Key variables including property tax revenue, likely enrollment growth, state funding amounts and employee health costs, remain unknown even as California law requires school districts to pass budgets by July 1.
On the upside for Palo Alto, officials appeared to expect a resumption of healthy growth in property tax.
Cathy Mak, the school district's chief business official, said Tuesday her budget conservatively assumed a growth of 2 percent in property tax revenue for 2012-13. But on Thursday, Santa Clara County Assessor Larry Stone announced that assessed valuations in Palo Alto are up 5.32 percent over last year.
With an improved property tax picture and possible passage of Gov. Jerry Brown's tax package this November Palo Alto schools could have a balanced budget without dipping into reserves.
On the downside, Brown's tax initiative could fail and enrollment could grow above projections.
The district has managed the uncertainty by maintaining an "undesignated fund balance" it can use to plug gaps. In the scenario approved this week based on the assumption that Brown's tax measure will fail about $5.5 million of the current undesignated reserve of $12.7 million would be used.
Property tax provides about 70 percent of the operating budget. Also on the revenue side is about $11.9 million from the district's $589-per-parcel tax, which runs through June of 2016; about $4.4 million raised by the parent-led independent foundation Palo Alto Partners in Education; and $141.75 per student in California lottery income.
The district's official enrollment as of last fall was 12,286, and a new headcount will be taken in September.
The bulk of district expenditures 86 percent go to employee salary and benefits.
Currently, a starting teacher in Palo Alto earns $51,422, with an additional benefit package worth $12,865. Under terms of the district's contract with the teachers union Palo Alto Educators Association, teachers work their way up based on seniority and units of graduate work, with salaries for senior teachers topping out at $103,836.