"This is a Horrible Predicament:" Fredericksburg City Council and School Board Try to Deal with Budget Uncertainty
"It is very alarming sitting up here with you guys," Vice Mayor Charlie Frye said.
By Adele Uphaus
MANAGING EDITOR AND CORRESPONDENT
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There are no federal funding streams that Fredericksburg City Public Schools does not consider to be at some level of risk, the division’s finance director said this week.
“We do believe that most [federal grants] have some level of risk at this point,” Jennifer Brody told School Board and City Council members at a joint meeting of the two bodies on Tuesday.
Brody said the division this week received six months-worth of funding for Head Start, the federally supported preschool program for children from low income families. This will carry the program through September, the end of the federal fiscal year.
In a normal year, Brody said, she wouldn’t worry about receiving funding for the second half of the grant cycle, September 2025 through April 2026. But this year, with the layers of uncertainty regarding federally funded programs, she is worried.
“We do not have enough [Head Start] funding for next fiscal year,” Brody said. “We believe our Medicaid reimbursements are at significant risk. We have concerns about our school nutrition program.”
Three out of the five city schools are Title 1 schools, where at least 40% of enrolled children come from low-income families. These schools are entitled to receive extra support from the U.S. Department of Education under the Elementary and Secondary Education Act.
But because so many families are low income, any decision to raise taxes to increase revenues to support city services is very difficult, said Charlie Frye, Fredericksburg’s Vice Mayor and Ward 4 representative to City Council.
City Manager Tim Baroody’s proposed budget, which recommends a 3-cent increase to the real estate tax rate, would provide $37.2 million to the school division—but there is still a $1.5 million gap between anticipated revenues and expenses in the School Board’s approved $65.2 million operating budget for fiscal year 2026.
The gap does not take into account the potential loss of any federal funds, which total about $10.7 million for fiscal year 2026. Federal funding is not included in the school division’s operating budget, but is part of the grants and special revenue fund.
The schools’ proposed operating budget includes $2.1 million to provide a 5% salary increase for staff; $360,000 for six new kindergarten instructional assistants; $220,000 for a division-wide elementary behavioral support classroom; an 11.8% health insurance cost increase; and $2.46 million for the new Gladys West Elementary School.
City Council is advertising a 6-cent increase to the real estate tax rate, Mayor Kerry Devine said Monday. The final adopted tax rate can be at or below that amount, but not above it. Each penny brings in an additional $585,000 in revenue, according to city finance staff.
Finance director Amanda Six detailed the city’s financial pressures, noting that the city relies more heavily on “consumer-driven revenues” from sales, meals, and lodging taxes than surrounding localities do.
“So when we head into the next year, we do need to pay closer attention to consumer driven revenues, which tend to change on the front end of an economic change,” Six said. “We know there are a lot of behaviors that may be changing just because of uncertainty and consumer confidence, but also, we have a close proximity to Washington, D.C.”
Six also pointed out that 24% of the city’s assessed real estate value is tax-exempt, which means there’s “a large amount of dollars that are not coming in.”
Three hundred and eighty-eight parcels in the city, valued at $1.82 billion, are tax-exempt, which equals a loss of $14 million in property taxes, according to a chart shown at Tuesday’s meeting.
And the city is looking at an increase in its required funding for the Rappahannock Regional Jail and Juvenile Detention Center.
Because of economic uncertainty, city staff recommend appropriating 90% of the budget for next fiscal year, and holding 10%—or about $12 million of the city’s budget and $3 million of the schools’ budget—in reserve.
“So we would have to keep in mind that we are not allowed to spend over a certain amount, and if it’s all going crazy and Council says we’re in free fall, then we’d all be looking at midyear adjustments to meet 90%,” explained Mark Whitley, assistant city manager.
Staff will keep a close eye on the sales and meals tax revenues, which come in every month, to determine whether the adjustments are necessary, Whitley said.
“We would have the first quarter results in November to see, are we in free fall, holding steady, or good to go,” he said.
Brody said that for the school division, reserving 10% of the budget would mean starting the school year with a freeze on discretionary spending.
“This is no way to try to build a budget,” Devine said in frustration towards the end of Tuesday’s meeting. “The uncertainty is very frustrating. This is a horrible predicament for us.”
This story has been updated to correct the value of tax-exempt real estate in the city.
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