The Board has identified $12 million in reductions as the FY27 target to restore structural balance and rebuild fund balance to 15%. The deficit is not a Covid hangover alone — it is the cumulative result of four structural shifts visible in the audited financials. Here is what the Board's own presentations and the audited ACFRs show.
The FY25-FY26 General Fund budget has been amended twice. Each amendment has expanded expenditures and reduced the projected fund balance percentage from the 15.05% originally adopted by the Board in June 2025 to 13.59% under March 2026 Amendment #2.1
The March 17, 2026 Amendment #2 presentation states the targets explicitly: structural balance and a 15% fund balance. To get there, the Board has set a $12 million reduction target for FY27, with cuts spread across four categories: salaries & benefits, purchased services, departmental adjustments, and discretionary spending.1
The Board's January 13, 2026 Budget Planning workshop offers important state-funding context for why the FY26 amendments have been needed:2
The March 17 presentation also documents the Board's formal Budget Reduction Rubric & Scoring system — a six-criteria weighted framework (Impact on Student Learning, Equity Impact, Legal/Compliance Risk, Cost Savings Amount, Feasibility/Timeline, Stakeholder Support) used to rank candidate reductions as Tier 1 (Strong Candidate), Tier 2 (Consider), or Tier 3 (High Risk).1
Areas under Board consideration for reductions:1
Final reduction recommendations are scheduled for the April 2026 Workshop; final RIF targets and FY26-27 budget adoption come at the June 2026 Regular Meeting.1
Cost growth at TSD has been steady and structural, not Covid-shock-and-recover. The FY24 Annual Comprehensive Financial Report — audited by Plante Moran — contains a ten-year statistical section that lets us see the full arc.1
The single cleanest measure is operating cost per student. It grew from $10,924 in FY15 to $15,383 in FY24 — a 40% increase, or 5.5% per year compounding through the second half of the period.1 Enrollment over the same period barely moved net (12,563 → 12,447), but Covid took out a 600-student layer between FY20's peak (13,073) and FY22 (12,519) that hasn't returned.1
Total operating expenditures (governmental funds) grew from $181 million in FY15 to $269 million in FY24 — up $88 million, or 49% over nine years.1 About one-third of that increase happened between FY22 and FY24 alone, the period when the post-Covid Edustaff buildup, MESSA premium inflation, and the MPSERS UAAL stabilization rate all hit at the same time.
The single most consequential line in TSD's budget that very few residents know about: the General Fund subsidizes Special Education by about $9 million a year, and that subsidy has grown $2.7M since FY21.1
Per the Special Education Update presented to the board on October 7, 2025, TSD now spends $34.0M annually on special education programs and services — for 1,367 students with IEPs.1 State and federal sources (the 51c foundation, PA-18 county millage, IDEA flow-through, and Medicaid reimbursement) cover only $25.0M of that.1 The remaining $9.0M comes from operating dollars that would otherwise go to general instruction.1
TSD is not unusual in this. According to a state-commissioned report released in October 2025, Michigan reimburses only 28.6% of district SpEd costs — among the lowest rates in the country.2 Every Michigan district fills the gap from its operating budget. The proposed fix is a six-year transition to a tiered-funding system at an estimated cost of $4.55 billion statewide.2 Until that passes, the $9M annual subsidy in Troy is a feature of the system, not an anomaly.
"The district has the desire and ability to serve students with severe needs in-district with its broad range of supports and services… very few students are required to attend out of district programs." — New Solutions K12 (Levenson) special-education review, December 2023, Commendation #53
That December 2023 outside review — commissioned by TSD and authored by Nathan Levenson's firm New Solutions K12 — actually recommended fewer paraprofessionals over time, achieved through "natural attrition."3 The check register tells the opposite story: the district has added approximately 100 contracted Health Care Aides since FY22, sourced through Edustaff.3 The trajectory of those costs is the next chart.
Section 3 introduced the General Fund subsidy to Special Education. The single largest new line within that program is the contracted Health Care Aide (HCA) layer — third-party staff supplied through Edustaff, billed against object code 3116 in TSD's accounting system. From FY22 to FY26, this single line grew from effectively zero to $2.74M per year.1
FY22 (July 2021 - June 2022). The HCA program was effectively non-existent — total Edustaff HCA charges of $1,586 for the year.1
FY23 (July 2022 - June 2023). HCA spending jumped to $1.33M as the contracted-aide model was implemented at scale, distributed across approximately a dozen distinct GL lines (ASD, AI, EI, ESY, MICI, MOCI, etc.).1
December 2023 (mid-FY24). Nathan Levenson's firm, New Solutions K12, delivered the report "Improving Outcomes and Equity for Students with Disabilities and Other Students who Struggle" — a 32-page review based on 130+ stakeholder interviews and commissioned by the district itself. Page 11 explicitly recommended that the paraprofessional layer should shrink over time: "fewer paraprofessionals or student support aides will be needed," achieved through natural attrition rather than layoffs.2
FY24 (the year Levenson delivered). HCA spending grew to $2.57M — up another $1.24M over FY23, in the same year the recommendation was received.1
FY25 (July 2024 - June 2025). HCA spending reached $2.74M, a further $170K increase.1
FY26 (in progress). Year-to-date HCA spending of $1.94M as of the source file's generation (approximately mid-FY26). The full-year figure will not be available until the FY26 ACFR.1
Two important caveats:
Normalized against IEP enrollment (the FY25 figure of 1,367 students with IEPs from Section 3), the HCA layer alone runs about $2,000 per IEP student per year.1 That is on top of the in-house aide layer, the teacher cost, and the other SpEd program costs that together produce the $9M general-fund subsidy described in Section 3.
One way to understand the deficit is to ask which categories of district spending have grown faster than others. Over the six years from FY18 (the proper pre-Covid baseline) to FY24 (the most recent audited year), three categories stand out:
Retiree benefits (MPSERS pension + OPEB retiree healthcare) added the most absolute dollars: $16.2 million per year between FY18 and FY24.1 MPSERS alone grew from 30.3% of payroll to 41.4% over that period, peaking at 48.6% in FY23.1 Most of that is now state pass-through under Section 147c, but it inflates the expense base regardless.
Active employee health insurance (MESSA) added $5.8M, growing at 7.3% per year compounded — pure healthcare inflation on a major cost line.2
Outsourced services (the combination of Edustaff contract staffing, DM Burr custodial, and First Group transportation) added $3.5M and grew slowest in absolute terms — but if you start the clock at the FY19 vendor-consolidation trough rather than FY18, outsourcing grew at 13.6% CAGR through FY24.2 The choice of baseline matters; both views are honest.
Salaries, by contrast, grew only 3.2% CAGR — roughly matching general inflation.1 The narrative that "teacher pay is breaking the budget" is not supported by the data. Average teacher salary went from $74,442 (FY19) to $78,145 (FY24) — about 5% over five years, well under healthcare inflation, well under MPSERS rate growth.1
Between FY20 and FY24, the federal government sent Troy School District a one-time stream of pandemic-relief money — the Elementary and Secondary School Emergency Relief (ESSER) fund. Total federal revenue ran $15M to $21M per year during the peak ESSER years, well above the ~$6.5M pre-pandemic baseline.1 Stacked end-to-end, that's about $30M of one-time money above the long-run trend.1
ESSER was allowed to fund "extended learning," staff, materials, and facilities. Districts had until September 30, 2024 to obligate ESSER III dollars. By FY25 federal revenue is back at its pre-pandemic baseline — the cliff. Any positions or programs ESSER had been paying for either ended, or transferred to the operating budget.
ESSER almost certainly subsidized part of the post-pandemic teaching FTE increase from 787 to 887 (a 50-100 position layer) and a chunk of the SpEd staffing buildup.1 The exact mapping is hard to recover from audited reports — single audits show ESSER expenditures by program, not by position. What we know with certainty is that the same period (FY20-FY24) saw both the temporary federal cushion and the structural cost increases that the FY26 budget now has to absorb without that cushion.
A useful mental model: imagine a household with a temporary second income for four years. They hire a nanny. Then the second income stops. The nanny doesn't unhire themselves; the family has to find the money somewhere or let her go. That is roughly the FY26 budget conversation.
Michigan's Public School Employees Retirement System (MPSERS) is the second-largest cost line in TSD's general fund — roughly $29.3M in the FY26 projection.1 The contribution rate is set in Lansing, not Troy. As a share of covered payroll it grew from 17.6% in FY15 to a peak of 48.6% in FY23, settling at 41.4% in FY24.1
Starting in FY22, Michigan shifted the funding of MPSERS UAAL (unfunded actuarial accrued liability) toward direct state payment via Section 147c of the State School Aid Act. The dollars still show up on TSD's books — but they also show up as revenue, dollar-for-dollar.2
Per the FY24 ACFR Management's Discussion and Analysis: the 2024 act provided "an offset to the MPSERS UAAL expenditures that each district incurs" equivalent to roughly $498 per pupil — about $6M of TSD revenue routed specifically to absorb MPSERS UAAL.2 Revenue-neutral, expense-inflating.
The implication: when board materials say revenue grew $34M FY19→FY24, a substantial slice of that growth is MPSERS pass-through, perfectly matched by a corresponding expense growth. The free operating revenue — money the district can actually choose how to spend — grew much less.2
The check register lets us watch non-payroll spending vendor-by-vendor. Comparing FY19 to FY25, just six vendors account for +$14.3M of recurring annual cost growth.1 That's roughly two-thirds of the total non-payroll cost growth in the operating budget over the same period.
The pattern is mixed-cause:
Note what's not in this list: there is no "we spent too much on technology" line, no consulting feast. The vendor growth is concentrated in healthcare insurance, contracted SpEd staffing, and managed-services outsourcing — three things that are individually defensible and collectively heavy.
Michigan funds school operations on a per-pupil basis. The state-set foundation allowance — roughly $10,836 per pupil in FY262 — is multiplied by enrollment to produce the bulk of TSD's revenue. Lose a student, lose a foundation. Gain a student, gain a foundation.
Between the FY20 enrollment peak of 13,073 and FY24's 12,447, TSD lost 626 students net — roughly 4.8% of its enrollment base, and about $6.8M of annual foundation-allowance revenue.1 The students did not all leave Troy. The city's population grew +5.5% over the same nine years (83,496 → 88,051). The school-enrolled share of the population dropped from 15.0% to 14.1% — Troy is aging, and a higher share of school-age children are enrolling outside TSD (private schools, charters, school-of-choice).1
But the buildings stayed open. The teaching staff barely changed. The MPSERS rate didn't fall. Healthcare premiums kept rising. When the same cost base is divided across fewer students, per-pupil cost goes up by arithmetic. Cost per pupil rose from $10,924 in FY15 to $15,383 in FY24 — up $4,459 per student, or 41%, in nine years.1
Reading Section 2's chart, both per-pupil cost and per-pupil revenue appear to grow at roughly the same rate. That picture is misleading: a meaningful share of the per-pupil revenue growth is one-time and pass-through money the board cannot redirect or repeat:
Strip those two layers out and the free per-pupil revenue — the dollars the board can actually direct — has lagged per-pupil cost growth materially. That gap, multiplied by enrollment, is the structural deficit.3
A natural question: Troy property values grew enormously — $3.49B in FY15 to $6.19B in FY24, up 78%.1 Doesn't all that new tax base feed the schools? Under Michigan's Proposal A framework (passed by voters in 1994), school operating revenue is decoupled from the local property tax base. Three constraints lock TSD in:
The practical result: TSD's operating millage and foundation allowance can only move when the state legislature acts. The board cannot vote itself more operating revenue. It can put bond questions for capital projects to voters (Troy did, and they passed) — but bond proceeds cannot be spent on operating expenses.
The compound problem in one line: revenue capacity scales with enrollment, but cost capacity barely scales at all. Lose enrollment, lose revenue; cost stays. The squeeze is mechanical, not the result of any one decision.
Troy School District's structural deficit is not the result of any single decision or bad actor. It is the compounding of four things happening at once:
| Driver | Approx incremental annual cost | Comment |
|---|---|---|
| MPSERS pension expense | ~$15-20M | Mostly state pass-through; visible on expense, offset on revenue |
| Healthcare (MESSA + BCBS) | ~$5M | Active employee insurance, structural inflation |
| Salary inflation (CBA + step) | ~$5M | ~3% CAGR; average teacher salary +5% over five years |
| SpEd non-payroll (HCAs, etc.) | ~$4M | $0 → $5M Edustaff line, partly offset by reduced sub usage |
| Outsourced services | ~$5M | DM Burr + First Group + Sec Shield + MASB-SEG combined |
| Other operating | ~$4M | Supplies, utilities, materials inflation |
| Total expense growth | ~$38M |
Revenue grew roughly $32M over the same period. But ~$15-20M is MPSERS pass-through (revenue and expense both up, by the same amount), and an additional ~$5M was ESSER pulled forward (one-time). The net "free" operating revenue growth — money the board could actually choose how to spend — was perhaps $12-15M.1 Free expense growth outran free revenue growth by roughly $20M. That gap is the structural deficit.
Changed: Support Services FTE collapsed from 276 to 175 over nine years as facilities and transportation were outsourced. The SpEd staffing model added ~100 contracted Health Care Aides on top of in-house aides. ESSER funded an incremental layer of 50-100 teaching positions.1
Did not change: total FTE is roughly flat (1,072 → 1,078); average teacher salary grew at about half the rate of inflation; operating millage is at the constitutional cap; foundation allowance grew at statewide inflation. This is a composition story — different mix of staff, more contracted services, more benefit cost — not an "everybody got rich" story.
A few things this analysis cannot answer from public records, and would benefit from board or administration clarification:
The honest summary: the district is structurally short on operating revenue, the largest individual driver is healthcare-and-pension cost inflation it does not control, the second-largest is a deliberate SpEd staffing choice that benefits Troy students but is under-reimbursed by the state, and federal ESSER money that was masking the gap is gone. The cuts conversation now in front of the board is the first one that has to be made without that cushion.