details: the ASB fund, capital projects and vehicle replacement plans were included in the adopted budget documents; capital projects are paid from the voter-approved capital levy and the transportation vehicle fund budget targets bus replacement lifecycle payments.