Board appoints Steve Norton and gets stark FY2027 warning: reserves could fall near intervention threshold

The Ann Arbor Public Schools board voted by paper ballot to appoint Steve Norton as a trustee; Norton was sworn in immediately after receiving four votes from trustees present.

Earlier in the evening the board's finance staff delivered a detailed FY2026 review and a proposed FY2027 budget that showed a narrowing margin between revenues and expenditures. Staff reported an amended FY2026 fund balance of about 6.52 percent of general-fund spending — below the board's 8 percent policy minimum — and modeled a FY2027 path that could reduce reserves toward roughly 5.12 percent without corrective actions.

Staff attributed the revenue decline to a net loss in enrollment and categorical state funding. The presenter said the district lost roughly 196 students since the prior estimate, which reduced the foundation allowance by about $2.5 million; additional categorical reductions and grants changes produced the larger roughly $3.5 million reduction in state funding year over year. Meanwhile, expenditures rose because wages and benefits plus vendor-paid services and supplies account for the majority of district costs; staff said roughly 91 percent of expenditures, when including contracted people-services, are people-related.

To avert dangerously low reserves, staff recommended a package of measures: pursue land and building sales to shore up one-time cash needs; keep negotiating price freezes and rebids with major contractors; collaborate with unions on rightsizing staff and, where necessary, consider program or school consolidation while prioritizing teacher compensation in budget scenarios.

Trustees asked for more granular line-item transparency, the bid sheets for major vendors, and clearer assumptions about payroll and health-care expenses tied to collective bargaining outcomes. The superintendent and CFO said multiple scenarios are being prepared and that some payroll assumptions are placeholders until negotiations and state aid determinations are final.

Why it matters: The board must adopt a final budget before the start of the school year. Administration warned that without combination of one-time and structural changes the district could approach state oversight thresholds and face difficult choices that would affect staffing and programming.

What's next: Board members scheduled further briefings and asked staff for updated vendor bids, program-specific savings options, and outreach plans for community engagement on any proposed structural changes.