South Washington County Schools is moving forward with a $13 million budget adjustment process as declining enrollment and expenses rising faster than revenues are projected to put increasing pressure on district finances.
Director of Business Services Kris Blackburn provided an update on the process during the Thursday, July 16 School Board meeting in the District Service Center, outlining financial projections, proposed reduction targets and plans to gather staff feedback before recommendations reach the board in November.
Blackburn said the district's unrestricted fund balance policy calls for maintaining 16.6 percent of expenditures, approximately enough to cover two months of operations. Without adjustments, however, the district is projected to fall below that policy during fiscal year 2027.
The district approved an approximately $8 million deficit budget for the upcoming 2026-27 school year. Without subsequent changes, projections show the financial position continuing to deteriorate, potentially reaching statutory operating debt by fiscal year 2029. Statutory operating debt occurs when a district's fund balance falls below negative 2.5 percent, triggering requirements for a plan to restore financial stability.
Enrollment is a major factor, as the district receives a set amount of funding from the state for each student enrolled.
Blackburn said South Washington County Schools is graduating classes of approximately 1,500 students while incoming classes are around 1,200 students or fewer. The district expects enrollment to remain approximately flat in the current year before declining by more than 300 students next year.
“We know that student enrollment is the largest single driver of our revenues,” she said.
Other pressures include employee insurance costs and general operating expenses increasing faster than state funding. Blackburn said the state's basic education formula, the district's largest revenue source, has not kept pace with inflation.
Rather than applying an across-the-board reduction, the district is using a program-based budgeting approach. Blackburn said $13 million represents approximately 3.5 percent of the applicable general fund budget, but applying a uniform percentage to every department or program would not necessarily produce the best result.
Under the program-based approach, elementary schools have a $4.2 million adjustment target, while middle and high schools have a combined $4.5 million target. District departments and services are assigned $1 million; facilities usage and maintenance, $1.2 million; transportation, ridership and routes, $1.4 million; and student support services, approximately $700,000.
Nutrition services have a separate $200,000 target and community education a $400,000 target. Because those programs operate through separate funds, their adjustments will not count toward the $13 million general fund goal.
Blackburn said the district is seeking employee input as recommendations are developed. A staff survey opened in May and will remain available through Sept. 11.
As of July 8, the district had received 438 responses from its workforce of more than 3,000 employees. Staff were asked what resources or positions they consider essential, where efficiencies or savings might be found, whether districtwide services could be streamlined and how revenues could potentially be increased.
Superintendent Julie Nielsen said administrators are also examining expenditures line by line and stressed that the process will include additional opportunities for feedback once preliminary proposals emerge.
The district expects to bring an initial budget adjustment package to the School Board for discussion at its first November meeting, followed by a request for approval at the November business meeting. Approved changes would take effect for the 2027-28 school year.
“This will be very difficult, challenging work,” Blackburn said.