Knox County Schools proposes $713 million revised budget, warns of staff impacts after $8 million funding gap

Knox County Schools officials on July 6 told the Board of Education they must revise the district’s FY27 general-purpose budget to $713 million after recent county and state decisions produced a nearly $8 million funding gap.

“On June 15, Knox County Commission voted to redirect 2 pennies in property tax revenue that amounts to approximately $4,000,000 away from Knox County Schools,” Ms. Lautner said, and the district’s final state TISA allotment, delivered June 30, produced about $3,800,000 in additional reductions. “So our total shortfall is nearly $8,000,000. That is the challenge that is in front of us today,” she said.

The district presented a two-part response. To match the county-approved total, staff asked the board to vote July 9 on a revised $713 million general-purpose budget (down from the $717 million the district proposed). Separately, staff outlined steps to address the state-driven $3.8 million shortfall, including a planned fund-balance designation and further spending adjustments.

Officials said the district has $71,000,000 in fund balance but noted legal and best-practice constraints. “The state does require that public school systems keep 3% of their total operating budget in reserve,” Ms. Lautner said, which for Knox County Schools would be roughly $27,000,000; by contrast the Government Finance Officers Association recommends about two months of operating expenses and the district currently holds just over one month.

Because roughly 85% of the district’s operating budget is personnel costs, administrators said any solution will affect staff. The proposed FY27 revisions include a five-day furlough for employees on 255- and 260-day contracts and a cap of one staff reduction at each middle and high school — a total of 29 positions. District staff said about eight of those positions can be absorbed by vacancies, roughly four by internal reassignment, and they currently expect approximately 17 employees will be moved or otherwise impacted.

“We have made some intentional choices to pay for things like textbooks, some technology, some one-time purchases so that we could preserve our general purpose budget for our people,” Ms. Lautner said. “Fund balance cannot absorb the entirety of the shortfall. It can take on some of it, but not all of it.”

Ms. Hemmelgarn described implementation details and timelines. The furloughs would occur on district closure days (Oct. 7; Dec. 21 and 22; Dec. 31; March 10). Staff said the district will notify impacted employees July 9–10 if the board approves the revised budget and will send individualized pay-impact notices by the end of July. The district also proposed a one-year moratorium on planned device purchases and moving some vehicle purchases to a fund-balance designation pending further board action.

On the compensation question, administrators emphasized the FY27 proposal preserves a 2% salary increase and step increases for eligible employees; in many sample scenarios the 2% plus a step change would offset the five-day furlough for mid-point salaries, though some employees — especially those already maxed on the step schedule — could see a net reduction. Presenters walked the board through sample calculations for custodial staff, principals, assistant superintendents and elementary assistant principals to show category-level effects.

To reduce recurring personnel costs beyond this year, staff said they will propose an early retirement incentive for eligible certified employees at the August board meeting, with a September application window and a Nov. 9 application deadline. If approved in August, the incentive would pay eligible employees a monthly amount to help cover medical coverage until age 65 or for a minimum of one year.

Board members pressed staff on alternatives. Mr. Triplett and others asked whether every one-time expense was examined; administrators said they had combed capital and one-time spending and that vehicles and delaying device purchases were the remaining viable one-time offsets without creating budget holes for next year. Several board members suggested asking the county commission to forgo its recent raises or consider targeted action; legal counsel said compensation for commission and board members is set by the Knox County Charter and any change requires commission action.

At the public forum Michael O’Malley, a Carter High School teacher, urged the board to use reserve funds this year to avoid job losses and to push the county for a property-tax increase as a long-term fix. “Please, I’m begging you to use these reserve funds to make up the budget shortfall this year,” he said, adding that the district should press county leaders and voters about long-term funding.

The board did not take a final vote July 6. Staff asked the board to approve the revised $713 million budget on July 9 to align the district’s operating budget with the county’s approved amount; additional board actions (fund-balance designations, retirement-incentive approval) were scheduled for August. If the board approves a budget amount differing from the commission-approved allocation, administrators cautioned that state and county approvals or additional steps might be required before payroll on July 17.

The district framed the changes as necessary but difficult trade-offs to protect classroom instruction and sustain core services while responding to rapid funding changes; board members repeatedly expressed support for staff while urging county-level conversations about longer-term revenue and equity across county services.