Scottsdale Unified projects smaller M&O budget next year as enrollment drop, Prop 123 uncertainty bite

Scottsdale Unified School District finance staff told the governing board on the district’s January special meeting that early maintenance-and-operations (M&O) projections for 2025–26 show a smaller budget driven by declining enrollment and lingering uncertainty over state funding.

At a high-level presentation, district staff said the preliminary estimate assumes a weighted student count reduction of about 499. That decline, combined with a lower carryforward into next year and an unknown outcome for Prop 123 funding, produces an initial gap staff described as “somewhere between a 2.8 and a 4.2 [million]” shortfall depending on whether the Prop 1–3 dollars continue at prior levels. The presenter emphasized the numbers are early and that final ADM and weight calculations will follow after the district’s 100th-day reporting and state adjustments.

The projection reflects three drivers the district identified: (1) a projected ADM reduction, (2) carryforward balances that are lower than expected this year, and (3) continued pressure from inflation on operating costs. The presenter said administration had hoped to carry forward $14 million into the current year but ended with roughly $3 million less than anticipated; those lower balances, plus inflation-driven expenditure increases, reduce the pool of one-time funds available to stabilize the M&O budget.

District staff described several tools under consideration to address the gap. Among the options discussed were shifting funds from District Additional Assistance (DAA) or capital accounts to M&O to preserve the ability to offer salary adjustments and address rising employee medical costs; using dollars from the district’s self-insurance trust (the board’s trust approved a $2 million allocation toward insurance for next year); and targeted program or FTE reductions if necessary. Staff said they are close to bridging the lower-end estimate if Prop 123 funding continues but will return with more detailed options in February.

Board members pressed staff on forecast uncertainty. One member called ADM forecasting “an art and a science,” and the presenter said the district’s estimate is not typically spot-on and that small errors can materially affect revenue-control-limit calculations and override amounts. On risk metrics, a board member asked whether transferring DAA would trigger a red flag on the Auditor General’s financial-risk indicators; staff said such modeling will be done in advance and that the district presently remains within its carryforward policy range (reported at roughly a 6% carryforward).

Why it matters: M&O is the operating budget for staff, classrooms and day-to-day services; changes in per-student funding and carryforward affect decisions about salary adjustments, staffing levels and program continuity. School leaders said roughly 80–86% of the override dollars are used for salaries and benefits, so any structural budget pressure is likely to involve difficult trade-offs in personnel costs.

What’s next: Finance staff will return to the board in February with updated ADM and weighted counts, more precise dollar impacts of the projected weighted-student reduction, and options for bridging the gap. The board and administration agreed to model impacts (including potential Auditor General metric flags) before any transfers from DAA or other restricted sources.

","sections":{"lede":"Scottsdale Unified School District finance staff told the governing board on the district’s January special meeting that early maintenance-and-operations (M&O) projections for 2025–26 show a smaller budget driven by declining enrollment and lingering uncertainty over state funding.","nut_graf":"The preliminary projection estimates a weighted-student-count reduction of about 499 and an early budget gap staff described as “somewhere between a 2.8 and a 4.2 [million]” shortfall depending on Prop 123 funding; administration said it will return in February with modeled options, including possible transfers from District Additional Assistance and targeted cost reductions.","ending":"Finance staff will return in February with updated ADM and weight numbers and modeled options; the board directed staff to include Auditor General-metric modeling before any fund transfers."},