Cabarrus County Schools’ chief financial officer warned commissioners Monday that the lack of a state budget and other state-driven cost shifts are creating mounting stress and uncertainty for the district.
During a work session briefing to the Cabarrus County Board of Commissioners, CFO Phillip Penn said the district is “in a fundamentally better place” than it was a year ago, with expenses mostly aligning with projections. Cabarrus schools ended last fiscal year with a small fund balance and “essentially no margin for error,” he said. Last school year, the district discovered an $11 million budget deficit created by increased enrollment, a decrease in expected revenue and higher-than-anticipated expenses.
Penn cautioned that several major pressures, most outside the district’s control, will shape the months ahead.
State budget delay challenging for staff and planning
The absence of a state budget remains one of the district’s largest and most immediate barriers.
“We don’t control a lot of our costs,” Penn said. “The salaries are set by the state legislature. Pension costs are set by the state legislature. The healthcare costs are set by the state legislature.”
Penn said the lack of a state budget makes it difficult to plan for salary costs. Raises compound year over year, he told commissioners, so even small adjustments can significantly affect a payroll of more than $200 million. Without state direction on pay, the school district is forced to estimate what this year’s increases might be.
“We’re kind of shooting blind,” Penn said.
Teachers and school employees have not received a raise since July 2024, even as inflation has risen, he said. And beginning in January, the state health plan will shift to a structure that increases premiums, copays, deductibles and prescription drug costs. Penn said out-of-pocket maximums will reach $16,300 for families in the top tier who make at least $90,000 each year. He told commissioners those added costs will make it harder to attract and retain staff.
Cabarrus County Schools also took an unexpected hit in transportation funding after the state relied on 2023–24 ridership instead of current-year numbers, a break from standard practice, Penn said. Because bus traffic increased this year, the district received $700,000 to $800,000 less than anticipated.
The district has frozen certain spending areas and expects the issue to be corrected next year once updated data is used.
EC growth and delayed Medicaid dollars
Costs tied to exceptional children services are also rising.
Penn said the district continues to see growth in its exceptional children population and a higher concentration of student needs.
Cabarrus County Schools does not have enough in-house occupational therapists, physical therapists, audiologists and speech-language pathologists, which forces the district to rely on more expensive contracted services.
“We are required by law to provide these services,” he said.
Medicaid reimbursements, which help offset those costs, have not arrived, Penn said. CCS budgeted $950,000 this year but has received none of it, even though the state owes the district $2 million for services provided up to 28 months ago.
Looking ahead
Penn told commissioners the district should expect higher utility rates, increased routine maintenance expenses, and a major replacement of its aging finance and HR systems. He estimated the technology conversion alone at $300,000 to $400,000.
Capital requests for next year will look similar to this year’s, including Chromebooks, security cameras and paging and intercom upgrades, Penn said.
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