Students will return to campuses next month with full complements of staff and programs, as well as funds allocated to give teachers time for professional development.
"We feel like we're in a good position, as strong as we could be given what's going on in California," Superintendent Kevin Skelly said.
"Our challenge in the next year as in past years is looking at the uncertainty and building a revenue balance to be prepared for whatever possibilities are happening."
The Board of Education approved the district's $162.4 million operating budget for 2011-12 on June 28. In addition to the revenues projected in the budget, the district also has nearly $16 million in restricted, reserved and designated fund categories and $13 million in unrestricted and undesignated categories going in to this school year.
By contrast, the neighboring Ravenswood City School District, serving East Palo Alto and eastern Menlo Park, will close campuses, boost class sizes and shorten the 2011-12 school year to make ends meet.
Funded mostly through local property tax, Palo Alto schools are largely buffered from the exigencies of 90 percent of California districts, including Ravenswood, that rely directly on Sacramento for per-pupil revenue.
However, Palo Alto's operating budget did take $7 million in so-called "fair share" state cuts, which were offset with, among other things, $1.3 million from the surplus.
Palo Alto found other savings in reducing the number of new teachers that will be hired, a slightly smaller allocation to routine maintenance and a projected increase in property taxes.
Given the uncertain state outlook, the Palo Alto school board for the past year has requested frequent budget updates from staff, for close monitoring of the situation.
Leftover funds from prior years are routinely used to plug gaps.
Under current projections, the district's Co-Chief Business Officer Cathy Mak said that the "undesignated fund balance" will be exhausted by the end of 2014-15.
The 2011-12 operating budget includes $11.6 million in revenue from the $589-per-parcel tax passed last year.
It also includes nearly $10 million in lease revenue — mostly from rent paid by the City of Palo Alto for use of the Cubberley Community Center — as well as $3.4 million in donations from Partners in Education, an independent, parent-led foundation that raises funds for Palo Alto public schools.
With a growing enrollment — officially counted at 12,024 as of last fall — Palo Alto operates two high schools, three middle schools and 12 elementary schools as well as a small school at Lucile Packard Children's Hospital.