The South Washington County School Board learned Wednesday that declining enrollment and state funding challenges will require $10 million in annual budget adjustments beginning in the 2026-27 school year.

Chris Blackburn, director of business services, presented budget forecasts showing the district could face statutory operating debt by 2028-29 without significant cuts. The projections assume enrollment will decline by approximately 600 students over the next several years, partly due to competition from the new Math and Science Academy charter school.

"Without $10 million worth of adjustments this year to be implemented next year, we would be in statutory operating debt by 2829," Superintendent Julie Nelson said during the workshop meeting. The district would need similar adjustments in subsequent years, totaling $30 million in cuts by 2029.

The financial pressure stems from state funding increases of 2.7% annually while district costs rise faster due to salary negotiations, benefit increases, and inflation. The state's basic formula provides $7,481 per pupil unit for 2025-26, representing about 43-45% of the district's general fund revenue.

Additional challenges include reduced special education transportation reimbursement, dropping from 100% to 95% this year and 90% by 2026-27. The district also faces an estimated $3 million annual decrease in special education aid starting in 2027-28 due to state policy changes. Board members will need to determine specific cuts following completion of the 2024-25 fiscal year audit by the end of October.