Budget and Legislative Updates

House Bill 2 (Substitute)

Passed by the House and sent to the Senate.
Adds 9,000,000,000 in new public education funding to the state budget.
Includes an increase to the basic allotment.
Mandates raises for staff, with a percentage allocated for teachers, nurses, librarians, and counselors, and the remaining for other staff.

Signed by the Governor.
Adds approximately 1,000,000,000 in costs for the 2026-2027 school year (when it goes into effect).
Expected to cost around 4,000,000,000 by 2029-2030.
Potential competition for state funds and possible enrollment loss could impact the public school budget in the future.

Approximately 10,600,000 in total reductions made to the budget.
Budget scenarios developed based on House Bill 2 and potential use of disaster pennies.

Initial shortfall of 34,600,000.
Enrollment projection expectations: 3,900,000 loss.
Loss of SHARS (Student Health and Related Services) revenue due to audit findings: 3,600,000.
Reduction of vacancy rate contributed to rising costs due to filling positions, adding approximately 8,800,000 to current expenses.
Anticipated ending of the current year with a 16,800,000 shortfall. Fund balance can cover the amount.

Additional revenue expected from the increase to the golden penny yield and increased safety allotment is around 4,600,000.
Offset by costs of opening Ferndale Henry, prorated costs for principal and executive assistant and inflationary costs related to fuel and Gold Star contract.
Deficit in the benefits fund requires a transfer of approximately 15,000,000.
Three options were considered to address the shortfall, with a recommendation of using a combination of reductions, fund balance, and potentially disaster pennies.
The community voiced concerns about increasing the student-to-teacher ratio. Changes do not include increases to student-teacher ratios.

Identified 10,550,000 in reductions.
Department-level reductions: Approximately 6,000,000.
Elimination of 22 vacant administrative positions: Savings of 2,400,000.
Maintenance and operations reductions: Totaling 4,460,000.
Software savings: Around 700,000 (shifting some costs to instructional materials allotment).
Campus-side reductions: Just under 3,000,000 at Title I campuses.
Shifting funding for designated substitutes from the general fund to Title I funding.
Innovative staffing model tied to the teacher pipeline: Savings of about 380,000.
Adjusting campus budgets to match actual expenditures: 1,600,000 in savings by rightsizing budgets.
Software reductions: 70,000 in savings through eliminating duplicative software and switching to no-cost options.

Initial 34,600,000 deficit. Does not include raises, need for operating reductions.
Potential use of disaster pennies.
Factoring in House Bill 2, about 35,000,000 in new revenue will be generated. 4,600,000 currently accounted for, reflecting 30,800,000 not currently accounted for.
40% of new funding must be spent on raises, with 75% of that allocated to teachers, nurses, librarians, and counselors. The remaining can be used for other staff.
Preliminary estimates: ~3% raise for teachers (inclusive of step) and ~2% for other staff.
Total cost of raises: Approximately 17,600,000 (inclusive of step), or 14,600,000 (backing out the step).
Pending legislation could change these figures; not final until legislative session outcome & board action.
Even with raises, a 7,800,000 deficit is anticipated while at 86 days of operating reserve. (Under 90 day requirement).

Potential start with a 7,800,000 deficit based on 2025-2026 projections.
Revenue-side assumptions: Stable enrollment/attendance based on PASA projections, no changes to federal funding (IDEA/Title I), continued Federal Reserve interest rate cuts resulting in an estimated 2,500,000 loss in interest rate earnings.
Expenditure-side considerations: Opening of Middle School 16 costs approximately 3,100,000, teacher step increases (estimated 3,600,000), maintaining a 4.5% vacancy factor adds about 3,400,000 in costs, assuming the benefits deficit for '26-'27 could be about 15,000,000 again.
Potential areas for additional growth: Special Education program costs, potential continuing use of bond contingency for major maintenance.
Inflation limited impact, no unfunded mandates.
Worst-case scenario: Could add approximately 27,600,000 to the deficit at the end of the 2026-2027 budget year.

Potential use of disaster pennies to address uncertainty.
Board perception that new initiatives or raises are limited due to maintaining a 90-day operating reserve.
Disaster pennies provide flexibility to build the fund balance above 90 days for addressing board priorities/goals.
Seven disaster pennies could generate about 35,000,000 after accounting for 5,100,000 in recapture payments (generates 40,200,000 with 5,100,000 for recapture).
Using disaster pennies with House Bill 2 changes: Fund balance increases by 27,100,000, putting the district at 102 days. Allows for retention supplement.
Potential scenarios: 500 retention supplement = fund balance increase 21,600,000, 99 days. 1,000 retention supplement = fund balance increase 16,100,000, 97 days.

One-time impact to taxpayers, going into effect for the 2025-2026 school year.
Seven pennies expire at the start of the 2026-2027 school year, and the tax rate would go down.
Current legislation compresses the tax rate by about 3¢ and may add an additional 40,000 to the homestead exemption.
If disaster pennies are not implemented, a taxpayer could see a 474 reduction in their tax bill. If implemented, that savings decrease to 274.
Cost to taxpayers is about 17 a month (approximately 200 per year).

Building an emergency reserve beyond 90 days.
Covering board priorities associated with one-time program investments.
Maintaining AA+ bond rating.
Hedging against enrollment declines due to vouchers.
Providing a source for unforeseen expenditures such as benefit fund deficits or hurricane repairs (expect reimbursement from FEMA/insurance).
Program stability.
Flexibility to strengthen workforce retention through one-time supplements.
A one-time impact to taxpayers, with the tax rate decreasing by 7¢ in the 2026-2027 school year.

Projected end to the 2025-2026 school year with a 7,800,000 deficit, putting district at 86 days.
Limited flexibility to address board priorities/goals or fund innovative ideas.
No ability to do retention supplements, and the need to significantly scale back premier programming.