While the Kent School District ends the fiscal year with a nearly $7 million negative balance, officials are working to make sure that doesn’t happen again.
The school board approved on Aug. 23 a $356.7 million general revenue budget for the 2017-2018 school year, which projects the district ending next fiscal year in the black with a $1.2 million fund balance.
Officials have spent the past few months trying to balance the budget by cutting expenditures and instituting hiring and spending freezes. At an Aug. 16 budget work session, finance staff told the board the district was still about $3 million short of a balanced budget for the 2017-18 school year.
Staff balanced the budget by reducing personnel costs by $2.9 million and cutting materials, supplies and operating costs by $1.4 million.
The personnel savings came from reducing the equivalent of 55 full-time employees.
“Through attrition, there are 34 reductions in teaching positions and 11 fewer central office positions,” district spokesman Chris Loftis said in an email. “We also instituted 10 reassignments from instructional support to fill classroom vacancies.”
No permanent employees were laid off as a part of the cuts, the district said.
“However, reductions are necessary in our temporary staffing, which will reduce the number of seasonal project-based workers and some intern positions,” Loftis said. “This is a difficult decision as the work performed by these fine people has been important, helpful and appreciated.”
Since the 2015-16 school year the district’s beginning fund balance, or money left over in the general revenue fund at the close of the previous school year, has gone down by $21 million. The district had a $14.1 million fund balance at the start of the 2015-16 school year, a $3.8 million balance going into the 2016-17 school year and a negative $6.9 million balance to start 2017-18.
School board policy calls for a 5 percent fund balance, which would equate to about $18 million. Mike Newman, the district’s chief business officer, said the district will work over the next couple of years to build up the fund balance.
“The belt tightening we experienced throughout the winter and the spring will continue,” he told the board. “It will have an impact on programs. It will have an impact on staff. We are doing our best to minimize what the impact is, and that’s why you are seeing a budget come to you that has a positive fund balance but not to the board goals that we have set out in policy. To do that would require significant disruption to the services in the school district. Our budget brings us a reasonable way to get to where we need to be over a two- to three-year period of time.”
Superintendent Calvin Watts told the board the budget shortfall was not a result of misusing district funds.
“I will tell you that over the past four years we are monitoring the investments that we make in our people, our programs, our services,” he said. “I wish I could say that they were free. They are not. They are resources we have to make sure that we are managing more effectively now. Even with our 20 percent MSOC (materials, supplies and operating costs) reduction, even with our administering very strict spending and hiring measures, we didn’t meet our goals. And with that, we also know that we need to be more judicious, prudent with our financial resources and we will. I do want to let you know that what will not go by the wayside, what will not be left out to chance is our work toward ensuring our students have what they need.”
Mistakes in enrollment projections and financial calculations led to budgeting decisions that the district couldn’t support, Loftis said.
“After several years of budget and staff reductions in the first part of this decade, and anticipating increases in enrollment, the district began making strategic investments,” he said. “Staffing, compensation and programming were gradually increased as part of a commitment to improving the educational experience and student achievement as well as the working experience of all KSD employees. These investments were based on predictions of a continued trend of significant enrollment growth.”
But the enrollment did not increase as much as originally predicted, Loftis said.
“State funding is based on actual enrollment each year and accounts for two-thirds of the overall revenue,” he said. “Staffing is set up in advance of the school year so if enrollment is appreciably lower than predicted, revenue can be significantly lower than expenses. In three of the past five years, the enrollment projections have simply been inaccurate.”
Projections for the 2015-16 school year were off by about 500 students, Loftis said.
“While recognizing the enrollment challenges in the fall of 2015, corresponding spending reductions did not begin until the spring of 2016, and that delay has complicated our financial challenges by further reducing our fund balance,” he said.
Typically if a district ends the fiscal year with a negative balance, it will be placed under binding conditions by state Office of Superintendent of Public Instruction (OSPI), which means the state office provides technical assistant and goal setting to help get the district back on financial track.
Kent may not have to be under binding conditions, Loftis said on Monday.
“There are several qualifiers and we are continuing to work with OSPI to see if our situation actually merits that designation,” he said. “We will know more once the fiscal year concludes (on Aug. 31) and all reporting is completed. At our invitation, we are already working with OSPI and PSESD (Puget Sound Educational Service District) for both guidance and monitoring of our financial recovery plan.”