After two years of budget cuts, including closing Hills Elementary School, Iowa City schools’ ‘not in a cutting mode’

IOWA CITY — After more than two years of budget reductions — which included closing an elementary school in Hills — the Iowa City Community School District is “not in a cutting mode” this fiscal year.

The district is “not in a growth mode either” as it is projected to see a steady decrease in enrollment over the next decade tied to a decline in area birth rates, said Adam Kurth, chief financial officer of the district.

But with several facility projects completed, the district will see a large reduction in expenditures in fiscal 2026 year, which begins July 1 and ends June 30, 2026.

A public hearing on the proposed budget will be held at 6 p.m. Tuesday at the Educational Services Center, 1725 N. Dodge St., Iowa City.

The proposed fiscal 2026 year budget lays out a total $279 million plan, a decline from $319 million this fiscal year.

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New projects like the Center for Innovation — a $2.1 million investment into an immersive career exploration program — are small expenses for the district compared to projects completed this fiscal year. For example, renovating and constructing additions on to Iowa City’s three middle schools to expand it to sixth-graders cost up to $20 million each, Kurth said.

Under the proposed budget, property owners in the district would pay a proposed levy rate of $16.10 per $1,000 in taxable valuation, a decrease of about 72 cents from the current property tax rate.

For a homeowner with a $200,000 home, the property tax bill for the school district would be $1,540 per year, a decrease of about $1.50 a month.

The lower levy rate is in part because of a decline in the district’s management fund levy, which was leveraged to fund the district’s “aggressive” early retirement initiative a few years ago, Kurth said. The management fund will see about a $4.7 million decline down to $8.2 million.

The district also saw an increase of about 172 students this year, creating more revenue for the district this fall through State Supplemental Aid — state funding provided to public schools each year, based on a percentage of the state's cost per pupil.

In Iowa, State Supplemental Aid primarily flows into the general fund of school districts, 86 percent of which in Iowa City schools pays staff salaries and benefits. Enrollment is the driving factor determining how much State Supplemental Aid a district receives each year.

State aid runs a fiscal year behind. This year’s certified enrollment in Iowa City schools kindergarten through 12th grade is 14,551 students, an increase of 172 students from the previous year, Kurth said.

State Supplemental Aid will increase 2 percent next school year, a $162 increase per student to $7,988.

Kurth said the low rate of increase for State Supplemental Aid is going to create a “challenging situation.”

“The reality for us in a lot of districts is we implement substantial budget reductions, underspending our new money,” Kurth said. That way, even with a low rate of increase in State Supplemental Aid, the district can increase its unspent balance.

Kurth said he’s “really worried” as the country faces the possibility of continued inflation.

State Supplemental Aid “trails inflation year after year,” Kurth said.

“We’ve seen salaries and wages in other sectors rise dramatically” to keep up with consumer prices, Kurth said. “It puts a continual pressure on us to pay our employees in a way that is reasonable and can attract new employees and maintain current employees in the face of rising consumer prices.”

“One advantage to the fact that our funding lags our enrollment is that it gives us a year to adjust to whatever changes happen,” Kurth said.

Kurth said the district is expected to see a decline of almost 50 students enrolled for the 2025-26 school year.

“We have seen historical enrollment be a little more resilient than birth rates. Personally, part of me is hopeful we don’t actually realize these declines. But it does send a very clear message to us we shouldn’t be forecasting substantial growth,” Kurth said.

Some of Iowa City’s resiliency in enrollment is because of families moving into the district and students open enrolling into the district from nearby schools, Kurth said.

The years spent in a budget reduction allowed the district to grow its unspent balance — which one year was in the negatives — and is expected to reach $7 million by the end of this fiscal year, which ends June 30, Kurth said. It will “continue to show growth in coming years,” he said.

Comments: (319) 398-8411; grace.king@thegazette.com