Scottsdale Unified projects $2.8–$4.2 million shortfall for 2025–26; board weighs moving capital funds to operations

Scottsdale Unified School District leaders told the governing board on Feb. 11 that a decline in weighted student counts and unresolved state funding could produce a $2.8 million to $4.2 million shortfall for fiscal year 2025–26.

Shannon, a district finance staff member, said the district is estimating an average daily membership (ADM) decline consistent with recent trends (about a 2% annual decline) and a net loss in weighted student count that translates to roughly $2.9 million in revenue. She said higher weights for free-and-reduced meals and gifted students were larger than projected, but overall the district’s estimated weighted count would fall, producing the revenue gap.

The shortfall scenarios depend on whether a one-time state funding source (referred to in the meeting as “Prop 123/1 2 3”) continues. Without that funding the district would face approximately a $4.2 million gap; if that funding is restored the gap narrows to about $2.8 million.

To address the gap, staff presented several options for reductions and reallocation of funds. Key proposals discussed included:

- Reducing 12 district-level full-time equivalent (FTE) positions (staff reported nine district-level FTE were reduced the prior year).

- Implementing selected program and staffing changes that would reduce M&O (maintenance & operations) costs by roughly $400,000 and an additional $1.2 million in other savings identified through benefits and special education program adjustments.

- Adjusting special education private placements (transferring some costs back into M&O because IDEA federal grant capacity is constrained).

- Reducing assistant-principal staffing at six sites (equating to a net reduction of three assistant-principal FTE for approximately $300,000 in savings) by moving those assignments to halftime rather than eliminating posts midyear.

- Proposing to move up to $4.2 million from District Additional Assistance (DAA, capital funds) into the M&O budget to cover recurring salary and medical contributions in the short term. Staff emphasized that moving capital funds into ongoing operations would be a continuing expense if adopted, though the money could be moved back in a later revision should revenues improve.

Superintendent Dr. Menzel and board members repeatedly signaled a priority to protect classroom-level spending while acknowledging most district expenditures (about 85% of staff) are campus-based and that large savings inevitably affect schools.

Board discussion focused on trade-offs and timing: several trustees urged preserving assistant-principal roles and site-level staff where possible; others pressed for exploring further district-level savings and insurance/purchasing options before cutting school-based positions. Board members asked for more detail on the breakdown of past staffing changes (the annual comprehensive financial report shows prior-year shifts in positions) and requested the district provide comparative data by June.

On benefits, staff said the district is self-insured and participating in a larger pool and that pharmacy and other procurements recently yielded about $800,000 in savings; the district’s self-insurance trust will contribute additional funds next year but premiums for employees remain a concern. Staff said a 1% district-wide raise would cost about $1.5 million and outlined options for distributing raises or stipends.

Shannon and administration said they expect to continue refining department requests, meet again Feb. 25 with interest-based bargaining (IBN) groups to review salary/benefit proposals, and return to the board with recommended salary schedules in March. The proposed budget will come to the board for first reading in June with adoption later that month.

Votes and formal actions related to the budget discussion were procedural: the board directed staff to continue work on reductions and revenue scenarios and to present options at subsequent meetings; no final cuts were adopted that evening.

Why it matters: The district’s plan will affect classroom staffing, salary negotiations and employee medical contributions, and could require shifting capital dollars to ongoing operations to meet near-term pay and benefits commitments. The board emphasized it wants to protect student-facing services but acknowledged difficult choices ahead.