Emergency board hears JFO update: Education Fund outlook shows $2.8 million cushion, policy and timing risks remain

The Joint Fiscal Office told the Legislature—s emergency board that the state—s Education Fund outlook shows a $2,800,000 positive balance with the stabilization reserve fully funded, but lawmakers were warned that several ongoing and timing risks could push rates higher if not addressed.

"After making those updates from the BAA and the downgraded revenues, we have $2,800,000 on the bottom line, with the stabilization reserve being fully funded," said Julia, a Joint Fiscal Office analyst, during a presentation of the Education Fund Outlook. Julia said the outlook reflects the most recent revenue forecast and the governor—s budget adjustments adopted by the emergency board.

The update reviewed a sequence of one‑time and ongoing actions that shaped the current position: a roughly $70 million one‑time general fund transfer used last year to buy down property tax rates; a $13 million tax‑rate offset reserve that was drawn to lower rates; and about $31 million of FY24 surplus that was also used to reduce rates. The JFO presentation also folded in new or recently changed revenue streams such as the short‑term rental surcharge and the inclusion of cloud services in sales and use tax collections.

Committee members pressed for more data on several items that affect the fund outlook. Lawmakers asked for updated school district budget data and staffing counts (FTEs) to understand how local budget votes will alter education payments. Julia said JFO will coordinate with the Agency of Education (AOE) and noted that AOE publishes FTE counts and that JFO can work with the committee on additional analysis.

Members also discussed drivers of recent growth in education spending. The presentation and subsequent discussion noted several contributors: increases in school budgets voted by districts, higher health care costs, and pension‑related costs (including OPEB and retirement normal costs). One senator recalled earlier years when a temporary sales‑tax windfall and federal stimulus produced unusually high revenues that masked longer‑term budget pressures.

Lawmakers asked for clarifications about line items and recent policy changes. Julia explained that the December 1 statutory modeling process and the yield setting used in the outlook assume uniform average bill changes across tax classes and that specific transition or policy proposals would change the modeled outcomes. She also said some budget lines changed because final school budgets came in lower than earlier estimates, reducing the education payment line; she attributed the decline in the universal school meals estimate in part to expanded direct certification through a Medicaid pilot that identified more students eligible for free meals.

Committee members raised a range of implementation and timing concerns: whether last year—s one‑time revenue choices smoothed tax impacts during a high‑revenue period but created a sharper adjustment when those revenues declined; the challenge of setting yield and rates while some municipal budget votes remain scheduled for May; and the need to reconcile any future transition to a different statewide funding system with an orderly phase‑in. Julia said the JFO outlook is a snapshot based on best available data and that the figures will change as school budgets are finalized.

No formal committee votes were recorded during the presentation. Members directed staff to provide additional background data, including updated ADM and FTE counts and a more detailed itemization of the recent increases in education spending, so lawmakers could better evaluate the drivers behind the roughly $113 million year‑over‑year growth in education spending that was discussed in committee.

The board concluded the item by noting there is an administration proposal for a new funding model under development; committee members said they expect to continue using and reviewing the current Education Fund spreadsheet and JFO outlook while any new model and a transition plan are refined.