(Updated at 4:05 p.m.) Arlington Public Schools Superintendent Dr. Patrick Murphy’s recommended FY 2014 budget would keep class sizes steady, would add new school buses and would provide for merit pay increases for school employees, despite a $23.5 million budget shortfall.

Murphy formally unveiled his budget Thursday night at a budget work session with the School Board.

To help close the gap, Murphy’s budget takes advantage of $20.2 million worth of surplus and reserve funds from previous years, and “efficiencies” in custodial staffing, the teen parenting program and gifted teachers, among other programs.

In all, $411.1 million of the $520.4 million budget comes from county tax revenue. Aside from the $20.2 million “carry forward” and $17.6 million in fees, the rest — about 13.3 percent of the budget — comes from federal and state sources.

The budget allocates an additional $10 million in staffing, materials and facilities costs for the nearly 1,000 additional students expected to be enrolled next year. That includes $1.9 million for new trailer classrooms.

The budget also provides $7.2 million for merit-based raises for teachers and other employees. Of that, about $446,000  will come from the state, under a plan to supposedly provide 2 percent raises for Virginia teachers. Of those staff members receiving raises, the increase in pay will average about 3 percent, APS said in a budget briefing for the media.

By maintaining the current class size levels while accounting for the rapid enrollment growth, Murphy says the budget fulfills the school system’s goal of putting students first.

“This budget is a prudent and targeted effort to maintain APS quality and the education that our community values,” Murphy said in a statement. “This budget firmly commits to our students by maintaining current class sizes and to our staff by including a compensation increase, the first step increase in two years.”

APS plans to purchase and staff 6 additional school buses this year. That should prevent another round of controversial bus service adjustment.

The budget also provides for a full-time residency verification specialist. Murphy also proposed the position last year, but it did not make it into the School Board’s final budget. Currently, APS only employs a part-time residency verification specialist for the entire 22,613 student school system.

Murphy said a full-time residency verification specialist could help identify students who are attending Arlington Public Schools but whose parents don’t live here.

“With the growing enrollment we have, we need to make sure we’re serving our kids here in Arlington,” he said. ”I think there’s a concern that people are attracted to Arlington Public Schools. We need to monitor that.”

Other additions in this year’s budget include a new security coordinator, technology upgrades, athletic trainer who specialize in concussion management, and dropout prevention coordinators.

The “efficiencies and reductions” — including cuts in custodians, high school gifted teachers, the teen parenting program, and administration — will eliminate 61 positions and save $7.8 million. With the school system continuing to grow and hire — some 300 teachers were hired last year — Murphy says those impacted by the cuts will be reassigned elsewhere in APS, not laid off.

With Murphy’s proposed budget, the per-pupil cost in Arlington will rise from $18,675 to $18,709, although that could drop to $18,405 if the School Board elects not to use one if its reserve funds.

The School Board will adopt the final FY 2014 budget on May 2. Between now and then, APS will hold a number of budget work session and public hearings.