Lake Oswego legal budget committee reviews $10 million in proposed cuts, 112 FTE reductions

The Lake Oswego School District legal budget committee on Tuesday reviewed a preliminary 2025-26 general fund proposal that assumes about $10 million in reductions, 112 FTE reductions between this year and next and a general fund budget of about $123 million.

The presentation by district staff updated a December financial model and extended the projection through 2026-27. "It is not enough for us to keep exactly what we have been doing," the committee was told by Dr. Shealy, describing the district—s need to reduce spending to match projected revenues.

The committee heard that the current financial model shows the near-term shortfall shrinking from the December projection of roughly $12 million to under $2 million for 2025-26 after the planned reductions. For 2026-27 the model currently projects a preliminary shortfall of about $1.5 million. The budget document places total proposed general fund revenues at approximately $123,000,000.

Stuart Kelsler, the district staff member who walked the committee through the model, told the group that the recently signed PERS relief bill is expected to reduce employer rates temporarily and that the district is awaiting a formal actuarial letter. "Preliminary indications are it's gonna be somewhere around 1.68%," Kelsler said; the district estimated that a PERS credit of that size would amount to roughly $900,000 systemwide but had not included the credit in the budget model because it was not yet final.

Committee discussion centered on where cuts would fall and which items the district cannot control. Staff described targeted reductions by category: 27 licensed classroom FTE reductions (7 at the elementary level, 20 in secondary) and 64 non-classroom FTE reductions across licensed, classified and administrative roles, plus about 20 positions already reduced through retirements or resignations since the November staffing peak. The district characterized the total change between the November peak staffing level and the proposed 2025-26 staffing level as about 112 FTE.

Special education and high-cost disability reimbursements were identified as major drivers of rising costs. Staff said statewide reimbursement rates for very high-cost individual special-education placements have fallen into the 30% to 40% range in recent years after historically higher coverage; the budget assumes $2.5 million in high-cost disability reimbursements next year and staff reported about $2.3 million in this year—s anticipated collections. Committee members and staff noted that increases in the share of students with IEPs and high-cost placements have materially raised district expenditures and are largely outside local control.

Board members asked about program impacts. Staff said elementary physical-education contact time will be reduced (staff described roughly a 30% reduction in elementary PE minutes tied to redeploying PE staff), and the committee discussed co-curricular stipends and possible small savings there (staff estimated about $24,000 if several stipends were not paid across sites). The administration said it is trying to preserve positions where possible and is relying on voluntary retirements/resignations that have already occurred to reduce the number of layoffs.

The budget presentation also noted a proposed reduction in the district—s planned reserve: the usual planned reserve has historically been $1,000,000, but the preliminary 2025-26 budget includes a proposed $500,000 planned reserve and a projected ending fund balance amount that would leave the district out of compliance with its minimum fund balance policy by roughly $6.7 million if assumptions hold as modeled.

Staff emphasized uncertainty that could affect the budget: the final state school fund appropriation, outcome of pending legislative measures affecting special education funding and the formal PERS actuarial update expected after the PERS board meeting on May 30. Kelsler said the district is monitoring those items and would use any extra one-time funding to rebuild reserves rather than to restore ongoing personnel costs.

The committee also reviewed other non-payroll lines and capital/operating notes: rising out-placement costs (the district projects nearly $2 million next year for placements outside district programs), increased software and technology costs tied to enterprise systems, energy and utility cost pressures, and the district—s dark-fiber network (built in prior years) that reduced recurring internet costs compared with commercial providers.

The committee approved minutes from the April 23 meeting by voice vote before the budget discussion began. No vote on the 2025-26 budget was taken; staff said the legal budget committee will reconvene to review remaining funds and consider a budget-approval resolution at its next meeting.

The meeting began at 6:13 p.m. and adjourned at 8:06 p.m.