Palo Alto Unified projects multi-year deficit; board told budget will return for adoption June 18

District financial staff on June 4 told the Palo Alto Unified School District Board of Trustees that the 2024-25 proposed budget, while balanced for the coming year, projects several years of deficit spending that could cut the districtfund balance sharply if actions are not taken.

"We are estimating an ending fund balance of 104,000,000 for this fiscal year end," the presenter said during the budget presentation, and later warned that, at current revenue and expenditure estimates, that balance could fall to roughly $45,000,000 within four years without changes. The slide deck and staff discussion said the districtprojects structural deficits in the range of $12 million to $17 million in out years, or about 4 to 6 percent of the budget.

Why it matters: the board must weigh near-term investments and one-time uses of reserves against longer-term sustainability. Staff said state actions (the June 15 state budget) and local variables such as property-tax growth will affect final numbers, but emphasized that expenditure reductions are the primary lever available to address structural deficits.

What staff presented: Sharon Yu, introduced as the incoming chief business officer, outlined revenue assumptions (a 3.4 percent property-tax growth projection for 2024-25 and 2 percent in out years), projected steady federal revenues, and adjustments for Proposition 98 and Proposition 28. Staff then turned to Multiyear Projections showing how ongoing deficit spending reduces designated and committed funds and leaves fewer options for future investments or contingencies.

Trustee reaction and public comment: Trustee DeBrienza praised the depth of the presentation and urged the board and administration to identify specific expenditure reductions or reforms to avoid prolonged multiyear deficits. "I am thrilled that we offered one-time money to our bargaining units, and I would have been comfortable with even more than that," DeBrienza said, while also urging attention to the district's ongoing commitments.

Next steps: Staff told the board the LCAP and budget will return for formal adoption at the June 18 meeting, after the state adopts its budget on June 15 and the district finishes the 45-day adjustment window. Staff also signaled continued quarterly monitoring and a fuller review at first interim in December.

Details and limitations: The presentation flagged several moving parts: unsettled bargaining agreements that will affect out-year expenditures, expiring one-time funds, and state-level funding mechanics that may change after June 15. The numbers presented are staff projections and were accompanied by caution that line items could change as state and local information is finalized.

The board did not take a final budget vote on June 4; adoption is scheduled for June 18.