Kent School District leaders project that the district will face an estimated budget deficit of at least $31.5 million in the 2024-2025 school year without new revenue or budget cuts.
The $31.5 million shortfall is due to the end of federal monies coming to the district from the Elementary and Secondary School Emergency Relief (ESSER) funding provided during the COVID-19 pandemic from Congress to school districts across the nation.
Kent received about $99 million in federal funds and included that money in budgets over the last three years, including $31.5 million in the 2023-2024 budget.
“This is the final year of the ESSER claim,” said Ben Rarick, associate superintendent, in charge of budget and finance, at a Jan. 24 Kent School Board financial status update workshop. “Most went to sustain staffing levels during declining enrollment. …there’s no question there will be a deficit, the question is the size. We will know more in a month.”
With district general fund expenditures about $3 million higher than revenues in 2023 ($495 million to $492 million), the deficit could grow even higher depending on how much money the district receives from the state. That amount, based on school enrollments, is expected to be released soon.
Rarick said enrollment numbers for January will determine how much money the district gets from the state, but not enough to cover such a large deficit from the loss of federal funds.
The November 2023 budget numbers also show expenditures up about $9.6 million (7.9%) compared to November 2022, which the district attributes to higher pay for employees.
“The budget is 80% to 85% salaries,” board director Awale Farah said at the workshop. “We have to pay and that’s why expenses are growing.”
Rarick said the state didn’t want districts shedding all of their staff during the pandemic so Kent and other districts used the federal money for continuity of operations.
The theory was although school enrollment dropped during the pandemic the students were expected to return after the pandemic. But most districts have lower enrollment in 2023 than in 2020.
Kent had 27,431 students in 2019-2020 at the beginning of the school year, according to state Office of Superintendent of Public Instruction (OSPI) statistics. That number dropped to 25,788 in 2020-2021 and 25,092 in 2021-2022 before rising to 25,454 in 2022-2023 and 25,815 at the start of this school year.
“In 2022, I remember I was devastated when we didn’t see an influx of kids return to 2019 levels,” Rarick said. “The kids did not come back.”
Rarick said that’s partly why the district spent about $33 million of federal funds each year to try to give the system a chance to recover students. He said the district spent some of the funds on specific jobs but about two-thirds of the money went to maintaining staffing.
The district also saved money when it didn’t replace about 42 positions lost through attrition during the 2022-2023 school year. Teachers retired, left for other districts and left the profession.
Fund balance
The district has kept a strong fund balance, money set aside for unanticipated financial shortfalls. The district’s policy is to keep at least 5% of the general fund budget in a fund balance.
With a fund balance of about $60 million, the district remains above its 5% goal, which would be about $25 million.
Tim Martin, president of the Kent Education Association that represent teachers, spoke at the Jan. 24 regular school board meeting that the district should use monies from the fund balance prior to cutting staff.
“We were told this year is not an emergency but now you say we need to cut staffing with $60 million in reserve,” Martin said. “You’re looking at not using it but bringing down staffing. …that’s concerning to teachers who worry about losing their job.”
Martin referred to an email Superintendent Israel Vela sent in December 2023 to district staff about “hard decisions” and saying budget cuts are ahead for the 2024-2025 school year.
Martin questioned why the district is saving 12.7% of funds in reserve if monies are needed to support staff and students.
“We need to take a deeper look into reserves,” Martin said.
As president of the union, Martin has plenty to look out for when it comes to budgets since the district and teachers two-year contract ends this August. Teachers were on strike for nine days at the start of the school year in 2022 before reaching an agreement.
In response to Martin’s request, board director Tim Clark asked district staff to address using fund balance monies.
Rarick, the head of finance, said the district won’t keep $60 million in the account but even using funds won’t solve the continual problem of a budget shortfall, it won’t sustain the budget.
District leaders said they want to avoid any scenario similar to 2017-2018 when the problem of expenses exceeding revenue caused the fund balance to drop to a negative $6.9 million.
Mistakes in enrollment projections and financial calculations led to budgeting decisions that the district couldn’t support, according to district officials. The district cut staff over the next couple of years, reduced costs and used a interfund loan to help balance the budget and eventually create a fund balance.
Process to begin cuts
The board approved a resolution 4-1 at its regular meeting to give Vela the authority to look at a plan for cuts in the central administration office.
Donald Cook, one of two new board directors on the five-member panel, voted against the resolution. He wanted a vote postponed for a month to find out more details about its potential impact and how much money could be saved with staff cuts.
Vela said he would come back to the board with more information.
Clark delivered a pointed message to Cook and Andy Song, the other new board member, prior to the vote.
“The rest of us on this side of the table, we have gone through three budget workshops where it’s crystal clear we are looking at trouble coming ahead,” Clark said. “The superintendent’s job is to present a budget sustainable and meets the basic needs under law. It’s impossible to look at a $31 million deficit and not say you’re not in trouble in a large number of areas.”
Levy passed
The district faces a budget shortfall even though voters approved in November 2023 a three-year Educational Programs and Operations Levy.
Rarick said the levy covers about 15% of the general fund, including monies for athletics, music and arts, which are not funded by the state. The levy also funds special education, advanced learning programs and multilingual education.
The passage will bring in $79.3 million to the district in 2025 from 2024 tax collections; $82.5 million in 2026; and $85.8 million in 2027, according to district documents.
But the levy won’t bring in enough revenue to cover the loss of federal funds, declining enrollment and rising costs, according to district staff.
Most of the rest of the operating budget, about 75%, comes from state funds.
Voters in November 2023 turned down the district’s Capital Projects and Technology Levy. That would have funded the district’s 1-to-1 laptop program, which provides a laptop to each student in the district, and paid to modernize safety systems, including intrusion and fire alarms. Monies also would have been used to upgrade HVAC systems, roof and boiler replacements, installation of synthetic fields at high schools, new flooring, paint and expand the preschool program to each elementary school.
Voters in April 2023 turned down a $495 million bond measure.
The district planned to use the funds for security improvements, including upgrades to access control, communication systems, alarm systems, security camera replacements, ADA improvements, reader boards and increased space for counseling services at middle schools.
The district also wanted to use bond proceeds to modernize elementary schools to accommodate pre-K education, and to repair, remodel, and upgrade school and administrative buildings districtwide, including improvements to HVAC, technology, boilers, roofs and interior and exterior paint.
In addition, the district planned to upgrade all parking lot lights, improve outdoor facilities at all school sites, including inclusive playgrounds at elementary schools, new field buildings, upgrades to bleachers and synthetic fields at secondary sites.
Budget talks
The board is scheduled for 2024-2025 budget discussions on March 13, April 24 and June 26 with budget adoption in August. Rarick said he will keep the board updated each month about the financial status of the district.
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