Highlands County officials say rising health costs and falling enrollment drove $8.5 million shortfall; state approves recovery plan

Andrew Lethbridge, the district’s deputy superintendent, opened a budget workshop by identifying rising employee health-insurance costs and declining student counts as the primary drivers of the district’s budget stress.

"Claims have surpassed revenue," Lethbridge said, listing recent health-fund swings: a little more than $2 million in surplus at the start of 2023, a drop to about $200,000, a $4 million negative in 2023, and further negative results in subsequent years that he summarized as about an $8.5 million cumulative shortfall in the health fund.

Lethbridge also said enrollment fell short of projections: the district budgeted for about 11,562 students for 2025–26 but recorded roughly 11,420 on the third count (about 140 fewer), and he warned of another projected drop of roughly 400 students for 2026–27. "If I'm a principal and this year I had 100 kindergarten students and next year I have 80, I need one less kindergarten teacher," he said, explaining how the staffing formulas automatically reduce allocations.

Administrators told the board an audit ruling also reduced the portion of the fund balance the district may count toward its statutory reserves, prompting required notice to the state and a recovery plan. Lethbridge said the superintendent sent a fiscal-recovery letter that the Florida Department of Education reviewed; the department "approved the fiscal recovery plan" and noted the district’s assigned and unassigned fund balance is projected to be 3.71% by June 30, 2027, and asked to be notified of any deviations from the plan.

Board members pressed whether 3.71% was sufficient or whether the district should aim higher. Several members argued the district should target a larger cushion to cover future health-fund losses: reaching 4% would require roughly $400,000 more in reductions; reaching 5% would require roughly $1.5 million more, according to materials presented at the workshop.

Superintendent Dr. Brenda Longshore said she had worked with department leaders to identify reductions that preserve core services and asked the board to set a target so administrators could return with a concrete plan. "If 3.71 is not the percentage this board wants, that's fine. We'll keep moving forward," Longshore said, asking for direction so she could devise measures that maintain functioning operations while improving the fund balance.

Next steps: administrators plan presentations to the board from the district’s insurance team and from Fleet (an outside insurance/benefits consultant) in May; the superintendent will return with a revised plan anchored to whatever fund-balance target the board selects.