The Santa Monica-Malibu Unified School District is refining how it forecasts its year-end finances, replacing historical approximations with a more rigorous, data-driven methodology that officials say will produce a sharper picture of where the district will close the fiscal year.
The shift was outlined in the district's 2025-2026 Third Budget Revision, which the Board of Education reviewed during its regular meeting May 19. The revision provides an overview of the district's financial position as of April 30 and is part of its routine financial review and annual budget reporting cycle.
"This year, we are taking a more rigorous, data-driven approach to our year-end projections — moving away from historical approximations and toward a more sophisticated methodology that produces a more precise picture of where we will end the financial year," said Gerardo Cruz, SMMUSD assistant superintendent of business services and chief financial officer.
Cruz said the refined methodology is intended to reduce uncertainty and improve how the district allocates its resources.
"A more accurate forecast means fewer year-end surprises, reduced instances of unspent funds and greater confidence in the numbers driving our determinations," Cruz said. "When projections are grounded in this revised and sound methodology, we can make more intentional, timely resource decisions; ultimately directing dollars more efficiently on behalf of our students and staff."
The Third Budget Revision follows the second interim budget special meeting held March 11 and features a thorough breakdown on the variance between the two periods. To produce the revision, district staff reviewed revenues and expenditures against projected figures, adjusted revenue lines for any changes in funding, evaluated how much allocated budget remains unspent and balanced funds before the fiscal year concludes June 30.
For the 2025-2026 fiscal year, the district projects approximately $153.2 million in total general fund revenue, a variance of $72,151 from the second interim budget. The revenue projections stem from stable funding sources, including local property tax, parcel tax revenue and community partnerships that help sustain programs across Santa Monica and Malibu schools.
Total unrestricted general fund expenditures decreased from $163.8 million to $160.1 million, providing a cost savings of $3.7 million. The variance is the result of a decrease in employee salaries and benefits for vacancies that have not been filled, partially offset by an increase in nonpublic agency contracts, additional special education contribution and books and supplies.
Total restricted general fund expenditures increased from $78.9 million to $79.7 million, a difference of $860,729. That change resulted from an increase in local revenue, a decrease in state revenue and an increase to the local general fund contribution to special education.
Superintendent Dr. Antonio Shelton emphasized that the revised figures do not signal reductions to district operations.
"It is important to note that the adjustments reflected in this report are not budget cuts — they are simply a more accurate accounting of expenses that we do not anticipate materializing before the close of the fiscal year," Shelton said. "No programs or positions are being reduced — we are simply right-sizing our projections to reflect reality. This approach strengthens our credibility with the Board and the community by demonstrating fiscal discipline and transparency."
In addition to providing an overview of the district's financial position, the revision analyzes the impact on multi-year projections of the general fund for the current fiscal year and the next two fiscal years. The district continues to maintain the state-required minimum reserve of 3% for economic uncertainties.
The district self-certified a positive certification for the revision and confirmed that it will meet its obligations during the current fiscal year and the next two fiscal years. Based on the multi-year projections, the district is expected to maintain a good financial position over the next several fiscal years, with an expectation that operational costs, including employee health and welfare benefits, will continue to increase each year.
District leaders noted that there is a reserve for future deficit spending and a reserve for up to two months of general fund expenditures. The district's fund balance includes restricted funds, such as the state-mandated reserve and the board-approved two-month reserve policy, which are not considered a surplus because they are set aside to ensure financial stability and cover unexpected emergencies.
District staff will continue to monitor expenditure trends and identify cost-saving measures as part of its strategy to maintain fiscal stability and refine the ongoing budget development process.
As part of its commitment to fiscal transparency, the Board of Education and community members will continue to receive updates from district staff. The upcoming budget reporting cycle updates include the Fourth Budget Revision and Estimated Actuals in June, followed by the Unaudited Actuals in September.