The end of November's Fairfax County Board of Supervisors and School Board Budget Committee Meeting on the FY 2026 Budget Forecast did not bring holiday cheer. Held on Nov. 26, Chairman Jeff McKay said, “This is not a budget presentation. This is a budget forecast.”

 “I think what we're going to see here is some worrisome numbers and some challenges we have ahead of ourselves, but one challenge we don't have is plenty of time between now and when we adopted a budget to work on these issues,” McKay said.

The presentation would detail a combined net projected budgetary shortfall of nearly $300 million for the upcoming year (FY2026), or $292.7 million. 

McKay asked School Board Chair Karl Frisch if he had anything to say before the presentation. “Fairfax Education Unions, the exclusive bargaining agents for our instructional and support employees, has ratified the contract stemming from our tentative agreement, with 98 percent of union members supporting the contract,“ Frish said. He added that it was the first collectively bargained contract in FCPS in about half a century and that it would come to the school board as a new business in January and for a vote in February. 

“Obviously, this news will impact budget conversations, but as Chairman McKay indicated in his opening, we are at the most preliminary of stages in this conversation when it comes to the economic enrollment and revenue forecasts that we're all learning about today,” Frisch said.

Christina Jackson, chief financial officer of Fairfax County; Leigh Burden, assistant superintendent of Financial Services, FCPS; Phil Hagen, director of Fairfax County Department of Management and Budget; and Bryan Hill, county executive, provided input. Jackson kicked off the presentation by stressing that things are going to change and that it is very early in the budget process.

Declining nonresidential (office) property values, rising employee compensation costs, and limited revenue growth are driving Fairfax County's projected FY 2026 budget gap. County revenues are estimated to increase by only $127.9 million, and nonresidential property values are expected to fall by 1.3 percent.

That marks two consecutive years of declines driven by high office vacancies and rising operational costs.

Last year's FY 2025 fiscal forecast noted a shortfall, too, slightly less, at $284.5 million. The county addressed it by making changes to its income and spending, like raising the real estate tax rate by 3 cents, seeing an improved real estate projection, bringing back the personal property tax assessment ratio to 100 percent, getting greater investment income, lowering school compensation changes from 6 percent to 4 percent, adjusting county compensation with a 2 percent cost of living increase instead of 4 percent; a 10 percent market rate increase, and some minor adjustments.

The forecast included early estimates of available revenues based on current information and projections on existing tax rates. The most significant disbursement requirements included collective bargaining agreements, investments in employee salaries and benefits, and debt service requirements. The plan did not include additional investments in affordable housing and an increase in WMATA contributions.

Real estate projections show a steady demand, with an estimated 4.78 percent increase in residential assessments in FY 2026 as of November 2024, and a 0.51 percent increase in new construction.

School's projected revenue is $30.4 million, which includes $23.7 million from the state and $6.7 million from Fairfax City and other sources. However, with county revenues estimated to increase by $127.9 million, there is a combined net projected budgetary shortfall of $292.7 million. 

Schools' projected change from the FY 2025 approved budget is $305.7 million. Implementing Virginia’s Joint Legislative Audit and Review Commission in full could provide an additional $568.7 million from possible FY 2025 revenue sources. This unlikely event would result in an additional $3,100 for each Fairfax County Public School student or local funding of over $1,300 on the average real estate tax bill.

County agencies submitted reduction options totaling 10 percent of their budgets. The county is reviewing them and expects them to include program and service impacts, resulting in estimated reductions of $33 million.

On Jan. 23, 2025, the FCPS Superintendent will present the FY 2026 Proposed Budget, and on Feb. 18, 2025, the County Executive releases the FY 2026 Advertised Budget.

“It was disappointing that the blame for rising taxes was placed squarely on underfunding from Richmond rather than the 50 percent growth in our own budget over the last ten years," posted Pat Herrity (R-Springfield). “County officials have been complaining about [state] underfunding of schools since my Dad was in office and it is nothing new,” Herrity wrote.

In 2026, the Board of Supervisors plans to consider a meals tax on food and drinks prepared at restaurants and grocery stores, which could range from 1 percent to 6 percent. The Senate Committee on Finance and Appropriations put the casino controversy on hold for SB 675 during the last legislative session, but that could resurface in 2026.

Revenue from either or both could generate much-needed funds for Fairfax County, as could the data center demand marching across Northern Virginia. 

In 2022, tax revenue in Loudoun County from data centers totaled $663 million. Fairfax, with a fraction of Loudoun’s data centers, collected $20.28 million in data center revenue in 2022, according to FOIA request by DC News Now,

Higher property taxes could also add revenue, as would cuts in county spending.