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START

Final State and Local Budget Adoption

June 2026

CA Governor’s Budget Proposal

January 2026

Unaudited Actuals Year End Close

September 2027

Legislative Analyst’s Review and COLA Recalculation

Spring 2026

May State Budget Revision �“May Revise”

May 2026

Second Interim Report

March 2027

First Interim Report

December 2026

45 Day Revision�at Local Level �(if needed)

August 2026

MCOE Review �and Support

AB1200

Life Cycle of 26-27 �Budget

Independent Audit Nigro & Nigro

October 2027

FINISH

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Purpose of 2025-26 Estimated Actuals and 2026-27 Adopted Budget Report:

Review the District's projected year-end financial position for 2025-26.
Present the proposed 2026-27 Adopted Budget and underlying budget assumptions.
Review the District's Multi-Year Projections and long-term fiscal outlook.
Evaluate the District's ability to meet current and future financial obligations.
Recommend adoption of the 2026-27 Budget and Multi-Year Projections.

The purpose of tonight's presentation is to provide the Board with an update on the District's projected financial position at the close of the 2025-26 fiscal year and to present the proposed 2026-27 Adopted Budget.

This report reflects the assumptions included in the Governor's May Revision, current enrollment and attendance projections, negotiated employee agreements, and local revenue forecasts. As a Basic Aid district, LCMSD remains highly dependent on local property tax revenues. While property tax growth continues to be positive, staff has incorporated conservative assumptions in recognition of broader economic uncertainty and the importance of maintaining long-term fiscal stability.

In addition to reviewing the District's estimated actual revenues and expenditures for 2025-26, this presentation includes an overview of the proposed budget, multi-year financial projections, reserve levels, and long-term fiscal outlook.

Staff is recommending adoption of the 2026-27 Budget, approval of the associated Multi-Year Projection, and approval of Resolution 2025/26-24 establishing a Multi-Year Fiscal Stabilization and Revenue-Expenditure Alignment Plan.

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LCMSD Estimated Actuals and Budget Adoption Analysis (General Fund 01 Combined)

	2025-26 Second Interim	2025-26 Estimated Actuals	2026-27 Budget Adoption	Explanations
LCFF Sources (Unrestricted)	$16,837,839	$16,837,861	$17,485,114	Increase reflects projected property tax growth and updated LCFF/local revenue assumptions.
Fed Revenue (Restricted)	$414,158	$430,316	$398,426	Decrease reflects removal of one-time/carryover federal funds and updated grant projections
Other State Revenue	$2,233,544	$2,222,454	$1,920,891	Decrease reflects lower restricted state revenues and updated one-time funding assumptions.
Other Local Revenue	$7,621,889	$7,840,529	$8,096,194	Increase reflects parcel tax growth, lease revenues, interest, and other local revenue assumptions.
Total Revenue	$27,107,430	$27,331,160	$27,900,625	Revenues increase modestly, driven primarily by local property tax and parcel tax growth.
Certificated Salaries	$10,952,675	$10,992,161	$12,128,640	Increase reflects negotiated salary adjustments, step-and-column movement, and staffing assumptions.
Classified Salaries	$3,420,387	$3,576,991	$3,519,607	Increase reflects negotiated salary adjustments, step-and-column movement, and staffing assumptions.
Benefits	$7,658,276	$7,466,481	$7,857,010	Increase reflects salary-driven benefit costs and updated employer contribution rates.
Books & Supplies	$850,859	$744,969	$851,783	Increase reflects instructional materials and planned program needs.
Services	$4,163,137	$4,175,627	$4,342,011	Increase reflects operating costs, contracts, insurance, utilities, and program services.
Capital Outlay	$0	$0	$0
Other Outgo	$924,992	$1,017,840	$996,328	Reflects special education excess costs and required debt/service payments.
Total Expenditures	$27,970,326	$27,974,069	$29,695,379	Expenditures increase primarily due to compensation, benefits, and ongoing program/operational costs.

This slide compares the District's 2025-26 Second Interim projections, 2025-26 Estimated Actuals, and the proposed 2026-27 Adopted Budget.

Estimated Actuals are generally aligned with Second Interim projections. Revenues increased modestly, primarily due to stronger local revenues, while expenditures remained relatively stable. As a result, the projected operating deficit improved from approximately $863,000 at Second Interim to approximately $643,000 at year-end.

For 2026-27, revenues are projected to increase by approximately $570,000, driven primarily by property tax growth and the annual parcel tax adjustment. At the same time, expenditures are projected to increase by approximately $1.7 million, largely due to negotiated compensation settlements, employee benefits, and ongoing operational costs.

As a Basic Aid district, LCMSD remains highly dependent on local property taxes. While local revenue growth remains positive, staff has incorporated conservative assumptions due to ongoing economic uncertainty and will continue to closely monitor assessed valuation growth, property transfer activity, and broader economic conditions.

The resulting operating deficit represents a planned use of reserves to support District priorities while maintaining long-term fiscal stability.

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All Funds Balance Review

Student Activity Special Revenue Fund (Fund 08):

Purpose: Accounts for student body activities that are District-managed.

Beginning Balance: $3,697
Ending Balance: $3,697

Transactions are managed through Redwood Credit Union and are maintained outside of the District’s financial system. Balances are reconciled and reflected during Unaudited Actuals.

Cafeteria Special Revenue Fund (Fund 13):

Purpose: Manages nutrition services and the Universal Meals Program.

Beginning Balance: $19,028
Revenue: $337,386 (Federal and State meal reimbursements)
Expenditures: $464,187 (Universal Meals program operations)
Contribution: $126,000 (Resource 7032)
Ending Balance: $18,227
The projected decrease reflects continued operational costs associated with providing Universal Meals to students.

Deferred Maintenance Fund (Fund 14):

Purpose: Supports major facility repair and upkeep (roofing, HVAC, plumbing, etc.).

Beginning Balance: $96,664
Revenue: $4,273 (Interest earnings)
Expenditures: $0
Ending Balance: $100,937
The balance reflects reserve growth through interest income, with facility projects expected in future periods.

This slide highlights several of the District's smaller special revenue and restricted funds.

Fund 08, Student Activity Special Revenue Fund, accounts for District-managed student activity balances. These transactions are maintained outside of the District's financial system through Redwood Credit Union and are reconciled annually as part of the Unaudited Actuals process. The fund balance remains stable at approximately $3,700.

Fund 13, Cafeteria Special Revenue Fund, supports the District's Universal Meals Program. Revenues are primarily derived from federal and state meal reimbursements. Program expenditures exceed direct reimbursement revenues; however, a contribution from Resource 7032 offsets most of the operating shortfall. The fund is projected to end the year with approximately $18,000 in reserves while continuing to provide meal services to students.

Fund 14, Deferred Maintenance Fund, is reserved for future facility repair and maintenance needs. The fund receives interest earnings and currently has no planned expenditures. As a result, the balance is projected to increase modestly and will remain available to support future facility maintenance projects and infrastructure needs.

While these funds represent a relatively small portion of the District's overall budget, they provide important support for student activities, nutrition services, and long-term facility maintenance. Staff will continue to monitor these funds to ensure resources remain available to support their intended purposes.

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All Funds Balance Review, Cont’d

Building Fund (Fund 21):

Purpose: Holds revenues associated with joint-use facility agreements and related facility resources.

Beginning Balance: $34,683
Revenue: $1,523 (interest income)
Expenditures: $0
Ending Balance: $36,206
The balance reflects interest earnings with capital projects expected to occur later in the fiscal year.

Capital Facilities Fund (Developer Fees - Fund 25):

Purpose: Used for facility expansion, technology upgrades, and related capital improvements.

Beginning Balance: $421,223
Revenue: $107,187 (Developer fees and interest)
Expenditures: $32,534
Ending Balance: $495,876
Activity in this fund supports ongoing facility improvements and infrastructure needs funded through developer fees.

School Facilities Fund (Fund 35):

Purpose: Reserved for larger capital improvement projects outlined in the District’s Facilities Strategic Plan.

Beginning Balance: $3,728,427
Revenue: $212,766 (interest income)
Expenditures: $1,105,244
Ending Balance: $2,790,949
This fund supports major facilities planning and capital projects across District campuses

Fund 21, Building Fund, maintains a relatively small balance and historically has been used to hold revenues associated with joint-use facility agreements and related facility resources. No expenditures are budgeted in 2026-27, and the fund balance is projected to increase slightly through interest earnings, ending the year at approximately $36,000.

Fund 25, Capital Facilities Fund, receives developer fee revenues generated by new residential and commercial development within District boundaries. These revenues may only be used for allowable capital facility purposes. During 2026-27, the fund is projected to receive approximately $107,000 in revenue and incur approximately $33,000 in expenditures, resulting in a projected ending balance of approximately $496,000. These resources provide ongoing support for facility improvements and infrastructure needs associated with growth.

Fund 35, County School Facilities Fund, supports major facilities modernization and capital projects. During 2026-27, the District anticipates approximately $213,000 in interest earnings and approximately $1.1 million in expenditures related to planned facilities projects. As a result, the fund balance is projected to decrease from approximately $3.7 million to $2.8 million as the District continues investing in facility improvements and advancing long-range facilities priorities.

Collectively, these funds provide important resources for maintaining and improving District facilities. While Fund 21 and Fund 25 continue to build reserves through interest earnings and developer fees, Fund 35 reflects the District's ongoing investment in facility modernization and infrastructure improvements.

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Multi-Year Projections (MYP) Highlights

Operating Deficit Trends

2026-27: Projected deficit of ($1,920,754).

2027-28: Projected deficit decreases to ($808,226), reflecting the expiration of certain one-time costs while continuing to support core programs, services, and employee compensation commitments.
2028-29: Projected deficit of ($245,447) as ongoing compensation costs continue and operational expenditures stabilize.

The overall trend reflects planned deficit spending supported by existing reserves while the District continues to invest in students, staff, and operational priorities.

Despite projected deficits, the District maintains reserves well above the State-required minimum throughout the Multi-Year Projection period.

Resolution 2025/26-24 establishes a Multi-Year Fiscal Stabilization and Revenue-Expenditure Alignment Plan to support ongoing review of revenues, expenditures, reserve levels, and long-term fiscal sustainability through the Fiscal Advisory Committee and regular Board review.

This slide highlights the District's projected operating deficits over the Multi-Year Projection period.

The District is projecting operating deficits of approximately $1.9 million in 2026-27, $808,000 in 2027-28, and $245,000 in 2028-29. While expenditures are projected to exceed revenues during the three-year projection period, the deficits decrease significantly each year as ongoing revenues continue to grow and expenditure growth moderates.

These projected deficits are planned and reflect the District's intentional use of accumulated reserves to support staffing, instructional programs, employee compensation commitments, and other Board priorities.

Even with this planned deficit spending, available reserves remain strong at 21.01% in 2026-27, 17.58% in 2027-28, and 15.22% in 2028-29, well above both the State-required minimum reserve of 3% and the Board-established reserve target of 10%.

In conjunction with the budget adoption, staff is also recommending approval of Resolution 2025/26-24 establishing a Multi-Year Fiscal Stabilization and Revenue-Expenditure Alignment Plan. The resolution formalizes the District's ongoing process for reviewing revenues, expenditures, reserve levels, enrollment trends, and long-term financial assumptions through the Fiscal Advisory Committee and regular Board review.

Overall, the projections demonstrate that the District remains fiscally stable, maintains healthy reserves, and is positioned to sustain programs and services while navigating future economic uncertainty.

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Multi-Year Projections (MYP) Highlights

Revenue Growth Trends

2026-27 Total Revenue: $27,900,625
2027-28: $28,693,606
2028-29: $29,513,305
Moderate annual revenue growth is projected, driven primarily by continued increases in local property tax revenues as a Basic Aid district, along with stable local revenue sources such as parcel taxes and contributions from SPARK.
Local property taxes remain the District's primary funding source, with projections assuming approximately 4.0% growth in 2026-27 and 3.5% annual growth thereafter. Staff has incorporated conservative assumptions given ongoing economic uncertainty and the District's reliance on local property tax revenues

Expenditure Trends

2026-27: Projected total expenditures of $29,821,379, reflecting continued investments in staffing, employee benefits, instructional programs, and operational services.
2027-28: Projected expenditures of $29,501,832, reflecting the expiration of certain one-time costs while continuing to support core programs, services, and employee compensation commitments.
2028-29: Projected expenditures of $29,758,752, reflecting ongoing salary and benefit cost growth, including step-and-column movement and other contractual obligations.

This slide summarizes the District's Multi-Year Projections and demonstrates the long-term sustainability of the General Fund budget.

As a Basic Aid district, LCMSD's financial outlook is driven primarily by local property tax revenues. Total revenues are projected to increase from approximately $27.9 million in 2026-27 to $29.5 million by 2028-29, reflecting continued growth in assessed valuation, parcel tax revenues, and other stable local funding sources.

Staff has incorporated conservative assumptions into the projections, including property tax growth of approximately 4.0% in 2026-27 and 3.5% annually thereafter. While local property tax performance remains strong, the District continues to closely monitor economic conditions, property transfer activity, and assessed valuation trends given our reliance on local revenues.

On the expenditure side, the projections reflect the District's ongoing investment in staffing, employee benefits, instructional programs, and operational services. Expenditures remain relatively stable throughout the projection period and include negotiated compensation increases, step-and-column movement, and known benefit cost obligations.

The Multi-Year Projection reflects planned deficit spending during the projection period as the District strategically utilizes reserves to support students, staff, and Board priorities. While expenditures are projected to exceed revenues, the District maintains healthy reserves throughout the projection period and continues to meet all State fiscal solvency requirements.

Overall, the Multi-Year Projection demonstrates that the District remains financially stable, with sufficient reserves to support ongoing operations while continuing to invest in programs and services that benefit students.

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Revenue Assumptions

Property Tax Growth:

2026-27: 4%
2027-28 & 2028-29: 3.5% annually
Local property taxes continue to be the primary driver of revenue growth for the District as a Basic Aid district. Projections are based on historical trends, county assessed valuation forecasts, and recent property transfer activity.

Parcel Tax Growth:

Projected at 5% annually, consistent with the terms of the voter-approved parcel tax measure.

LCFF COLA Assumptions:

2026-27: 2.87%
2027-28: 3.30%
2028-29: 3.09%
While the District is Basic Aid and primarily funded through local property taxes, COLA assumptions are still incorporated into projections for state-funded programs and categorical funding streams.

Lottery Revenues:

Unrestricted: $190/ADA
Restricted (Instructional Materials): $82/ADA

Mandate Block Grant:

Mirrors COLA percentages (2.87%, 3.30%, 3.09%) across the three years.

Other Local Revenues:

Includes SPARK contributions, interest income, facility use fees, and developer fees, projected based on historical trends and conservative estimates.

This slide summarizes the key revenue assumptions used to develop the District's Multi-Year Projection.

As a Basic Aid district, local property taxes remain the primary driver of District revenues. The budget assumes property tax growth of approximately 4.0% in 2026-27 and 3.5% annually thereafter, based on historical trends, county assessed valuation forecasts, and recent property transfer activity.

While local property tax performance has remained strong, staff has incorporated cautious assumptions given ongoing economic uncertainty and the District's reliance on local property tax revenues. This approach reflects a cautiously optimistic outlook while recognizing that property tax growth can fluctuate over time.

Parcel tax revenues are projected to increase by 5% annually, consistent with the voter-approved escalation factor contained in the measure.

Although LCMSD is primarily funded through local property taxes, State COLA assumptions remain important because they affect categorical funding programs and other State-funded revenue sources. The projections incorporate the most current SSC May Revision planning factors, including COLA assumptions of 2.87% in 2026-27, 3.30% in 2027-28, and 3.09% in 2028-29.

Lottery revenues are projected using current State estimates of $190 per ADA for unrestricted purposes and $82 per ADA for instructional materials.

Other local revenues include SPARK contributions, interest earnings, facility use fees, and developer fees. These revenues have been projected using historical trends and cautious assumptions to support long-term fiscal planning.

Overall, these assumptions reflect a balanced approach that recognizes the District's strong local funding base while acknowledging the uncertainty that can accompany a property-tax-dependent revenue structure.

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Expenditure Assumptions

Staffing Costs

2026-27 includes negotiated salary schedule increases approved through collective bargaining agreements:

Certificated: 4.51%
Classified: 4.51%

Step & Column

Annual step-and-column movement is included for eligible employees.
Certificated and Classified: 2.0% annually.

Employee Benefits

2026-27: $7,857,010
2027-28: $7,889,142
2028-29: $7,941,415
Includes health and welfare benefits, retirement contributions, payroll taxes, Workers' Compensation, and other statutory benefits.

STRS & PERS Rates

STRS:

2026-29: 19.10%

PERS:

2026-27: 26.40%
2027-28: 26.80%
2028-29: 25.90%

Insurance & Other Benefit Costs

Workers' Compensation: 0.749%
Unemployment Insurance: 0.05%

This slide summarizes the major expenditure assumptions incorporated into the District's Multi-Year Projection.

Salary projections reflect negotiated compensation increases approved through collective bargaining agreements. For 2026-27, certificated and classified employees receive a 4.51% salary increase.

The projection also includes annual step-and-column movement of approximately 2.0% for eligible certificated and classified employees, reflecting normal salary progression based on experience and educational advancement.

Employee benefit costs are projected at approximately $7.9 million annually, increasing modestly from $7.86 million in 2026-27 to $7.94 million in 2028-29. These costs include health and welfare benefits, retirement contributions, payroll taxes, Workers' Compensation, and other statutory benefits.

Retirement costs continue to be a significant expenditure driver. The projection assumes a STRS employer contribution rate of 19.10% throughout the projection period. PERS rates are projected at 26.40% in 2026-27, 26.80% in 2027-28, and 25.90% in 2028-29 based on current CalPERS estimates.

Additional assumptions include Workers' Compensation at 0.749% and Unemployment Insurance at 0.05%, consistent with current rates and historical experience.

Overall, the expenditure assumptions reflect a prudent approach that maintains current staffing and program levels while accounting for known compensation commitments, retirement costs, and employee benefit obligations.

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What’s Next - Unaudited Actuals 2025-26

Fiscal year closes on June 30, 2026.
Staff will complete year-end accruals, adjustments, and fund reconciliations.
Marin County Office of Education will review year-end financial reporting.
Unaudited Actuals will be presented to the Board in September 2026.
The report will provide the final financial results for 2025-26 and establish beginning balances for 2026-27.

Tonight's budget adoption is based on Estimated Actuals for 2025-26. The next major financial reporting milestone will be the Unaudited Actuals report.

Following the close of the fiscal year on June 30, staff will complete year-end accounting activities, including accruals, adjustments, and reconciliation of all District funds. This process ensures that revenues and expenditures are recorded in the proper fiscal year and that all fund balances are accurately reported.

The Unaudited Actuals report will be presented to the Board in September and will provide the District's final financial results for 2025-26. Those final balances will also serve as the starting point for the 2026-27 fiscal year and will be incorporated into the First Interim budget update.

While changes between Estimated Actuals and Unaudited Actuals are typically not significant, the report provides an important opportunity to validate the District's year-end financial position and confirm available reserves.

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What’s Next - First Interim 2026-27

Review final 2025-26 Unaudited Actuals and beginning balances.
Update property tax revenue projections based on current county reports and economic conditions.
Incorporate final State budget information and revised planning factors.
Review enrollment and staffing adjustments, if necessary.
Update the Multi-Year Projection and reserve levels.
Present First Interim Report to the Board in December 2026.

The First Interim Report will be the Board's first formal update on the District's financial position following budget adoption.

At that time, staff will incorporate the final 2025-26 Unaudited Actuals balances, which become the starting point for the current fiscal year. We will also update property tax revenue projections using the most current information available from Marin County and evaluate any changes in economic conditions that may affect future revenues.

The report will incorporate the final State budget and any updated planning factors released after budget adoption. Staff will also review enrollment, staffing, and expenditure trends to determine whether any adjustments are necessary.

The Multi-Year Projection and reserve levels will be updated to reflect the most current financial information available.

As a Basic Aid district, continued monitoring of local property tax revenues remains especially important. First Interim provides an opportunity to evaluate whether revenue growth is tracking as anticipated and whether any adjustments are needed to maintain long-term fiscal stability.

Overall, First Interim serves as an important checkpoint to ensure that the District remains on track to meet its financial obligations while continuing to support student programs and services.

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