Gasconade County R-2 Assistant Superintendent Dr. Staci Johnson presented the board of education with a grim view of the future financials between the failed no-tax-increase bond issue and state and federal funding cuts.

“I want to take you through a little bit of information for you to think about tonight, and then kind of talk about the timeline for when some decisions may need to be made, because it’s relatively quickly on a couple of options,” Johnson said. “We’re about to enter a different middle landscape for Missouri public school funding. The next three years are going to be really tight financially from the state’s state funding model.”

Looking at the local level, Johnson began to list the perfect storm of budgeting shortfalls that are expected over the next year, including the loss of the 67 cent debt service levy for building maintenance and capital improvements. The district’s petition to extend the 67 cent per $100 of assessed valuation on property taxes failed in April after receiving a 53 percent majority vote instead of the required 57.14 percent it needed to pass.

“For the 2026-27 school year, we will need to roll down the debt service levy to 15 cents or less, depending on the end of June fund balance and interest on repayments,” Johnson said. “This happens at the August board meeting during our tax hearing.”

The capital fund has a $2,727,880.84 fund balance with outstanding projects, including:

• Middle school gym HVAC, bleachers, painting, floor (partially covered by insurance $94,000).

• High school gym floor (partially covered by insurance).

• Summer maintenance rotations (parking lots, brick sealing, tuck pointing, busses, roofs).

• Stadium lights.

“Every year, we transfer as much as we are allowed from operations to capital to cover summer maintenance projects,” Johnson said. “If we moved over less, we would need to defer maintenance.”

The district’s operational fund (like a savings account) is projected to be at a healthy 40 percent fund balance at the end of the 2025-26 school year.

“If expenditures continue to rise at the current rate (3.61 percent), and revenue flattens or declines, our reserve balance will drop,” Johnson said. “I want to give you an update on our debt service so as you guys are well aware, but we did not get the number votes needed in order to pass the debt service levy extension. This coming August, we will have to roll down the debt service levy (from 67 cents) to 15 cents or less. We do not have a choice.”

The new debt service levy will be determined by how much outstanding debt the district has in June. A calculation sheet will be provided to show how much the district owes and how much may be collected.

“The reason why we’re going to have to roll it back is because we don’t have another bond that’s extending that,” Johnson said. “We can only collect what we need to pay off the current bond, plus a little bit extra, as according to law, right? You have to have a little bit of reserve in there.”

The district will lose at least 52 cents per $100 of assessed valuation that would have gone toward building improvements.”

On the state and federal side, a decrease in funding continues to add to the big picture.

“There’s a lot of budget pressure at the state level, because the state is in a shortfall,” she said. “If you want to know what it really comes down to, the lottery and gambling money is not coming in at the rate that they budgeted for and that they anticipated it would. Multiple, hundreds of millions of dollars. So there’s a big shortfall from the state level, from the local level. Obviously, we’ve been talking about property taxes a lot. We’ve got Senate Bill three that just passed in this last election to discuss. There are several policy changes that are changing the amount of local revenue that we’re getting.”

All funding methods impact the bottom dollar at the district level.

“The difficult thing about school budgeting is all of these things are happening, and they’re unknowns, but we have to set our budget by the end of June for the next year,” Johnson said. “All the ESSER relief is set to run out or has run out. There are other federal constraints,” she said. “And then, of course, just like anybody in our community, our operating costs are continuing to rise. So insurance is going up. We’re wanting to stay competitive with salaries. After this year, the state will let us know how much we have to increase our salaries.”

Several pressures are converging at once, including:

• The state budget is uncertain, in turn, making the formula for funding education less predictable.

• Local revenue is uncertain, attributed to property tax fatigue and policy changes, which make local revenue growth hard to rely on.

• Federal dollars from the temporary relief that helped stabilize districts after COVID are exhausted.

• Operating costs continue to rise with insurance, salaries, contracted services, and inflation, increasing the cost of doing business.

The state funding shortfalls also extend to:

Transportation: The district expects to receive a shortfall of $56,960 in transportation reimbursement for the 2025-26 school year, and another $104,961 shortfall in the 2026-27 school year.

The state considers fully funding the transportation formula to be 75 percent of the overall cost. The district currently receives 93 percent of the expected 75 percent reimbursement. This is a problem every school district in Missouri is experiencing.

“So we are already paying 25 percent,” Johnson said. “Regardless, the state has come back and said, because we don’t have the money in the account to pay you, we are not going to appropriate the full amount. These are the real numbers; this year, we are not going to receive $56,000 of what the state told us they were going to give us at the beginning of the school year. Next year, we are not going to receive $104,000, and that’s real as well. So those are real numbers that they’ve sent out to us.”

Johnson said that the education committees are requesting more money from the state than districts received last year, adding to the expected deficit.

State Adequacy Target shortfalls included negative $454,085 in the 2025-26 school year and another negative $303,076 in the 2026-27 school year.

“That’s the amount of money you’re getting per student in your district from the state net,” Johnson said about the State Adequacy Target. “This current year that we are currently sitting in, we are going to be shorted almost a half a million dollars. Next year, it will be an additional $300,000; so in total for the 2026-27 school year, we are looking at a $700,000 shortfall.”

Property tax freezes will result in further shortfalls with the passage of bills like SB190, which provides eligible seniors with tax relief at the county level, and is estimated to create a negative $274,805 in revenue to the district. SB3, which focuses on capping property taxes for everyone, will result in a decrease in available funding, though how much and when is unknown. The passage of the bill is currently being challenged.

The district will also be required to increase teachers’ salaries and benefits by state legislation. The district paid out $16,611,628 in longevity stipends, pay increases, staffing needs and other expenditures in the 2025-26 school year and is expected to pay out $17,211,628 in the 2026-27 school year.

“The district hasn’t added any new teaching positions,” said Superintendent Dr. Jeri Kay Hardy.

“If fact we are going down by one, unless the ELA bill passes, and then we will need to add another intervention classroom,” Hardy said.

Johnson said the district can still operate next year, despite the shortfalls, but they need to be thinking about cuts.

“The reason to share these numbers is because I don’t want you to think that we can’t afford to operate next year, we’re going to be okay,” she said. “I’m going to give you some overarching scenarios to think about, but the reality is we’re spending more and less is coming in. At some point there’s got to be a change, or we’re not going to be sustainable.”

The capital projects fund will pay for the outstanding projects.

“Every year, we transfer as much as we can into capital from our operational, you only do it once a year. It’s a certain percentage that’s locked by the state, and we do that so that we can do capital projects,” Johnson said. “The reality is, there have been some that have said, ‘Okay, well, like one year, just transfer $10 million and do a really big project.’ It’s not legal to do that. You can’t transfer that much, and if you did, let’s say you transferred $4 million, you could do a $4 million project, but then you couldn’t do any roofs, parking lots, ceilings, tuck pointing, HVAC, any of the stuff you plan for. That’s kind of where the push and pull is on capital projects.”

She said the district can make the transfer again this year, because there are funds to cover it, but they will need to begin considering the cuts.

“Based on current legislation and based on if you have to freeze your salary schedules, you may be able to freeze your salary schedules, but you can’t freeze the increase that’s mandated by the state, so you’re still going to have to make those increases with less money,” Hardy said. “And so that’s something that we always have to look at. And this legislative session has been really detrimental.”

Hardy said it sounds bad.

“Because, I mean, I know this sounds like a lot of doom and gloom right now, because right now, that’s what we’re hearing,” she said.

The district’s operational fund is healthy now, but Johnson said it will continue to spend down every year the go into the deficit.

“Unless you infuse more revenue or less spending,” Johnson said. “Remember the board has said that 25 percent is around where we’re comfortable being. If you go below a certain percent, the state comes in and starts to take notice. If you go above a certain percent, the state comes in and starts take notice.”

Johnson noted the levy decisions to consider are that the 15 cents or less debt service levy will roll down in August without an extension. The board could voluntarily roll down the debt and ask voters to approve moving some or all of the 67 cents to operations with a simple majority vote on the August 2026 ballot. Neighboring school districts, such as Maries R-2, are funded similarly.

The board could roll down the debt and maintain only the operating levy of $3.18 for the 2026-27 school year.

Forward, any bond the district requests will need a 4/7 vote to add to the operating levy or create a new debt service levy.

The board scheduled a budget workshop that is open to the public at 5:30 p.m. on May 6 at the Administration Building to discuss next steps for the district’s financial health.