December 18, 2025 - AAPS Budget Update
Ann Arbor Public Schools Prepares December Budget Amendment, Emphasizing Transparency, Oversight, and Long-Term Stability
Last night, the Ann Arbor Public Schools (AAPS) presented a routine, planned budget amendment at its December 17 Board of Education meeting, reflecting updated enrollment data and finalized details from the State of Michigan’s 2025–2026 K-12 education budget. This amendment aligns with fund balance projections shared publicly when the district adopted its budget in June 2025, and demonstrates continued fiscal oversight during a period of state-level funding uncertainty.
The December amendment reflects an ending-year projected fund balance of 5.7%, consistent with the original budget presented earlier this year in June, 2025. The recently released independent audit confirmed that the district ended the 2024–2025 fiscal year with a 7.17% fund balance, a significant improvement from just 2.2% two years ago.
State Funding Challenges and Budget Adjustments
The district continues to manage the effects of an unusually delayed state budget. Although Michigan’s budget was due June 30, it was not finalized until October 7, 2025. Final student enrollment counts and special education funding determinations were also completed in the late Fall.
In November, we presented a budget update focused on revenue assumptions. Now that we have comprehensive information on state aid, enrollment and expenditures, last night we presented a mid-year budget amendment.
In summary, the budget amendment reflects a higher starting fund balance than projected, a reduction in expected revenues and a reduction in expenses. Combined, these leave our projected fund balance at the end of the year essentially the same as when the budget was publicly presented and approved in June 2025. The full amendment presentation can be viewed here.
Explaining Fund Balance
The fund balance serves as a “savings account” for AAPS, helping the district to adjust to fluctuations in revenues and expenditures. There is currently some incorrect rhetoric suggesting a “deficit” in the fund balance. This is not the case. It is natural for the fund balance to increase or decrease month-to-month, as reflected in the budget monitoring reports that are publicly presented each month.
As an example, some months there are three pay periods instead of two, which increases expenditures for those months compared to the typical month. During these months, the fund balance drops. On the revenue side, local tax collections peak a couple of times a year. During those months, revenue increases significantly, and the fund balance goes up. In short, the fund balance provides the district with the funds necessary to meet the typical ebb and flow of expenses and revenues.
Progress Recognized by State Treasury
In early December 2025, the Michigan Department of Treasury released AAPS earlier than anticipated from its Early Warning Potential Fiscal Distress monthly reporting process. This decision followed the Michigan Department of Treasury conducting a comprehensive review of the district’s budget, budgetary assumptions, audit, enrollment, and multi-year financial trends.
The district had been required to submit monthly financial reports after being placed on the Early Warning list in 2023, when the fund balance fell to nearly 2%. Treasury cited improved fiscal responsibility, avoidance of deficit status, and strengthened financial controls as reasons they recently released the district from monthly financial oversight.
While we are glad to be released from the potential fiscal stress list, it is essential to continue to stabilize the district’s finances. To do so, maintaining a healthy fund balance is necessary for the district's short and long term financial stability. The Michigan Department of Treasury will continue to monitor the district’s financial health to ensure continued stability. AAPS Board of Education policy requires us to maintain a fund balance of 8% of expenditures for the fiscal year ending June 30, 2026. The state average fund balance is 22%
Employees, Bargaining, and Fiscal Responsibility
We care deeply about our teachers, staff and leaders and do not take them for granted. We want to be able to provide competitive wages that help retain and attract high-quality educators in the Ann Arbor Public Schools, while at the same time continuing the process of ensuring long-term financial health.
This year, the district provided salary schedule steps for all employee groups except central office leadership. For those employees eligible for steps, this represented a 4% - 7% increase in compensation. When our health care providers increased Health insurance premiums by approximately 18%, all staff were offered lower-cost plan options to help mitigate the impact. AAPS continues to negotiate with employee groups in good faith.
Looking Ahead
The district remains in a period of careful rebuilding and diligent monitoring of the budget and district operations after the 2023 budget challenges that required significant reductions. We will continue to provide publicly shared budget information. This includes the monitoring reports presented to the board of education and future budget amendments.