Milpitas Unified presents first interim budget, projects positive certification while warning of building-fund transfers

Staff presented Milpitas Unified School District's first interim budget for 2025-26, reporting a positive financial certification to be submitted to the Santa Clara County Office of Education while flagging a projected unrestricted variance of about $8.3 million that will require offsetting transfers and budget adjustments.

The business services presentation, delivered to the board on Dec. 9, summarized revenue and expenditure projections as of Oct. 31, 2025. General fund revenue was shown at roughly $173.3 million, about 74% of which comes from LCFF/ADA funding. Expenditures were projected at approximately $186 million, leaving a structural gap staff said will be managed in the near term using one-time transfers from the district's building fund and other reserves.

Why it matters: a positive certification means staff projects the district can meet its financial obligations for the current year and the two out years required by state rules. But sustaining that position in future years depends on reversing the trend of drawing on capital and restricted funds to balance routine operations.

What staff said and highlighted - Staff emphasized statutory payroll-driven costs (CalSTRS/CalPERS and other mandated benefits) and sharply rising health-and-welfare premiums as principal budget pressures. The presenters said the CalPERS employer rate for 2025-26 is projected in the mid-20 percent range and that those rates are set at the state level. - Enrollment and ADA: the district's enrollment was shown at about 10,168 with funded ADA of roughly 9,909. Staff explained how the district uses prior-year, current-year or three-year-average ADA to calculate funding under LCFF. - TK and staffing: Trustees heard that implementing transitional kindergarten (TK) required adding classroom teachers and paras, and that some positions are currently funded by grants that expire, creating a multi-year cost pressure when grant revenue ends. Staff said they are exploring restricted-fund uses and other strategies to preserve essential positions without cutting services. - Reserves and transfers: presenters said the district intends to apply a planned RMA transfer (about $5.7 million this year) from the building fund (fund 210) to support the general fund; staff warned that repeated transfers would reduce the building fund balance over the two-out-year projection.

Board reaction and follow-up Trustees asked technical and policy questions about the composition of "services" versus salary line items, the district's approach to converting recurring contracted services to staff positions, and the timeline for the governor's January budget and county review. Trustees asked staff to return with options for lowering the annual variance, including reviewing recurring contracted services, pursuing available restricted funding, and pursuing grant opportunities. Staff confirmed a second interim update will be presented in March 2026 with audited data to follow.

Formal action The board unanimously approved the 2025-26 first interim report and directed staff to submit a positive certification to the county office of education.

Next steps Staff will return at second interim with updated financials (using P2 ADA data in April) and will continue working on multi-year balancing strategies. The board asked for clearer detail on positions funded by one-time grants and on the schedule of future transfers from capital funds.