Marshall Public Schools projects $1.7 million FY2026 shortfall; staff recommends $2 million referendum to stabilize cash flow

Sarah, a district staff member, presented the Marshall Public School District’s preliminary fiscal year 2026 budget to the school board, saying the district is projecting a planned deficit "of just over $1,700,000" and outlining options to avoid cash-flow problems.

Why it matters: The district projects continued declines in student enrollment and faces reduced state and federal aid in several categories, which district staff said will increase pressure on the general fund and could leave the district unable to cash flow during high-expenditure months without additional revenue or cuts.

During the presentation, Sarah said enrollment for the most recent month was 2,465 students and that the district expects year-over-year declines. She said Marshall had 323 students open-enrolling into Marshall from other districts this year, while 344 Marshall resident students attended schools in other districts, producing a net negative for the district. Sarah also reported 27 Marshall resident students used the district’s newly offered online option this year.

On state funding, Sarah said the state provided the district’s funding formula allowance for 2026 and increased that allowance by 2.74 percent (about $200 per adjusted pupil unit), while noting the minimum statutory increase remains 2 percent and the cap 3 percent. She said the district’s calculated cost per student from the 2024 audit was $16,538, and that the state general education allowance (reported earlier in presentation) is substantially lower than that amount.

Sarah described several other state-level changes she said will reduce revenue or aid categories for the district, including a change in how compensatory revenue is calculated (moving from free-and-reduced-counting to direct-certified students), reductions or reorganizations in special education transportation aid, reduced student support personnel and library aid, and lower student lunch reimbursements. She said one positive change under discussion is an expansion of long-term facilities maintenance (LTFM) eligibility to include roof replacements.

The presentation included revenue history and projections. Sarah said federal COVID-era funding provided sizable increases to federal funds in prior years and that these funds have now ended. She presented a projection that, under current assumptions (approximately 4 percent revenue growth and 3 percent expense growth per year, plus known policy changes), the district’s fund balance would decline into the red and that the district would not be able to cash flow without new revenue.

To address the projected deficits and cash-flow risks, staff recommended consideration of a $2,000,000 operating referendum lasting 10 years. Sarah said that, under the district’s estimate, the average Marshall home assessed at $225,000 would see an increase of about $26 per month if the $2 million referendum were approved; a $500,000 commercial property would increase by about $57 per month. She noted revenue from the referendum would not appear until fiscal year 2027.

Sarah also identified new costs the district has included in the projections: a family medical leave program beginning Jan. 1, 2026, for which she included an employee portion of 0.44 percent in the budget, and an increase in Teachers Retirement Association (TRA) contributions from 8.75 percent to 9.5 percent, which she estimated would raise district TRA-related costs by roughly $160,000 per year.

Board discussion included a question about next-year cash flow; Sarah replied, "No. We shouldn't," and explained the district maintains short-term certificates of deposit and has previously authorized short-term borrowing instruments (tax or revenue anticipation certificates) as contingencies. Sarah said the district currently holds approximately $2,000,000 in short-term CDs that could be made available if needed.

No budget adoption vote occurred at the meeting. The presentation was informational; the board did approve procedural items earlier (agenda and consent agenda) but did not adopt the preliminary FY2026 budget during this session. Sarah said the district plans further work on options including referendum timing, potential cuts, and continuing to monitor state legislative developments.

The district staff emphasized uncertainty in several areas and repeatedly cautioned that projections rely on assumptions about enrollment trends, state funding formulas, and the end of pandemic-era federal aid.