Updated five-year forecast reconfirms future budget pressure

by Judy Stringer

Oct. 12 school board meeting

Months after submitting a preliminary placeholder to meet a newly imposed state deadline, Hudson City Schools Treasurer Phil Butto delivered a comprehensive, “hard” five-year financial forecast to the board of education.

On the positive side, the September real estate settlement brought in an additional $800,000, improving the immediate financial picture compared to the August report. However, surging operational costs – such as diesel fuel for transportation services that has climbed over $6 per gallon – prompted the treasurer to increase spending projections for contracted services.

Butto also noted that actual expenses came in higher than expected, particularly in purchase services, which threw off previous numbers. Additionally, the updated figures factor in public utility tax assessment cuts and about $3 million in property shifting to tax-exempt status.

What remains constant are ongoing economic and legislative headwinds, including state-imposed caps on inside millage. While outside (or voted) millage has historically been subject to House Bill 920 – which eliminates inflationary tax increases and prevents school districts from receiving extra revenue when home values rise – districts could previously rely on a modest amount of growth from inside millage.

“Now, the legislature took that away, and that’s going to cause some issues for us in the long run,” Butto said, pegging the reduction to an annual loss of approximately $310,000 in baseline revenue.

Other challenges include flat funding under the state’s fair school funding model and growing personnel and benefit costs.

The numbers

The district currently maintains what Butto calls “a comfortable cash balance,” ending the year with an estimated $34.5 million, which represents roughly 154 days of cash on hand. Although revenue during the updated forecast grows from $82.6 million in 2026 to just under $87.3 million in 2031, expenditures are expected to climb more steeply, from $81.3 million in 2026 to $90.9 million in 2031.

If current trends hold, Butto anticipates deficit spending will reach $3.6 million by 2031, and the cash balance will fall to $27.5 million, or roughly 103 days of cash on hand. Changing that trajectory will require a 4% spending cut or a 4.1% revenue increase, according to the treasurer. Internally, he said, the district is reviewing building and department budgets to identify savings and plans to align staffing with enrollment and economize operations. It also will review its busing contract and continue to defend its commercial tax base.

Butto warned that “if the things haven’t changed or we haven’t been able to do enough internally to flip that around, we would have to look to some additional funding down the road from our constituents. But we’re going to talk about what we can do and what we are going to do internally to try and put that off.”