Iowa City Community School District plans March short-term loan as payroll and special-ed costs tighten cash

School finance staff told the Iowa City Community School District Board of Education on Monday that a combination of higher-than-expected payroll costs and a growing special-education deficit have tightened cash so severely the district is preparing to borrow short term in March.

"If your cash balance is low, obviously, this is just a cash in and cash out situation on this graph," said a district finance presenter, noting the district receives large property-tax payments in October and April but carries a heavy payroll in September. Staff estimated the March borrowing need at roughly $3 million to $5 million, with a larger, longer-term loan possible for fiscal 2027 if deeper adjustments are required.

The presenters distinguished two concepts: cash flow (actual bank receipts and payments) and unspent authorized balance (UAB), a state-granted spending authority that is not the same as cash. They told the board the district's general-fund payroll (salary plus benefits) is projected at just over $189 million and total cash payroll at about $194.4 million for the year.

The district reported a special-education deficit that grew from about $10 million in fiscal 2024 to more than $18 million in fiscal 2025. Staff said Iowa's funding mechanics mean authority to levy to recover those funds will not fully materialize until fiscal 2027, creating a multi-year recovery timeline.

"We spent that cash in fiscal year 25. We get the authority granted back in the next fiscal year, but put back on fiscal year 25," the presenter said, describing the lag inherent in Iowa school funding.

Board members asked why the payroll increase was not evident in September. Staff said the early months provide limited data and that growing payroll pressures became clear once October through January figures were available. The district's wage-only contract-group data (from the VISTA IOHR management system) show raises and added positions across several employee groups, including added paraeducators and 11.5 teacher FTE tied to new programs and special-education needs.

Staff projected an unspent authorized budget in modeling scenarios between about $3.2 million and $3.6 million, although Department of Management state figures in the presentation showed an estimated $5 million UAB (labeled "estimated"). Presenters warned that miscellaneous income figures from 2022–23 were unusually inflated by COVID-era federal dollars and should not be treated as recurring.

District leaders said they will present concrete loan options and interest-rate scenarios in a board work session next week and return with more detailed budget ideas for fiscal 2027 at a regular meeting later in February. They also told the board they plan follow-up communications with staff and the community to explain the cash situation and next steps.

The board did not take a formal vote on a borrowing plan during this meeting; staff said any loan and related interest costs would come from the general fund and would be presented for board approval once terms are known.