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North Kansas City Schools warned of $5.6M–$10.1M state funding shortfall; bond arbitrage could cost about $2.04M
Summary
Finance director Carol Embry told the board the district faces a near-term revenue reduction tied to changes in the state adequacy measure and recommended budget adjustments; she also flagged an estimated $2,037,113 bond arbitrage liability the district must resolve with the IRS.
Carol Embry, the district finance director, told the board the district has recorded a revenue adjustment of $966,310 tied to Senate Bill 190 and that updated projections could reduce per‑pupil state funding from an expected $7,145 to a range of $6,700–$6,900. "That results in approaching $5,600,000 reduced revenue in the current year," Embry said, and she warned the FY27 outlook could worsen into the $6.7K–$6.9K range per student.
Embry said the district has already identified approximately $2.25 million in possible cuts—largely in non‑salary categories such as food, travel and professional development—but noted that with about 80% of the budget in salaries and benefits, personnel reductions are especially difficult. "If we want to retain a 15% minimum operating fund balance, then what would the reduction need to look like for each year?" she asked the board as part of the budget planning discussion.
On the bond fund, Embry explained rules that restrict bond proceeds to the ballot‑approved capital uses and described an arbitrage calculation under Internal Revenue Code rules. She said the district’s current arbitrage exposure is "estimated at $2,037,113," and outlined that the usual remedy is a calculation run by a bond tax attorney followed by payment to the IRS and appropriate accounting entries. Embry recommended coding any payment to capital if the underlying projects would have otherwise used capital funding.
Embry also walked the board through the district's theoretical borrowing capacity under Missouri law, noting a statutory 15% limit applied to a subtotal that includes assessed valuation and state‑assessed property. She said the district's adjusted bonding capacity—after accounting for existing series and outstanding principal—would leave roughly $108 million in potential issuance, depending on decisions to issue the remaining authorized bonds.
The presentation closed with a reminder that many numbers remain provisional until late June, when final state revenue allocations and year‑end cash balances are known. The board asked clarifying questions about scenarios, and Embry and Superintendent Dr. Daniels said they will return with budget‑amendment recommendations as the numbers firm up.
What happens next: staff will continue scenario planning, bring budget amendment language to the board if needed and present a comprehensive recommendation on the bond/debt and operating budget at the June work session.
