Denver Public Schools officials are forecasting the district will run a budget deficit at least through the 2025-26 fiscal year, if it is unable to find significant savings as enrollment shrinks.
The state’s largest school district anticipates a roughly $9 million shortfall at the end of the 2022-23 academic year, an improvement over the $23.5 million deficit officials were predicting only two months ago. Still, the gap would lead DPS to pull $9 million from reserves to balance its budget, according to a presentation district leaders plan to give the Board of Education Thursday.
“We are really trying to run a balanced budget,” said Chuck Carpenter, the district’s chief financial officer. “If we do nothing, this is what is going to happen in the next several years.”
The deficit represents a small percentage of the district’s budget, which often fluctuates. DPS expects to bring in almost $1.27 billion in revenue and spend $1.28 billion during the 2022-23 academic year, according to the slides.
DPS anticipates a smaller-than-expected deficit this year after local taxes increased and the district received more money from the state because its percentage of at-risk students, including those who qualify for free-and-reduced lunch, rose.
The rise in tax revenue will help the district pay for employee compensation, which increased this year because of raises and is one of the district’s main expenses. DPS expected to spend more than $900 million on employee compensation this year, according to the presentation.
Despite the recent wage increases, DPS, along with other districts, are facing widespread staffing shortages, said Rob Gould, president of the Denver Classroom Teachers Association.
“There’s going to be a lot of red until the state of Colorado figures out how we can fully fund public education,” he said.
Fewer children are enrolling in Denver schools as birth rates decline and housing costs push families from the city, resulting in less money for the district. The district predicted it lost about 1,000 students since the 2021-22 academic year, a trend Carpenter said is likely to continue for the foreseeable future.
In late October, Superintendent Alex Marrero recommended closing 10 schools with low enrollment to address the problem, but the school board voted against the plan. Marrero has since warned there was a “strong likelihood” he will have to ask the school board to dip into the district’s reserves.
The upcoming presentation, which is given to the board annually, forecasts the district’s budget through the 2025-26 fiscal year and shows that if nothing changes, the district’s reserves will shrink from about $124.3 million at the end of 2022-23 fiscal year to $96.6 million in three years.
“We are in a reasonably healthy place right now, but there are (financial) headwinds and we will need to readjust to the fiscal realities of the future,” Carpenter said.
The district’s budget forecast can change if the district finds new revenue sources or changes operations to reduce spending, he said.
The district underwent a reorganization last year, cutting dozens of positions from its central office in an effort to save money.
At this time, there are no plans for layoffs or hiring freezes, Carpenter said.
Schools in the district will also face another financial challenge in the coming years: COVID relief money will soon disappear and there won’t be a new revenue source to replace it.
DPS received more than $200 million in federal ESSER – Elementary and Secondary School Emergency Relief Fund – during the pandemic, but that money will run out by the end of the 2023-24 academic year, Carpenter said.
The district has tried to slowly phase out how much money schools receive each year so that when there is no more it won’t be such a “big cliff,” said Katie Hechavarria, executive director of finance for DPS.
Schools can use COVID relief money on things such as hiring paraprofessionals and interventionists and providing more mental health support to students, according to the presentation.
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