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District finance chief warns of a $3.7 million preliminary shortfall and falling reserves
Summary
The district’s preliminary FY27 forecast shows a projected $3.7M deficit (about 2% of the $158M budget) and declining reserve ratios through FY30 if current assumptions hold; staff recommended targeting a 14% reserve first and exploring options including voluntary debt rollback.
Dr. Robert Hedgecourt presented the board with the district’s final June amendment for FY26 and a preliminary forecast for FY27, describing revenue declines and multi-year reserve trends.
For FY26, the June amendment projects an operating fund balance of about 10.24% and estimated fund balances for debt service and capital projects of roughly $9.5 million and $1.8 million respectively. For FY27, Hedgecourt estimated revenues around $159 million (operating revenues ~ $155 million), down about $15 million from FY26 largely because one-time federal funds lapsed and decreased foundation formula funding. Projected expenditures are roughly $158 million, producing a preliminary deficit of approximately $3.7 million (about 2% of total expenditures).
Hedgecourt told the board his forecast assumes a 2% assessed-valuation increase and a flat tax rate and noted uncertainty tied to an ongoing state foundation formula modernization task force. He said the district will update assumptions when assessed valuation and enrollment figures are finalized and will present an amended budget in October.
Board members asked about reserve goals and options to address the shortfall. Hedgecourt recommended aiming for 2–3% year-over-year reserve growth with a near-term target of at least 14% to avoid taking a TAN (tax anticipation) loan. He discussed possible strategies including voluntary debt rollback, attrition-driven staffing reductions, underspent budgets, and other cost-saving measures. He also warned that if current trends continue without changes, reserve percentages could decline to the single digits by FY28–FY30 under the status-quo scenario.
The board directed staff to continue refining assumptions, prepare the June amendment for approval at the June meeting, and present follow-up analyses of options for restoring reserves, including the fiscal impacts of potential program changes, debt strategies and enrollment scenarios.
