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Gilroy Unified adopts 2026–27 budget and wins exemption to reserve cap amid uncertain state funding
Summary
The Gilroy Unified board approved the district's 2026'27 budget, a request for an exemption from Proposition 2's reserve cap, and related spending plans, while officials warned state funding uncertainties and rising pension costs create multi-year budget risks.
The Gilroy Unified School District board on Tuesday approved the district's 2026'27 budget and voted to seek an exemption from the Proposition 2 reserve-cap rule after staff warned that maintaining the required 10% reserve would force deep cuts.
Chief Business Officer Alvaro told the board the adopted budget reflects changes since the May public hearing, including updated COLA calculations that show a combined statutory and "augmented" COLA of roughly 4.3 percent. He said the district is awaiting clarity on several large state funding pieces'notably one-time "settle-up" payments the state owes and proposed new special-education funding'and cautioned that those unknowns make the multi-year projection precarious.
"We're projecting deficit spending across the multiyear plan and a significant drawdown of reserves if those state revenues don't materialize," Alvaro said, stressing the difference between one-time and ongoing funding streams. He said the district has budgeted a proposed 3% off-schedule payment to the Gilroy Teachers Association using one-time device and textbook funds, and will record that as a liability when closing the fiscal year.
Why it matters: district leaders said the Proposition 2 exemption is necessary to avoid what they called "draconian" midyear cuts that would otherwise be required to preserve cash flow in a budget where about 88% of costs are salaries and benefits.
Trustees pressed staff for details about CalSTRS and CalPERS employer-rate impacts and how any incoming state special-education dollars would be handled through the SELPA funding formula. Alvaro declined to speculate on exact layoff counts if reserves dwindle, calling such estimates "devastating" and premature.
Board action and next steps: trustees voted to adopt the 2026'27 budget and then approved a resolution asking the state to exempt the district from the Prop 2 reserve cap; the exemption was approved in a roll-call vote with trustees recorded as voting yes. Alvaro said the budget will be revisited in August should the state's enacted budget include new one-time or ongoing revenues that change the district's projections.
Votes at a glance: the board adopted the budget (motion carried) and approved the Prop 2 exemption in a roll-call vote. The district also adopted the Education Protection Account (Prop 55) spending plan to use EPA funds for teacher compensation.
What officials said next: Alvaro said the district will prepare a budget revision for the August board meeting if the state's final budget includes the supplemental or special-education amounts staff described. "We will come back with updated multi-year projections so the board can reconsider appropriation levels based on enacted state law," he said.
The meeting moved on to other items; trustees later approved multiple facilities contracts and policy updates.
