LINN — Linn R-2 Superintendent Bob James painted a realistic picture of the district’s financial future during the June 18 board meeting, warning that while the district remains on stable footing, the next several years will require careful planning, disciplined spending, and difficult decisions.

“It’s going to be tough for the next two to three years,” James told the board. “Next year is going to be very tight, and I believe 2027-28 is going to be more tight. I think we’re going to drop back and wish we had the finances that we’ll have in 2026-27. We can survive it. We’ll keep focusing on improving what we’re doing in the classroom.”

The board later approved the district’s proposed FY 2027 budget, which James said was intentionally built using conservative assumptions because of continued uncertainty surrounding state funding. “We budget for our worst-case scenario,” he said.

Using that approach, James projects ending the 2026-27 fiscal year with a 27.43% unrestricted operating fund balance, a decline of approximately 1.9% from where the district is expected to finish the current year. James emphasized that the projection assumes a funding level roughly $200 per student below what the state has promised, while also assuming every budgeted position is filled, every stipend is paid, and every budgeted expenditure occurs. “If I’m really wrong, we end up with about a flush budget,” James said. “But I’m trying to be conservative.”

Even reaching that projected fund balance requires significant reductions already built into the budget.

“It is very important for you guys to understand that the 1.9% slide is with us cutting an elementary teacher, cutting a PE teacher, cutting a paraprofessional, cutting an aide, reducing instructional budgets by 10%, and activity budgets by 15%,” James said.

The superintendent added that administrators will continue looking for savings throughout the year by delaying projects whenever possible.

“We’re going to continue to be conservative,” he said. “We will not do any special projects.”

That includes evaluating maintenance contracts and determining what work can safely be postponed. James acknowledged that deferred maintenance always carries risk because delaying repairs can eventually lead to equipment failures, but he noted the district recently replaced much of its HVAC equipment through the bond-funded construction project, providing some flexibility in the short term.

State funding remains the district’s largest concern.

James said the budget assumes the state’s foundation formula will remain at $6,760 per student. If funding instead reaches the higher level currently under discussion, the district’s financial outlook would improve modestly. Likewise, increases in assessed valuation could provide additional revenue beyond current projections.

However, James expressed concern that future state budgets could move in the opposite direction. “I wouldn’t be surprised if SAT came in at $6,760 this year,” he said of the State Adequacy Target. “We looked at $6,500 for the year after.”

James explained that the difference would indicate an approximate $250,000 shortfall for this year and a $401,000 shortage the next.

He noted that repeated reductions over multiple years could create an $800,000 revenue gap, even after the district has already taken steps to reduce expenses.

James also discussed broader legislative concerns, saying school districts are facing increased financial pressure as mandated costs continue to rise while revenue growth becomes less certain. “They’re cutting us off at both ends,” he said, referring to reduced state support combined with proposals limiting local districts’ ability to generate additional operating revenue.

Despite those concerns, James said the district is committed to protecting classroom instruction while making prudent financial decisions. “We’re going to have to be crafty,” he said.

James acknowledged future reductions could become more difficult if financial conditions fail to improve.

“If the state budget doesn’t rebound,” he noted, “those are the types of cuts that we’ll be looking at — not in 2026-27, but in 2027-28.”

James also criticized the format of the budget reports generated by the district’s financial software, saying they combine multiple funds in ways that can create a misleading impression of the district’s financial position.

Instead, he encouraged board members to focus on the projected 27.43% operating fund balance because it provides the clearest picture of the district’s financial health. He said he plans to work with the software vendor to develop reports that better reflect the information the board needs to make decisions.

The proposed budget projects $9.36 million in revenue and approximately $16 million in expenditures. Much of the apparent increase in spending reflects bond-funded capital construction projects that flow through separate funds and do not affect the district’s operating fund balance in the same way as day-to-day educational expenses.

As part of year-end financial housekeeping, the board also reviewed the annual amendment to actual revenues and expenditures, a routine process that aligns the budget with actual financial activity before the close of the fiscal year. District documents note the amendment does not represent a change in financial priorities but ensures compliance with Missouri budget requirements and maintains accurate financial reporting.

Board members also approved the routine annual transfer from Fund 1 to Fund 2. James explained that because teacher salary dollars are restricted once placed into Fund 2, the district keeps as much operational flexibility as possible by holding eligible funds in Fund 1 throughout the year before making an accounting transfer to balance Fund 2 at year-end. District officials emphasized the transfer is a standard accounting practice and does not represent additional spending or a change in the district’s overall financial position.