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Board adopts FY25 budget amendment after lengthy discussion of state 3% reimbursement to employees
Summary
The board unanimously adopted a FY25 general fund second budget amendment. Finance staff highlighted a stronger cash position and a $2.5M state reimbursement (the '3%/1.47g' payment to employees) that raised questions about timing, taxable treatment and partial reimbursement rates.
The Ann Arbor Public Schools Board of Education voted unanimously to adopt the fiscal year 2025 general fund second budget amendment after a detailed presentation and trustee questions on March 17.
Finance staff told trustees the district is in a stronger cash position than a year ago, with February showing roughly $16.2 million more cash and investments than the same date last year and a projected addition to fund balance of about $40.5 million as of Feb. 28 (subject to year‑end timing and payroll adjustments). Consultant Casey Zaski and finance director Darcy Franckor reviewed the amendment, which projects roughly $1.3 million more in revenue and about $0.55 million less in expenditures compared with the December amendment — a net $1.8 million improvement to projected fund balance.
A focal point of trustee questions was a $2.5 million state reimbursement described in the meeting as the 3% (referred to in the presentation as the '1.47g' item) that the state will return to employees for a prior health‑care deduction; the district said it expects to be able to reimburse employees about 92% of the deducted amounts. Finance staff noted two consequences: the reimbursement is treated as taxable earnings to employees and the district must pay employer taxes (FICA) on the distributed amounts (the district estimated roughly $191,000 in related FICA expense). Staff also explained that the Office of Retirement Systems did not provide names and districts must determine eligible employees internally.
Trustees pressed on the timing and scope (how many employees are affected), the tax implications and whether the state might provide a later 'fix' to cover remaining shortfalls; staff said the state has discussed a possible fix but there is no guarantee. Trustees also discussed timing shifts on other items (an electric bus grant deferred to next fiscal year), federal grant draws, and the district's multi‑year uncertainty tied to pending state budget decisions.
The motion to adopt the amendment was moved by Trustee Wilkerson, supported by Trustee Wilkes and passed on a unanimous roll call vote.
Next steps: the board's finance committee and staff will continue monitoring revenues and reimbursements, and staff said they will report details on employee reimbursement mechanics and the final budget as the fiscal year progresses.
