Centennial SD 28J projects $3.5–$4 million shortfall for 2025–26 as PERS, pay increases and enrollment pressure outpace state revenue

Centennial School District 28J officials warned the district’s Budget Committee on Jan. 22 that the district faces a projected structural shortfall of $3.5 million to $4.0 million for the 2025–26 school year unless administrators and the board take reductions or identify new revenue.

The projection comes as the state moves into a new biennium, district leaders said. "The state of Oregon is not projected to provide sufficient funds to do the same things next year that we are doing this year," Superintendent James Owens said during the presentation.

The district’s leaders said four dynamics create the gap: the scheduled expiration of pandemic-era federal Elementary and Secondary School Emergency Relief (ESSER) funds, increases to the Public Employee Retirement System (PERS) employer rate, collective-bargained cost-of-living adjustments (COLAs) and continuing declines in enrollment.

"These dynamics are certainly not specific to Centennial," Owens said. "Payroll costs — and more specifically PERS and cost-of-living increases — continue to outpace our revenue." Director of Business and Operations Paul Sotherton added that the district projects expenses will increase by about 8 percent next year while state school fund allocations, after accounting for declining enrollment, are expected to produce a net increase of roughly 5.5 percent.

Nut graf: Why it matters

Centennial’s combination of rising fixed personnel costs and falling per-pupil revenue means the district plans to spend down reserves this year and next. District officials said a modest, planned deficit in 2024–25 was anticipated; a sustained $3.5–$4.0 million deficit in 2025–26 would be unsustainable and would require targeted reductions to avoid larger cuts in subsequent years.

Key details

- ESSER: Owens and Sotherton said ESSER funds that offset some 2024 costs expired in September 2024 and will not be available to support 2025–26 operations. Owens said the district used residual ESSER this year to pay for certain summer and temporary expenses.

- PERS: Owens explained that PERS rates have risen substantially from roughly 6 percent in the system’s early years to roughly 28 percent in the last biennium and are projected to be about 30 percent in the coming biennium. "Said another way, when PERS began, the district paid $60 to PERS for every thousand dollars of salary. This year it was $280 per thousand dollars of salary and next year it will be $300 per thousand," Owens said.

- Compensation: Two-thirds of staff are eligible for step increases; classified staff bargained a 5 percent increase for the current year and a 2.5 percent increase for 2025–26. The district used a 4 percent COLA forecast for licensed staff in the 2025–26 budget projections.

- Enrollment: District enrollment has declined from about 6,700 a decade ago to roughly 5,400–5,500 currently. District staff said midyear patterns (withdrawals and transfers) historically reduce the October headcount by roughly 120–160 students by the end of the year; that dynamic is built into revenue forecasting.

- Special education and "hot spot" staffing: Sotherton and Owens said special education costs are over budget this year and that the district…