Tempe School District CFO: enrollment decline driving shortfall in 2025-26 budget

The Tempe School District held a public hearing on the proposed 2025–26 annual budget in which Chief Financial Officer Eric Thompson said the district will spend more in maintenance and operations (M&O) than it will receive in state and local funding unless additional cuts are made.

“This is part 2 of the budget adoption… It has to be approved by July 15 per state statute,” Thompson said, explaining the timetable and the need to adopt a budget now and revise it later when state numbers are finalized.

Thompson said enrollment — measured as average daily membership (ADM) — is the primary driver of revenue: “The enrollment is the revenue and that drives the budget.” He told the board the district is estimating roughly 9,000 students for the coming year and that various weighted categories (special education preschool, ELL, K–3) increase the district’s weighted pupil count to about 10,500. That weighting and other add‑ons yield an approximate base revenue figure just under $70 million, plus roughly $2.7 million for transportation.

Nut graf: The presentation framed a structural gap between recurring operating costs and projected recurring revenue. Thompson said the district is spending more in M&O than it collects in formula funding and that carryover reserves are declining; he warned the district will need further cuts unless enrollment reverses or reserves are reallocated.

Thompson outlined the district’s reserves and how one‑time funds have been used. He said carryover (fund balance) has been shrinking after prior years when federal ESSER dollars deferred recurring costs, and that the district is drawing down reserves to cover current spending. “We’re spending more this year… than we’re bringing in,” Thompson said, and added that if ADM had remained at 2020 levels (about 11,000), the district would have about $9 million more.

On a per‑program basis, Thompson described the classroom site fund — funded by sales tax and therefore more volatile than the state funding formula — noting the district expects about $9 million in classroom site fund revenue and to carry over roughly $4.6 million into the new year. He said the board has used that fund to add $500 to teacher base pay in each of the past two years, with performance pay of up to $3,000 also available.

Thompson also discussed DAA (discretionary additional assistance) and capital carryovers, saying the district plans to shift most available DAA into M&O to cover teacher salaries and supplies rather than hold it in capital where it is less needed this year. He estimated capital carryover near $11 million and projected roughly $7 million in capital spending in the fiscal year ending this week.

When asked by a board member about the magnitude of the shortfall, Thompson estimated an overspend of about $4 million next year and said carryover would fall from about $6 million to about $2 million absent other actions. He said debt‑service payments funded by property taxes are expected to be about $20 million and that the district is setting property tax rates to meet those obligations.

Thompson closed by reminding the board that the district will revise the adopted budget after the state finalizes its budget and that any such revision will be made at the September meeting when actual enrollment counts (the first 100 days) are known.

Ending: Board members asked follow‑up questions about tax rates, the composition of classroom site fund revenue and future prioritization. The board took no formal vote on budget amendments at the hearing; Thompson said staff will return with any recommended revisions once state funding figures are final and when the board sets priorities for balancing M&O spending and reserves.