Fairfax officials warn of roughly $293 million shortfall in FY2026 budget forecast

Chairman McKay and county and school budget staff told a joint budget-policy meeting on Nov. 26 that an early FY2026 forecast projects modest revenue growth but a large combined shortfall.

County staff said general fund revenue is projected to rise about 1.8% in FY2026—roughly $128,000,000—driven primarily by rising residential assessments. Schools staff reported an early projected increase of about $30,400,000 on the school revenue side. After accounting for known obligations—salaries and benefits, debt service and other recurring requirements—staff presented a combined net projected shortfall of about $292.7 million (reported in presentations as roughly $293 million). County and school officials repeatedly emphasized the numbers are preliminary and will be refined before the county executive’s advertised budget on Feb. 18 and the superintendent’s budget release on Jan. 23.

Officials cited several factors behind the pressure on the forecast. On the revenue side, residential assessments are projected to increase (staff cited a 4.78% residential equalization figure), while nonresidential assessments are projected to decline; commercial office values and rising vacancy rates are a notable drag on nonresidential tax base growth. Staff also noted that investment interest revenue is expected to decline about 14% (roughly $14 million) and that personal property revenue is projected to decline as vehicle values fall (J.D. Power estimates down ~5.8%), partially offset by rising volume. The presentation listed other revenue items such as phased-in user fees for certain services.

On the expenditure side, the county’s forecast includes contractual obligations and negotiated steps: second-year collective bargaining and step increases for public-safety unions, a 2% cost-of-living adjustment for nonrepresented employees, an $8 million placeholder for a market-study realignment, and a $22 million net increase in employer contributions for retirement systems. Staff also included an operating-cost estimate for new facilities (Kingstowne complex and Fair Ridge Shelter), debt-service assumptions tied to a higher bond-sale limit, IT licensing and baseline funding for previously deferred projects, and inflationary contract adjustments.

Budget staff described a two-step approach to balancing, noting prior experience turning forecast shortfalls into adopted balanced budgets through a combination of rate changes, improved revenue projections and selected reductions. As an example, they cited the prior year’s 3¢ real-estate tax-rate increase and subsequent revenue improvements that helped close a similar forecast gap.

Supervisors raised questions about specific drivers and options. Several asked for further detail from JLARC (the Joint Legislative Audit and Review Commission) materials and state funding scenarios, and staff committed to providing updated numbers at upcoming meetings. The county highlighted reduction exercises—with agencies asked this year to return 10% reduction options—and previewed a preliminary $33 million placeholder equivalent to a 1¢ real-estate tax rate adjustment among possible levers. Officials cautioned these are early concepts and that some savings options may involve program or service impacts.

The committee scheduled further steps in the joint process: the school superintendent will release her proposed budget Jan. 23, the county executive will release his advertised budget Feb. 18, and the boards will hold another joint session the week after to reconcile details. The meeting ended with an invitation for additional questions and public updates on specifics as staff refine assumptions.

Ending — The meeting adjourned with staff and elected officials emphasizing that the forecast is a snapshot, not a final budget, and that the boards will continue joint work and public hearings through the winter to close the remaining gap ahead of formal adoption next spring.