Schools gearing up for looming budget shortfall

There are no budget lightening-and-thunder decisions to be made yet, but the dark clouds are closing in on the Central Kitsap School District. At a budget study session with the board of directors last Wednesday, administrators enumerated the concern business and operations director Paul McNeill refers to as “The Gathering Storm.”

In the worst case scenario, at the end of the 2005-06 fiscal year the district could face a $1.9 million deficit, McNeill said. That is, the current school year started with an $8 million buffer and when all the revenues and expenditures are added and subtracted, the district will have $6 million and change to carry over to the 2006-07 budget year.

“Obviously you can’t continue that pattern,” McNeill said.

If general fund expenditures continue to outpace revenue at this rate, within a few years the district will melt its carry-over buffer and it must keep an unreserved fund balance of 3 percent of the revenue, in accordance with school board policy, McNeill said. That comes out to a $3.1 million minimum carry-over buffer that the district should have from its current $104 million general fund budget.

“The community demonstrated a wonderful show of support during the recent passage of our school support levy. As we stated last fall, the increase in the amount of local revenue will not resolve our anticipated shortfall in the future,” wrote superintendent Greg Lynch in an e-mail sent to district staff last week.

Declining student enrollment and increasing expenditures in areas such as transportation and special education are some of the factors CKSD officials say will contribute to the anticipated deficit.

One looming change in district revenue for upcoming years is the federal impact aid Congress is scheduled to reauthorize in 2007. CK schools will not know how much federal funding they will receive for the next six-year period until after January 2008.

While the district does not anticipate the necessity for drastic changes for next school year, there is the possibility for program cuts in the near future.

With the gathering storm in mind, administrators presented a hypothetical budget reduction analysis summary to the school board last week.

“And finally the million dollar question, or more, is the budget reductions we’re going to have to make,” McNeill said after presenting decreasing enrollment numbers and other budget-crunching factors.

There were two scenarios — one for a 5 percent budget reduction and one for a 10 percent reduction, listing myriad programs that would face potential funding cuts.

A 5 percent cut would be a drastic measure, admitted McNeill.

“The utility for doing this is for everyone to recognize we’ve got some issues and we don’t want to have this discussion next year,” Lynch said.

He also gave his assurance to the board that “the right people will be involved when we do (have to make) really hard decisions in the future.”

Three options are available to CKSD: Find more revenue, which will be difficult considering federal and state revenue is enrollment-dependent; decrease expenditures; or continue eating into the fund balance.

According to enrollment projections, there will be 11,695.5 full-time equivalent students enrolled in CKSD next school year, down 851 from 2001.

Declining birth rates in the county are cited as the culprit for the plummeting enrollment numbers.

“A lot of the growth in the community, in the district (is due to) baby boomers,” McNeill said, and that group’s children are older than school-age.

Central Kitsap is becoming a more expensive area to live in and that means fewer families with children are moving here, he added.

The district expects to receive $1 million to spend on new programs helping students meet graduation requirements recently mandated by the state and federal governments. However, that new source of revenue is locked in for a specific purpose and cannot be utilized to fund renovation of aging infrastructure, wrote Lynch in his e-mail to CKSD staff.

With this exception, most state and federal requirements imposed on schools nowadays come without sufficient implementation funding, district officials said.

CK schools have remained on the forefront of educational technology for students and staff thanks to federal impact aid in the last 15 years, but in the foreseeable future there may arise a need for a technology levy or bond to keep the same level of technology resources, Lynch wrote.

“The dilemma for us is we don’t know in ’07 whether we’d be fully reauthorized (for the same amount of federal impact aid),” he said at the budget study session.

“With the magnitude of the deficit we are facing,” Lynch added, “the question we have to ask ourselves now is wether we’ve been pretty good stewards of resources ... and we have.”

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