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Poquoson officials warn $4 million budget headwind as schools and city weigh pay increases
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Summary
City and school leaders told the joint work session that three factors — $2.7 million in tax exemptions, a 19% jump in health-care costs (about $563,000) and a state LCI change that created roughly a $750,000 hole — combine to create roughly a $4 million shortfall entering FY2027. Staff outlined grant restrictions, ADM assumptions and options if the state approves additional pay.
Mayor Huxley opened the joint City Council–School Board work session by telling attendees that three factors beyond local control are driving a roughly $4 million budget shortfall for FY2027: $2.7 million in tax exemptions, a 19% rise in employee health-care costs (about $563,000) and increased state Local Composite Index (LCI) calculations that reduced state aid by roughly three-quarters of a million dollars.
School Board Chair Chris Burbage introduced the school leadership team, and Tracy Spence, who addressed budget details and staffing costs. Spence said the school presentation assumes a 2% compensation increase; if the General Assembly instead approves a 3% increase for SOQ (Standards of Quality) positions, the local share of that extra 1% would be on the order of roughly $100,000–$216,000 depending on which positions qualify and how state funding is finalized.
Spence and Assistant Superintendent Ashley Ibe explained that federal grant funds — Title I, Title II, Title IV and IDEA (Title VI-B) — are largely designated for specific uses, frequently salaries and benefits, and cannot be repurposed outside grant rules. That limits the division’s flexibility to cover general compensation costs with federal funds even when total federal revenue rises. Spence noted the budget book's grants section lists specific grant amounts (examples cited: Title I roughly $179,000; National School Food Service $185,000; a large grant of roughly $448,000 primarily for salaries and benefits) and cautioned that unspent federal grant dollars must be spent within grant cycles or risk reductions in future allocations.
Council members pressed staff on enrollment (ADM) assumptions. Staff reported the March 31 ADM was 2,050; the FY27 budget is based on 2,065. Kindergarten enrollment was up (107 new enrollees), which staff said supports confidence in reaching the budgeted ADM but that final FY26 actuals and any state budget action would refine the FY27 request. Spence said the school division typically closes books in mid-August and will present an amended FY27 budget in August if state action arrives earlier.
Council members also asked whether one-time operational savings — staff cited about $135,000 in FY26 — could be turned into ongoing efficiencies. School staff replied many efficiencies are situational and vendor-dependent; some savings (for example, renegotiated platform licenses) may not recur.
Why it matters: The combined impacts of exemptions, rising benefits costs and state aid shifts leave Poquoson facing hard trade-offs between local tax adjustments and maintaining competitive pay for city and school employees. Council and school leaders emphasized they are trying to preserve service and retain staff while awaiting final state decisions and reviewing carryover and grant balances.
What’s next: School staff will close FY26 books in August and may present an amended FY27 budget; council retained flexibility to hold additional budget work sessions before the May adoption schedule if needed.
