Montgomery County Public Schools (MCPS) plans to implement some hiring and spending restrictions and to use leftover funding to address a projected $5 million deficit in the district’s fiscal year 2025 operating budget, Superintendent Thomas Taylor told the school board Thursday.
“The commitments that I made coming in as your new superintendent was to offer a level of transparency to our financial operations and to make sure that the public was aware of the good, bad and the indifferent,” Taylor said during the board meeting at MCPS headquarters in Rockville. “And this is one of those times where things are not going well.”
The school district has been facing significant budget constraints after receiving roughly $30 million less than the county school board requested after the County Council allotted S3.3 billion in spending for fiscal year 2025, which began July 1.
Taylor said the district is facing a projected deficit of $5,055,620 that is primarily attributed to position salaries costs that are higher than anticipated, particularly relating to instruction and special education. Special education costs also are higher than expected due to contractual services, student placements in nonpublic schools and critical staffing, according to a monthly financial report.
To address the deficit, the district is utilizing its “fund balance” and implementing fiscal restrictions. Taylor explained that a fund balance is a collection of money remaining in accounts across the district at the end of the fiscal year. According to the monthly financial report, the district began fiscal year 2025 on July 1 with a fund balance of $11.8 million, not including interest.
“It seems like this is a big sum of money. It’s not, it’s an alarmingly small fund balance for an organization of this size,” Taylor said.
To maintain special education programs and ensure the district doesn’t go into the red, MCPS is asking the County Council to approve a $17 million supplemental appropriation, $7 million of which will come from “interest earned” on a fiscal year 2024 fund balance that was supposed to be used for employee benefit plans. The remaining $10 million will come from the fiscal year 2025 fund balance.
Taylor is also imposing “hiring and expenditure restrictions” on the district’s central office. Schools are exempt from hiring and expenditure restrictions, according to the monthly report.
According to an internal memo to employees from Taylor and Ivon Alfonso-Windsor, MCPS acting chief financial officer, the fiscal restrictions began Oct. 24 and are expected to remain in place through June 30.
“Under these restrictions, all Central Office hiring will be scrutinized on a case-by-case basis to determine if the position is one that must be filled now or delayed,” according to the monthly financial report. “At the same time, Central Office leaders have been instructed not to overspend their budget accounts and identify expenses that are not essential in order to recognize potential surpluses.”
According to the memo, central office account managers can’t approve expenses that would result in overspending in an account and the central office must submit spending plans that include detailed explanations of the purpose of expenditures. Also, temporary part-time staff can’t work more than the number of hours allocated by funding for their positions.
“We are optimistic that with everyone’s collaboration and follow-through, we can right-size our spending in the Central Office during the remainder of FY 2025, generate savings in certain areas to offset increased spending needs in other areas, and not have to identify additional measures to resolve the fiscal state for FY 2025,” the monthly report stated.
