Despite ending fiscal year 2026 with more cash than anticipated, the Iowa City Community School District may need to borrow $8 million after financial advisers warn of impending trouble.
The recommendation for an anticipatory warrant for $8 million comes from the district’s financial advisers, PFM, despite ending FY26 with an estimated $26.3 million cash balance, $5 million over earlier projections. Still, the district might see its cash reserves fall to about $3.5 million in March because of the timing of state aid and property tax payments.
PFM recommends that the district establish an $8 million taxable anticipatory warrant. The loan is essentially a safety net, not an additional debt. Rather, it is permission to borrow if needed and functions like a line of credit. The district will withdraw what they need and repay it when state aid and property tax payments arrive later in 2027.
Susanne Gerlach of PFM Financial Advisors told the board of directors on Tuesday, Aug. 11, that, due to SF 2472, which implements a 2% annual limit on local revenue growth, possibly reducing the district’s per-pupil SAVE revenues, the district’s cash flow could be “tight” over the next few years. The Secure an Advanced Vision for Education (SAVE) is a capital account funded by statewide sales taxes based on enrollment.
Gerlach said September and March are the district’s biggest “cash-flow pressure points” because they occur just before large revenue payments arrive.
ICCSD continues to find ways to fix budget issues
The $8 million anticipatory warrant will “eliminate the need to rely on interfund loans,” according to Gerlach. The Iowa City CSD has used recent interfund loans to address short-term cash needs. The district is scheduled to repay a $10 million loan from its self-insurance fund, while also expecting a repayment of a loan previously made to the SAVE fund.
Under PFM’s proposal, the district would pay interest only on money it borrows; an estimated $8 million for 30 days would cost roughly $40,000 in interest. The anticipatory warrant is a “low-cost option that provides maximum cash flow flexibility and stable liquidity.”
The board of directors largely supported the recommendation Tuesday because they believe it is a more consistent approach to meet the district’s short-term cash needs.
“I would be in favor of the warrant as opposed to more interfund loans,” said vice president Molly Abraham during Tuesday’s meeting. “Because it seems like a more consistent way to meet our financial needs: borrow, pay it back, borrow, pay it back, and not try to be transferring money between funds.”
In March, the district borrowed a $3 million anticipatory warrant, a loan uniquely issued to school districts, to make payroll before property tax revenue was handed out by the state.
Gerlach then suggested the district seek a $25 million anticipatory warrant in April but revoked the request a few weeks later, noting that the district had made “tremendous progress” reducing its spending. Local banks also denied the loan because of the district’s improving financial standing and a lack of audits.
Retroactive interfund loan prompted ICCSD’s budget crisis
The latest anticipatory warrant is not a fix-all for the district’s underlying financial issues.
The shortfall was uncovered in January when the board of directors were asked to retroactively approve a $10 million interfund loan to pay salaries, a move that outpaced the district’s projections and exposed years of inaccurate spending and revenue tracking. The district responded by pledging to make $7.5 million in spending cuts for FY27.
The $8 million anticipatory warrant is a “bridge,” Gerlach said as the district continues to fix its budget woes.
“I consider this sort of a bridge between some of the decisions that will be coming to sort of shore up the general fund,” Gerlach said. “This is sort of the bridge to get the liquidity we need until the expenditures are really sort of right-sized for where we are today with revenue.”
Officials will negotiate terms with local banks to secure the $8 million anticipatory warrant. A special meeting will be held in early September to authorize the loan before the district’s Sept. 15 payroll payment.
Jessica Rish is an entertainment, dining and education reporter for the Iowa City Press-Citizen. She can be reached at JRish@press-citizen.com or on X, formerly known as Twitter, at @rishjessica_
This article originally appeared on Iowa City Press-Citizen: Iowa City CSD weighs $8M loan despite stronger finances
Reporting by Jessica Rish, Iowa City Press-Citizen / Iowa City Press-Citizen
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By Jessica Rish, Iowa City Press-Citizen | USA TODAY Network
