Kyrene CFO outlines $110.1 million M&O revenue estimate as enrollment decline drives budget squeeze

Chris Herman, Kyrene Elementary District chief financial officer, told the governing board during the April 8 study session that the district’s fiscal 2026 general-fund revenue assumptions show continued pressure from declining enrollment and limited state increases.

“The M and O amount for the fiscal year 26 budget is a hundred and $10,100,000,” Herman said. He added the total general-fund estimate is “just under $112,000,000” and explained those figures reflect current projections that could change with legislative action before the June budget adoption.

Herman said Kyrene’s M&O revenue is calculated from three components: the base support level (state per‑pupil funding multiplied by weighted student counts), the revenue control limit (base support level plus the transportation revenue control limit), and additional amounts such as district additional assistance (DAA), the M&O override, and Proposition 123 distributions. He told the board the base support level for fiscal 2026 is approximately $87.8 million and that the district expects a net enrollment‑driven reduction in base funding of about $4.1 million compared with the prior year.

Why it matters: Kyrene is a kindergarten–8 district whose state funding is tied to current‑year enrollment and weighted average daily membership. Herman said the district faces a structural squeeze because incoming kindergarten cohorts are substantially smaller than outgoing eighth‑grade cohorts, reducing state base funding even if most families remain within the district.

Herman walked the board through the demographic drivers. He summarized demographer data showing birth rates in Maricopa County fell sharply across cohorts and that the share of homeowners aged 25–44 in the district has declined over the last two decades, leaving fewer elementary‑age children. He gave a concrete example: “There are 1,622 students enrolled in eighth grade this year, but only 1,060 students are expected and projected to enroll in kindergarten next year,” which he said equates to a projected year‑over‑year drop of about 562 students just from cohort progression.

Herman described the funding formula elements and assumptions in detail: projected weighted unadjusted ADM of 17,810 (a decline of about 668 ADM versus last year, equivalent to 761 students), a teacher experience index (TEI) of 1.0149 that adds roughly $62,000, an assumed maximum statutory inflation increase of 2 percent that would raise the per‑pupil base to $5,113.26 (about $1.8 million districtwide), and a $47,000 nonfederal audit reimbursement. He said the combined effect of enrollment losses and those adjustments yields the $110.1 million M&O revenue assumption.

Herman further noted the district’s special education costs exceed state special‑education funding and offered a figure for last year’s gap: “last year's Kyrene special education funding gap between the revenue received and the expenses for the services provided was 3,500,000.” He said that higher need in Group B weighted categories is increasing Medicaid reimbursements and that Medicaid revenue is estimated at $1 million for FY26 (higher than FY25) while one‑time catch‑up Medicaid receipts inflated the FY24 number.

On DAA and overrides: Herman said Kyrene assumed no change in DAA per pupil for FY26 ($549.45 per pupil) and an allocation of DAA to M&O near $1.7 million so the district remains below the Arizona Auditor General’s 25 percent threshold for shifting capital funds to operations. He explained the district’s voter‑approved M&O override is in year 4 of a 5‑year authorization and projected a roughly $240,000 decrease in override revenue next year under the calculation method using prior‑year ADM.

Herman told the board that the transportation revenue control limit (TRCL) has been essentially flat at $5.3 million for Kyrene and that, under current statute, transportation funding has not declined even when mileage decreases. He said the district’s estimated fiscal‑year‑26 total M&O revenue of $110.1 million is about $2.2 million below last year’s revenue on a like‑for‑like basis (excluding one‑time state funding) and that total general‑fund budgeted revenue (all general‑fund components) is projected to be just under $112 million.

Board discussion and next steps: Board members thanked Herman for the presentation and asked about exposure to state formula changes. Vice President Trina Nelson asked whether the district has contingency plans if categories such as Group B weights change. Herman said the district monitors state adjustments and would bring updates back to the board if the state changed weights or other assumptions; he pointed to several recent occasions when state adjustments were made and said staff would return to the board with any material changes.

Herman also told the board that expense adjustments and detailed expenditure information will be shared during the May/early‑June cycle and that the district aims to present a proposed budget for board vote on June 27.

Ending: Herman closed by offering to answer questions and the board committed to review additional expenditure detail as it becomes available.