Dixon Public Schools District 170 administration is looking at ways to reduce spending.

Superintendent Margo Empen told the board Wednesday, Dec. 17, that recent cuts to federal funding along with several years of rising health insurance costs and decreasing student enrollment numbers are “causing us to take a more critical eye on what we do.”

She emphasized it “is not an overspending problem on behalf of the district.”

Empen said administration will present specific recommendations to the board at its Jan. 14 meeting before board members will be asked to vote on them at the Feb. 18 meeting. Those meetings begin at 6 p.m. and will be held at 1335 Franklin Grove Road in Dixon.

The district’s fiscal 2026 budget, approved by the board Sept. 24, estimates a $1.6 million deficit, which means it expects to spend that much more money than it expects to bring in. Fiscal 2026, for the district, began July 1, 2025, and ends June 30, 2026, according to the budget.

[ Dixon school board approves fiscal 2026 budget with $1.7M deficit ]

In the last two fiscal years, the district had a deficit. It’s expenses in fiscal 2024 were $368,000 more than its revenues and in fiscal 2025, before its audit was complete, it spent about $1 million more than its revenues, district records show.

“We’ve got these reserves, which is great, but if we’re not increasing revenue streams, it’s like continually drawing out of your savings account with nothing to put in it,” Empen said.

If no changes are made, by fiscal year 2028 “our operating fund balance will be down by $8.2 million,” Empen said.

Federal funding cuts

The district, Empen said, has had lower revenue from federal grants.

Empen said the district lost about $650,000 in grant funds used to provide services to students with disabilities.

With or without funding, public kindergarten through 12th grade school districts in Illinois are required by state and federal laws to provide an education to that student group through individualized plans, called IEPs, and other specialized services.

“It is not an option. It is a law,” Empen said.

On top of that, the district lost between $70,000 and $100,000 in funding to its Title I, Title II and Title IV grants, Empen said.

Title I funds support the academic success of low income students, Title II funds training for teachers and administrators and Title IV funds support a well-rounded education including curriculum, mental health and technology.

Empen said the funding through those grants is expected to continue to drop.

“We are constantly sitting in on updates on the finances and what to expect. Right now, they are telling us in relationship to this year’s revenue stream to estimate anywhere between 0% and 50% of what we got this year,” Empen said.

Overall, the district estimated it will receive about $2.6 million from federal grants in fiscal 2026, an about 60% decrease from fiscal 2025, according to the district budgets.

That decrease mainly reflects the expiration of the Elementary and Secondary School Emergency Relief program that provided almost $5 million to DPS during the COVID-19 pandemic. Those funds were used to update programs, materials and equipment such as the upgrades made to Dixon High School’s career and technology classrooms in summer 2024.

Those ESSER funds allowed the district to not need to consider changes in its staffing for the last couple years, Empen said.

Rising insurance costs, decreasing enrollment

While those funds decrease, the cost of health insurance for its employees has significantly increased over the last three years.

Insurance costs increased by 39% in fiscal 2024 and by 11% in fiscal 2025, Empen said.

Now, about halfway through fiscal 2026, the district is expecting around a $2.7 million deficit related to insurance, Empen said.

“We’re 135% over the estimated budget that we have” for insurance, Empen said.

Insurance is an unfunded expense that comes out of the district’s education fund, which is also the fund that pays employee salaries, Empen said.

“There isn’t a grant. There isn’t a line item. There is no revenue stream that helps offset our insurance,” Empen said.

As that cost goes up year over year, student enrollment has continued to go down.

For the 2026-27 school year, August’s enrollment numbers showed a 5% decrease from the previous school year, which is equal to over 100 students, Empen said.

Enrollment only decreased slightly in the 2025-26 and 2024-25 school years, but it had another big drop - 4.5% - in the 2023-24 school year, Empen said.

“We used to have grade levels of 200 to 225 kids. Currently, we only have one grade level that’s over 160 [students] for total enrollments,” Empen said.

Areas where spending can be reduced

“We have been working with the principals over the last couple of months. It is every building. Nothing is going to be left untouched,” Empen said.

Empen said administration will be looking at ways to equalize the number of students in a classroom, but will not eliminate necessary programming. They’ve also been discussing combining the nurse positions at Reagan Middle School and Madison Elementary.

“These are never easy decisions to make, but we are hoping to make decisions that will have the least amount of impact and keep programming going for Dixon Public Schools,” Empen said.