The Tamalpais Union High School District has adopted a $124.2 million general fund budget for 2025-26 that indicates a need for about $2 million in cutbacks next fiscal year.

Corbett Elsen, an assistant superintendent, said the budget is not in an immediate crisis. But expenses for 2025-26 are exceeding revenues by $652,000, and the district projects deficits of $1.8 million for the 2026-27 fiscal year and $1.7 million for 2027-28.

“The biggest factor in our deficits is the loss of property tax revenue,” Elsen told trustees at their meeting on Tuesday. “We need to make sure we rightsize the budget with at least $1.8 million in reductions early next year.”

The district will receive about $89.2 million in property taxes for 2025-26, up $226,000 over this fiscal year. In 2026-27, however, the revenue growth is projected to decline by $618,000, followed by a $1.2 million decrease in 2027-28 and a $1.7 million decline in 2028-29, Elsen said.

School districts in California have until March 15 to issue layoff warning notices, also called pink slips, for the next school year. The notices can be rescinded later if things change, but otherwise they become final by May 15.

Elsen said he would meet with union leaders and other staff this fall to create a plan for potential cutbacks. He said the amount of reductions could be as high as $2.2 million if the federal government cuts back on funding for various programs.

“There’s a high level of uncertainty locally, statewide and nationally,” Elsen said. “We need to make sure our reserves are set.”

Housing values have fallen in some of the district’s municipalities, Elsen said. Since June 2022, Mill Valley has had a 10.5% home price depreciation; Larkspur, a 9.2% decrease; and Belvedere, a 9.2% depreciation. Countywide, there has been an 8.6% home price depreciation, according to a chart Elsen presented based on data from Zillow.com.

“I just want to clarify that these are homes turning over, this is not our tax base, correct?” trustee Emily Uhlhorn said.

“Correct,” Elsen said. “These are not a decrease in our property tax revenue — that shows up later.”

Cynthia Roenisch, the board president, said the depreciation in home values could prompt residents to ask that their homes be assessed at lower values.

Elsen agreed, adding that the Marin County assessor’s office announced in May that it has seen a five-fold increase in the number of assessment appeals.

In the state budget, which has a $12 billion shortfall, the district could risk losing funding for universal meals, depending on federal funding, Elsen said. It also might lose proposed one-time funding of $397,000 out of a $500 million discretionary block grant.

Federal funding for special education is also in jeopardy.

“The risk to special education is a significant threat,” Elsen said. “We won’t know for sure until October.”

The district has set a minimum budget reserves level of 17% to cover emergencies, uncertainties and unexpected expenses. According to the three-year projections required by the Marin County Office of Education and the state, the district foresees budget reserves of 17.5% for 2025-26, 15.7% for 2026-27 and 16.9% for 2027-28.

The state has a standard required minimum reserves level of 3% for economic uncertainties, but a number of districts choose to set a higher minimum for greater fiscal stability.

“While districts may choose to set higher reserve levels than the state requires, the MCOE strongly encourages districts to adopt more robust reserves to help sustain programs during times of fiscal uncertainty,” said Breean Brown, an assistant superintendent for the Marin County Office of Education.

Tam Union is what is called a community funded district, also referred to as “basic aid.” That means the district is funded by property taxes. Other school districts, like the Novato Unified School District and San Rafael City Schools, are funded by state per-student subsidies pegged to average daily attendance.

Although the Tam Union budget is not directly affected by attendance, declining enrollment can be a factor. The district cut $1.3 million from the budget in February, at least some of that to reduce staffing because of declining enrollment, Elsen said. District enrollment for next year is projected at 4,322 students, down 5.6% from this year.

The district’s labor unions, the Tamalpais Federation of Teachers and the California School Employees Association classified staff union, have settled contracts through 2026-27, but not beyond that point. The cost of a 1% raise for employees for 2025-26 is $770,000, Elsen said.