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CFO outlines preliminary FY26–27 budget shortfall; district estimates ~$16.5 million reduction target
Summary
The district’s preliminary financial forecast projects a two‑year gap driven by transportation contract increases, insurance trends and state funding uncertainty; staff estimated a $16.5 million target for reductions to preserve reserve levels and scheduled a final budget adoption June 23.
Anoka‑Hennepin Chief Financial Officer Michelle Vargas presented a preliminary look at the district’s FY26–27 general fund outlook, telling the board the district is working toward a two‑year reduction target driven by inflationary pressures, increased transportation costs and uncertain state funding.
Vargas said a higher consumer price index and updated special-education revenue estimates produced incremental revenue gains, but those were outpaced by anticipated expense increases including a larger-than-expected transportation contract and projected salary and benefit inflation. CFO Vargas said updated assumptions show the district facing a fiscal‑year 2027 budget reduction target of roughly $16.5 million to maintain prudent fund balance levels under current parameters (2.5% salary growth and 5% on benefits used in the projection).
The CFO outlined timing: department and site budgets are being finalized, preliminary staffing work is complete, and a full budget presentation for all funds will return to the board in two weeks with final FY26 figures; the board is scheduled to consider final adoption of the FY26 budget at its June 23 meeting. Vargas said legislative proposals remain in flux; the district is monitoring omnibus bill language that could change district revenue by several million dollars.
Board members asked clarifying questions about the mechanics of step-and-lane salary movement, transportation contract impacts and risks associated with pending state decisions. Vargas and Superintendent McIntyre urged the board to schedule follow-up conversations and said staff will return with recommended reductions, tradeoffs and potential one‑time funding options if the legislature does not close the gap.
"At this point in time with the assumptions that we're making...we're looking at about a 16 and a half million dollar target for budget reductions," Vargas said in the presentation.
