Katonah-Lewisboro: A first look at 2026-27 education budget

Actual revenues and expenses, balanced in the current year, alongside two possible scenarios for 2026-27, showing even in the best case scenario, expenses will outstrip revenues. KLSD Graphic

By Jeff Morris

Beginning the school budget season that will continue until May’s referendum, Assistant Superintendent for Business Lisa Herlihy gave an overview on Jan. 15 of conditions that will guide development of the 2026-27 budget.

Under a range of scenarios presented by Herlihy, expenditures are expected to outstrip revenues.

The presentation was intended to give a preview, to the extent possible, of the conditions likely to influence revenue and expenditures in the coming year, and to seek the Board of Education’s guidance during the budget development process before the formal budget presentations begin in February.

Herlihy said that a year ago, the district learned that state aid ratios had changed, going from 9.30% in 2024-25 to 8.41% in 2025-26. That caused the district to quickly pivot and increase its use of reserves and fund balance from 2.57% to 2.79%. State aid is typically not finalized until the state budget is agreed upon in April.

While the tax cap is sometimes assumed to be 2%, Herlihy noted that under state law, 2% is actually the maximum consumer price index number that can be used in its calculation.

“If inflation is lower than 2%, the lower number is used,” she said, “but if inflation is higher than 2%, it’s still capped at 2%.” She showed that for the past three years, the actual CPI was well above 2%. “That means our expenses are growing at a far greater rate than 2%, but that does not allow us to keep up with our revenues” which are not staying in track with the rate of inflation.

An early estimate of what the budget might be, using currently projected numbers, if the district went to the tax cap, shows a budget total of $131,569,954, up from $127,410,469 in 2025-26 — a budget increase of $4,159,485, or 3.8%. Those numbers are based on the maximum allowable tax levy and all other revenues remaining flat.

Herlihy reviewed major expenditures, which as usual include salaries, benefits and debt, with health insurance and retirement system costs being most significant components of benefits. She said if recent patterns continue, health insurance expenses could increase by approximately $2.4 million.

Presenting two possible scenarios — best case and worst case — for revenues vs. expenses in the 2026-27 year, Herlihy pointed out that even in the best case scenario, expenses still exceed revenues. 

Expenses are “driven primarily by benefits, insurance, retirement and contractual obligations, which are set and cannot be changed. The district does not control many of these fast growing costs,” she said, noting that even under the best case assumption, expenses exceed revenues by approximately $1.37 million.

Under the more conservative assumption, with lower revenues and higher than expected expenses, there is a significant structural gap of approximately $6.7 million.

“While we always hope for the best case outcomes, we must be prepared for less favorable conditions,” Herlihy said. “The scenarios that we have run to date, looking at rollover scenarios and looking at other scenarios, the expenses do exceed anticipated revenues.”

Trustee Marjorie Schiff asked if there is anything that can be done to come in closer to the best case. 

“As the finance committee has been looking at and as we’ve been keeping a close eye on,” replied Herlihy, “is looking at our staffing, looking at our sections, as well as class size, of course keeping them favorable, but being cognizant of delivering a balanced budget.”

Superintendent Ray Blanch added their approach is to “stay as far away as we can from the classroom proper.” He said the reality is that whatever that gap ends up being, even in the best case scenario they know they have to reduce expenditures. 

“We will try to protect and preserve the classroom proper as much as we can,” he said, noting that last year, when there was a loss of $1.1 million from the state at the last minute, they cut one of five instructional coaches. 

In response to a question about a comment made by Gov. Kathy Hochul saying some of the more affluent school districts have an abundance of reserves, and asking whether KLSD is one of those, Blanch was clear. 

“No,” he said, laughing. “We are not in that situation. There are a few of those but they are far and few between; especially over the last couple of years they’ve had to access those funds.”

Switching gears, Herlihy said there will be a bond referendum on the May ballot for a Lewisboro Elementary School renovation to create a Universal Pre-Kindergarten center. Another proposition that will appear on the ballot, Herlihy said, is seeking voter approval to use capital reserve funds for athletic updates. That transfer will have no impact on the budget.

The upcoming budget meeting dates include a non-instructional budget overview on Feb. 12; instructional budget overview on Feb. 26; additional board reviews as needed on March 12 and 19; possible adoption of the budget on March 26; and a public hearing on May 6. The budget vote will be on May 19.