It has been a challenging season for public school funding.

At the June 16 meeting, the Mexico School District Board of Education approved the fiscal year 2026-27 budget.

This year’s budget calls for $32.4 million in scheduled operating expenditures — 56.8% will be spent on salaries, 19.4% on benefits, 12.4% on purchased services and 11.4% on supplies. It also outlines $5,760,300 in scheduled capital expenditures. The budget will support increased salaries for district teachers and teachers of record, and aligns with other Comprehensive School Improvement Plan Goals including lowering the fund balance.

According to the superintendent’s report, Mexico School District’s expenses totaled $27 million, which is 87% of the budget, at the end of May. After June, July and August payrolls are complete, the district will likely end the fiscal year with a smaller deficit than originally called for in the FY 26 budget, which Superintendent. Troy Lenz estimated was around $2 million.

“I think we’ll probably be around $800,000,” he said. “That depends on when we receive some federal revenues.”

In FY26, revenues totaled $30,191,729, which is 101% of budget revenues and more than Lentz said he originally anticipated. He added that the operating fund balance could be below 40% as the district enters FY 27.

According to district policy, the fund balances should be between 20% and 30% — the way to achieve that is intentional deficit spending.

On Feb. 9, the district hosted “Let’s Talk Finance” night where community members were asked to weigh in on how the district would spend its money going forward. Participants’ responses to a questionnaire indicated that salaries and benefits should be the district’s main priority, and there was support for deficit spending.

“Our district has healthy reserves, but you can’t deficit spend forever,” Lentz said. “Somebody has to make some choices along the way that are going to balance that budget and we’ll have to make choices to slow the curve in the short term because the state budget doesn’t look like it’s going to be any better next year than this year.”

More than half of Mexico School District’s operating funds come from local and county revenues while 36.5% comes from the state and 11% comes from federal funding.

Missouri’s public school funding model is largely dependent on assessed property values — more assistance is given to communities with lower property values because, in theory, communities with higher property values should be enough to make up the difference through property taxes.

“There’s such a huge gap between the assessed value of homes and the actual value of homes,” Lentz said. “Nobody’s really assessing houses at their actual value, so that suppresses what the district gets from local revenue. That’s certainly the case here in Mexico.”

In May, the Missouri General Assembly passed a $48.7 billion operating budget that includes $8.43 billion for elementary and secondary education. Lawmakers’ decision to not increase K-12 funding means revenue will fall approximately $190 million short of what the Department of Elementary and Secondary Education requested based on its foundation formula.

“It would be good for the state leadership to find solutions to the school funding shortfall,” Lentz said. “Hopefully we’re not in a permanent season of declining revenues.”

Since 80% of the district’s spending is on payroll, Lentz said the only way for the district to really impact expenditures is to shrink payroll, but it would like to avoid cutting positions and impacting jobs. He added that due to shrinking enrollment, the district may be able to reduce spending by simply not filling positions of staff who leave the district, but at this point, staff is already stretched thin.

“The tradition in our culture has been to make sure that the kids have better than what we had,” Lentz said. “There’s always a push to try to take care of the next generation.”