TUSD’s FY2027 Budget: Where Are the Expense Cuts?
Tucson Unified School District has now published a 495-page FY2027 Budget Book containing extensive detail by fund, school, expenditure category and staffing level.
For months, one of the central questions surrounding TUSD's developing financial problems has been straightforward:
When enrollment and recurring revenue decline, when will recurring operating expenses decline with them?
After reviewing the FY2027 Budget Book, I believe that question becomes even more important.
The Budget Book contains reductions in several areas. But when the numbers are examined more closely—particularly Maintenance & Operations, the new M&O Override, staffing, and school-level spending—the document does not demonstrate the magnitude of recurring expense reduction I would expect from a district confronting a structural financial problem.
That concern is especially significant when viewed alongside TUSD's FY2026 trial balance showing the actual results for FY20265-26. That trial balance reported approximately $325.8 million of M&O revenue against $373.2 million of expenditures—a preliminary operating gap of approximately $47.5 million before transfers.
The $28.8 Million M&O “Reduction” Does Not Tell the Whole Story
At first glance, the Budget Book appears to show a substantial reduction in Maintenance & Operations spending.
TUSD reports:
FY2026 Adjusted Budget | FY2027 Budget | Change | |
M&O | $390.37M | $361.54M | $(28.83)M |
M&O Override | $0 | $44.88M | +$44.88M |
Combined | $390.37M | $406.42M | +$16.05M |
The Budget Book expressly separates $361.5 million of Maintenance & Operations from another $44.9 million of Maintenance & Operations-Override. This is a trick play by TUSD Management!
Consequently, describing FY2027 simply as a $28.8 million reduction in M&O would obscure an important change in funding presentation.
Combine the two operating categories and TUSD has approximately $406.4 million of FY2027 M&O-related budget authority.
That is approximately $16.1 million more than the FY2026 adjusted M&O budget shown in the Budget Book.
The relevant financial question is therefore not: How much did the base M&O line decline?
It is:
How much did TUSD actually reduce its recurring operating cost structure?
The Override Tax Provides $44.9 Million of Additional Operating Resources
The voter-approved M&O Override changes the financial equation substantially.
The FY2027 Budget Book includes $44.88 million in the M&O Override category.
Additional revenue could have relieved financial pressure. But the additional revenue has been spent on additional expense.
TUSD's underlying problem has been that expenditures have not declined sufficiently as enrollment and associated funding have declined. As I have previously discussed, management itself has acknowledged an ongoing structural deficit.
The override therefore creates an important test of financial discipline:
Is the new revenue being used while simultaneously resizing TUSD's recurring cost structure, or is it allowing the District to postpone more difficult expenditure reductions?
The Budget Book does not adequately answer that question.
Districtwide Staffing Barely Declines
Staffing provides another warning sign.
The Budget Book reports:
FY2026 FTE: 6,752.14
FY2027 FTE: 6,722.81
That is a reduction of only: 29.33 FTE, or approximately 0.43%.
The District is therefore budgeting essentially the same overall staffing level as the previous year's adjusted budget.
That is difficult to reconcile with the larger financial picture without additional explanation.
TUSD is dealing with declining enrollment, excess facility capacity, recurring financial pressure and a need to restructure its operations.
Yet total budgeted FTE falls by less than one-half of one percent.
That does not establish that every one of those positions will actually be filled. Nor does the Budget Book alone establish that every FY2026-to-FY2027 FTE comparison is directly comparable; positions may have been reclassified among funds or sites.
But if reclassification explains the numbers, management should provide that reconciliation.
Elementary-School Spending Moves
The elementary-school numbers are even more striking.
TUSD reports:
FY2026 adjusted elementary-school budget: $54.40 million
FY2027 elementary-school budget: $63.07 million
Increase: $8.67 million — approximately 15.9%.
Budgeted elementary-school FTE increases from: 817.75 → 972.38
Increase: 154.63 FTE — approximately 18.9%.
This deserves a detailed explanation as to will this increase the ADM?
The issue becomes particularly significant because TUSD is simultaneously discussing school consolidation and closure because of excess capacity and declining enrollment.
A district should be able to explain how it can have too many seats and too many underutilized facilities while simultaneously budgeting substantially more FTE and expenditures at elementary schools.
There may be a valid accounting or programmatic explanation.
But it needs to be provided.
Look at Some Individual Schools
The pattern appears repeatedly in the Budget Book.
Blenman's budget increases approximately $368,000 and FTE increases 5.34.
Borman increases approximately $348,000 and 7.39 FTE.
Erickson increases approximately $390,000 and 6.36 FTE.
Miller increases approximately $441,000 and 6.44 FTE.
Mission View increases approximately $373,000 and 7.40 FTE.
Borton increases approximately $452,000 and 6.80 FTE, while Davidson increases approximately $460,000 and 7.40 FTE.
These examples do not prove that the spending increases are inappropriate. Some may reflect changes in funding sources, program allocations, compensation, special services or position assignments.
They do demonstrate why a simple claim that TUSD has substantially reduced expenditures needs much closer examination.
TUSD Has Too Much Capacity—But the Budget Has Not Yet Been Resized Accordingly
This is where the Budget Book should be read alongside TUSD's school-reconfiguration analysis.
TUSD has reported that it operates 88 schools, serves approximately 39,180 students, has combined facility utilization of approximately 58%, and has approximately 28,180 excess seats.
Those are extraordinary numbers for an organization attempting to reduce operating costs.
Maintaining excess facilities costs money.
Each additional school can require some combination of administrators, teachers, support personnel, custodians, utilities, maintenance, technology, security, transportation and other expenditures.
Closing schools is difficult.
But keeping substantially underutilized facilities open also has a cost.
If TUSD has approximately 28,000 excess seats, the FY2027 Budget Book should show the beginning of a clear strategy for removing the associated recurring expenses from the organization.
I do not see that strategy demonstrated clearly enough in this budget.
Desegregation Spending Also Deserves Attention
TUSD budgets approximately $63.71 million from the desegregation tax funds in FY2027.
That compares with:
FY2026 adjusted budget: $64.28 million
FY2025 actual: $68.84 million
The FY2027 reduction from the FY2026 adjusted budget is therefore only approximately $569,000, or less than 1%.
Yet budgeted desegregation FTE falls from 904.59 to 815.91, a reduction of approximately 88.68 FTE.
That relationship deserves explanation.
How can approximately 89 budgeted FTE disappear while total spending falls by only about $569,000?
There may be changes in compensation, purchased services, program allocations or other expenditures that explain it. The Budget Book should enable the Board and Audit Committee to identify those factors.
The Real Benchmark Should Be FY2026 Actual Spending
Another problem with evaluating this Budget Book is the comparison column.
Management prominently compares the FY2027 budget against the FY2026 adjusted budget.
But budget authority and actual expenditures are not the same thing.
Our review of the FY2026 trial balance identified approximately $373.2 million of actual M&O expenditures, subject to final AFR reconciliation.
Therefore, the meaningful financial analysis should be:
FY2025 Actual
↓
FY2026 Actual
↓
FY2027 Budget
↓
FY2027 Forecast
The analysis should also normalize expenditures for changes in funding classification.
Otherwise, moving expenditures from base M&O into an M&O Override category can make one line look smaller without demonstrating that the underlying cost disappeared.
The Budget Needs to Be Evaluated Against Enrollment
This issue becomes even more important because TUSD developed the FY2027 budget using an assumption of approximately a 2% decline in Average Daily Membership.
The September ADM information I have reviewed shows the reported ADM measurement declining approximately 4.25% between the July and September measurements. That does not mean TUSD literally lost 4.25% of its students during those two months, nor does a 4.25% ADM movement automatically translate into a 4.25% revenue reduction.
But it does mean the budget assumption needs to be continuously tested against actual enrollment, ADM and then WSC.
The financial chain remains:
Enrollment → ADM → WSC → State Funding → Revenue → Expenditures → Fund Balance → Cash
If the first half of that chain continues declining while expenditures remain relatively fixed, the financial imbalance continues.
TUSD Cannot Revenue Its Way Out of a Cost-Structure Problem Forever
This is the fundamental concern I have with the FY2027 Budget Book.
The M&O Override provides significant new resources.
That is helpful financially.
But new revenue does not eliminate the need to resize an organization whose student population and operating requirements have changed substantially.
The FY2026 trial balance already raises serious questions. My review identified approximately $47.5 million more M&O expenditures than revenues before transfers, approximately $16.1 million transferred into M&O, and a reported negative $26.5 million Cash on Deposit with County Treasurer balance in Fund 001 that requires reconciliation.
Against that background, FY2027 should have been the year for an unmistakable structural reset.
Instead, the Budget Book shows: $44.9 million of new M&O Override resources.
Combined base M&O and M&O Override budget authority of approximately $406.4 million.
Only a 29-FTE reduction districtwide.
Approximately 155 additional budgeted elementary-school FTE compared with the FY2026 adjusted budget.
Approximately $8.7 million more budgeted at elementary schools.
Those numbers require explanation before anyone concludes that TUSD has solved its expenditure problem.
What a Real Expense-Reduction Plan Should Show
The Governing Board should be receiving a separate financial recovery schedule showing, for each major cost-reduction initiative:
FY2026 recurring cost → action taken → positions eliminated → facilities eliminated → FY2027 recurring savings → FY2028 annualized savings.
That schedule should distinguish genuine cost elimination from: fund transfers, expenditure reclassifications, vacant-position reductions, one-time savings, grant expiration, and movement of expenditures between funding sources.
Only then can the Board determine how much of the structural deficit has actually been eliminated.
The $739 Million Total Is Not the Answer
The Budget Book reports a total FY2027 budget of approximately $739.3 million, compared with a FY2026 adjusted budget of approximately $778.0 million—a $38.6 million reduction.
That sounds substantial.
But the total includes federal grants, bonds, debt service, capital, internal-service funds and numerous other activities.
A decline in total budget authority does not necessarily mean TUSD reduced its recurring operating cost structure by $38.6 million.
That is why the discussion must return to the basic question:
How much recurring operating expense has TUSD actually eliminated?
TUSD Needs to Reduce the Cost Structure, Not Just Rearrange the Budget
TUSD has spent years dealing with declining enrollment.
The District now acknowledges excess school capacity.
The Arizona Auditor General has identified significant financial-risk indicators at TUSD, and the District's own financial records show recurring operating pressure. Previous analyses has discussed those warning indicators and the consequences of failing to adjust expenditures as student-generated resources decline.
The FY2027 Budget Book provides much more transparency than the high-level budget information previously available.
That is valuable.
But transparency also allows us to ask better questions.
And the most important question I see in these 495 pages is:
Where are the permanent expense reductions commensurate with TUSD's declining enrollment, excess capacity and deteriorating financial condition?
The $44.9 million override should have bought TUSD something extremely valuable: time.
But it has not accomplished that goal.
What kind of management increases costs when time matters.
Postponing a structural financial problem generally makes the eventual correction more difficult.
The Governing Board and Audit Committee should therefore demand a simple reconciliation:
Show us, in dollars and positions, exactly what recurring costs TUSD has permanently eliminated in FY2027—and demonstrate that those reductions are sufficient to bring recurring expenditures into alignment with sustainable recurring revenues.
Until management can provide that reconciliation, I would not consider the FY2027 Budget Book evidence that TUSD has adequately addressed its underlying expenditure problem.
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