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Issaquah School District projects $12.5 million shortfall, cites enrollment decline and rising costs
Summary
District finance staff told the board the 2025–26 fund-balance projection grew to an estimated $12.5 million deficit, citing lower enrollment, utility and insurance cost increases and state funding gaps; staff said the district will align budgets, preserve levy commitments and present final proposals for August adoption.
Issaquah School District finance leaders told the board on June 9 that the district faces continued fiscal pressure and a growing fund-balance shortfall, driven primarily by declining enrollment and rising operating costs.
Chief of finance and operations Martin Tney and district budget staff said the district's March projection of an $8.9 million deficit increased to about $12.5 million as costs came in higher than expected. Tney cited rising utility costs, the financial effects of recent collective-bargaining agreements and a sharp increase in insurance expenses as contributors. The presentation also highlighted an expected $18.6 million in taxpayer savings from a bond-refunding move the district timed to market conditions.
Enrollment changes were another major factor. Presenters reported kindergarten confirmations of 911 this May compared with 977 at the same time last year and said the district has lost nearly 500 students since the pandemic; staff said they continue to monitor confirmation trends through August. Given lower enrollment, the district has proposed budget alignment steps that include reducing some administrative and school-based FTE while preserving class-size ratios and levy commitments through attrition and targeted restructuring.
Budget staff framed the approach as conservative and targeted. They described options used elsewhere by districts—raising class sizes, consolidating schools or cutting extracurriculars—but emphasized Isquah's plan to preserve core student supports and levy-funded programs where possible. The administration said it does not plan school consolidation and will first use attrition and restructuring to limit layoffs.
Presenters also flagged the district's fund balance: with current estimates the unassigned fund balance would be about 1.45% of expenditures, below the board's 3–7% target and credit-rating guidance that recommends at least 5% to avoid negative ratings. Staff recommended reviewing reserve assignments and budget-development guidelines prior to final adoption of the 2026–27 budget in August.
Board members asked for follow-up data on early-learning and preschool enrollment, and for clearer timelines on when FTE decisions would be released; staff said they will provide more granular enrollment and preschool information as a follow-up and reiterated that many staffing decisions are held until late July–early August when enrollments are confirmed.
What the meeting recorded: presenters said the district had a clean 24–25 audit, expected bond-refunding savings of about $18.6 million, and a projected operating deficit of about $12.5 million for the 25–26 year; kindergarten confirmations were reported at 911 versus 977 the prior year; annual insurance costs were cited as rising from about $2.9 million (five years ago) to a projected $8.5 million next year.
Next steps: staff will return with an August budget hearing and potential adoption after refining multi-year financial planning and, if necessary, adjustments to reserve assignments; the board will consider the budget alignment recommendations and public hearing materials in coming weeks.
