HERMANN – Gasconade County R-1 Superintendent Geoff Neill wore a look of disappointment tinged with frustration as he did something Thursday night that several of his counterparts across the state possibly was doing: Submitting a proposed operating budget with a red number.

Indeed, the spending plan for the coming school year is the first deficit budget Neill has put in front of a school board. In terms of the numbers found in a school district’s operating budget, $50,893 is not a huge number. But the fact that it’s a red number — the difference between the anticipated revenue coming in during the 2026-27 school year and the level of expected expenditures — that’s cause for concern because it could be a harbinger of what’s to come in the next few years.

Neill clearly was disappointed with having to submit an unbalanced revenue-to-expenditure plan. To be clear, the R-1 District’s overall budget is balanced. It has to be as required by the Missouri Constitution. But because of the shortfall in revenue, administration officials had to lean more than they would have liked on the beginning balance. That translates into a smaller year-end balance once all the bills are paid.

The new budget, which becomes effective July 1 with the start of Fiscal Year 2027, shows anticipated revenue of $16,069,503 and projected expenditures of $16,120,398, accounting for the $50,803 deficit.

Neill is a school-finance hawk, paying particular attention to the numbers, not just the numbers here but those working their way through state government. For a couple years, he has been cautioning about a “financial cliff” that was on the horizon for public education.

“The cliff is coming and we’re here,” he told the board during its monthly session last week.

The reason for the deficit is two-fold: Firstly, state funding for public education is down.

The Foundation Formula again is not fully funded. State dollars for transportation has been reduced and the per-pupil amount allocated to districts will be below the already low level considered earlier. Secondly, local revenue (property tax money) is projected to be down because of the likelihood that Senate Bill 3 — which has been approved by Gasconade County voters — is expected to be upheld in a pending legal challenge. Senate Bill 3 is a state law adopted last year by the Missouri General Assembly that aims to provide property tax relief to homeowners 62 and older.

However, SB3 will results in a substantial loss of revenue by all property tax-dependent public service agencies, except ambulance districts, which were exempted from revenue loss. That means school districts, county government, municipalities, library districts, Hermann Area District Hospital and all other publicly supported political subdivisions will be hit with a revenue loss.

In this county, Gasconade County R-1 and R-2 would be the biggest losers of revenue. An analysis of the potential impact of SB3 shows a revenue loss of more than $600,000 in the first year. If the law is upheld, it will take effect in January 2027 with the assessed values of the properties in the program rolled back to 2024 levels.

In his budget message to the board, which had little discussion before adopting the financial blueprint, Neill said whatever additional funds that can be found will be used to improve student performance.

“The FY27 budget features a deficit operating result, which management anticipates will be fairly accurate,” the message began. “Despite revenue and expenditure increases, the district aims to maintain reserves between 25 percent and 28 percent of expenditures.

“Additional funds will be used to improve student access to technology, upgrade facilities on all campuses, enhance security and safety, cover increased transportation costs and support recruitment and retention of staff, among other priorities,” the superintendent said in his message.

He noted there are “several critical factors” to monitor in the coming year and future years by district officials:

• The ongoing decline in the number of students. “Continued participation in efforts to grow Hermann and surrounding areas will be essential,” he said. Those efforts now include R-1 participation in the work of the Hermann Regional Economic Development (HRED) Corporation and Neill’s membership on the Montgomery County Economic Council. On the Montgomery County Economic Council Neill represents R-1, the Hermann Area Chamber of Commerce and HRED. Each of those organizations allocated a little more than $3,000 to meet the $10,000 cost to have a seat on the economic council.

• Frozen property values at 2024 levels. Local funds provide 65 to 68 percent of district operating revenue. Neill anticipates the district losing $370,000 because of SB3.

• Growing expenditures in the outside placement of students. Staff numbers will continue to decrease as enrollment declines. At this time, he noted, the district is able to make these reductions through attrition. The district anticipates that barring a change in the state’s priorities the district will continue to cut positions and provide reduced services.

• The rapid increase in the cost of liability and health insurance coverage. Competitive compensation packages for the staff. “We are currently above the state requirement for both certified and classified staff compensation offerings. Mandatory certified staff raises will lead to salary compression,” he said.

He left the budget discussion with the board with a sobering thought for the policymakers. As the district deals with tighter state finances and further attempts to erode the local property tax base, there are only two things that can be cut in a substantial manner.

“People and programs,” the superintendent said.