District finance director warns of multi-year shortfalls; $10 million annual adjustments modeled

Chris Blackburn, director of business services, presented a multi-year budget forecast at the Oct. 2 meeting and told the board that, under current assumptions, expenditure growth and expected declines in state special-education reimbursements mean the district will need substantial adjustments in coming years.

Blackburn said the district'''s forecasting model uses historical enrollment and revenue assumptions and cautioned that the figures are sensitive to several unknowns, including the enrollment impact of new schools and changes in state aid. He told the board the basic general-aid formula for 2025-26 is $7,481 per adjusted pupil unit and that he used a 2.5 percent annual inflation assumption for future years.

He highlighted two state-level changes that will reduce revenue to the district: a reduction in special-education transportation reimbursement from 100 percent to 95 percent in the current year (which Blackburn estimated as about a $750,000 revenue loss) and a planned further reduction to 90 percent in 2026-27. He also projected a possible multi-year reduction in special-education aid tied to the Blue Ribbon Commission'''s work, which his back-of-the-envelope estimate placed at roughly $3 million in decreased aid in some future years.

Because salaries and benefits represent about 78 percent of district spending, Blackburn emphasized that negotiated salary increases and built-in steps and lane changes materially affect the forecast. He noted the new statewide Paid Leave tax (employer share of at least 0.44 percent) will begin Jan. 1 and added that payroll-related taxes and benefit costs rise as wages rise.

The presentation included an enrollment projection showing a modest decline beginning in 2026-27, partly tied to expected enrollments moving to programs such as Math and Science Academy and other school-choice programs. Blackburn told the board he modeled a scenario of up to a 600-student decline over several years as a planning assumption.

Under the district'''s current assumptions, Blackburn told the board that without adjustments the fund balance would decline to a level that triggers statutory operating debt; his modeled remedy was a series of budget adjustments totaling $10 million per year in 2026-27, 2027-28 and 2028-29 to stabilize the fund balance and preserve a reasonable reserve level.

Superintendent Julie Nielsen said the $10 million annual adjustment is a significant fiscal step and that the board will need to discuss how to approach it, including staffing decisions, potential referendum options and targeted efficiencies. "It would mean $10,000,000 worth of adjustments this year as we go into the 2026-27 school year," Nielsen told the board, adding that staff will need to coordinate timing with staffing and enrollment projections.

Board members asked whether alternatives such as a new operating levy or raising the capital projects levy could offset part of the gap. Blackburn said current law would allow an operating-levy increase of roughly $225 per pupil (about $4 million of additional revenue under their estimates) but that levies shift cost to taxpayers and do not fully close the modeled shortfall. He also noted options to reduce non-salary spending and seek small efficiencies, but said the structural pressure largely stems from personnel costs and state funding changes.

Ending: Blackburn and district leadership said they will return to the board with more refined audit results, enrollment numbers and targeted proposals. The board was advised that the district will need to finalize staffing decisions with the fiscal forecast in mind and that further public discussion would likely be necessary before making large structural changes to the budget.