February budget update projects $10.4M deficit for 2026-27

At the February 12 Budget Committee Work Session, District leadership reviewed current-year financial conditions and provided an initial outlook for the 2026-27 budget cycle. The discussion focused on sustaining academic progress, as highlighted in recent record graduation rates, while addressing structural financial challenges driven largely by enrollment decline and rising costs.

Over the past 17 years, SPS has increased its four-year graduation rate from 56.7% to 76.9%, reflecting sustained growth across district high schools. As the District works to maintain and improve student outcomes, it must also respond to enrollment trends. Enrollment has declined since 2018-19 and is projected to continue decreasing through 2033-34. 

Looking ahead, preliminary projections for 2026-27 show a $6.19 million decrease in total revenue and a $4.2 million increase in expenditures, resulting in a projected $10.4 million deficit. Contributing factors include continued enrollment decline, reduced State School Fund revenue, contractual salary step and benefit increases, inflationary pressures on goods and services, and required capital improvements.

The projected ending fund balance for 2025-26 is $14.16 million, down from $20.85 million the prior year. Reserves are a one-time revenue source and should not be used to support ongoing expenditures. Professional financial guidance recommends maintaining reserves between 5% and 15%, and district policy requires at least 4% of adopted revenues.

Currently, nearly 80% of General Fund expenditures support employee costs, underscoring that the majority of District resources are directed toward staffing and student services. To manage current-year pressures, the District has implemented a non-essential spending freeze, an out-of-state travel freeze, and a hiring freeze within the General Fund.

The Budget Committee will reconvene on March 12 to review legislative updates, finalized enrollment projections, updated revenue forecasts, and 2026-27 budget parameters. 

The District recognizes these discussions directly impact our staff and schools, and we remain committed to transparency and collaboration throughout the budget development process.