Kent school budget worries premature, KEA says

Officials from the local teachers’ union are saying all of this talk of budget gaps and cuts at the Kent School District are premature, unnecessary and function as a scare tactic to put a chill on contract negotiations with them, the Kent Education Association.

“The district is haggling with us now by saying ‘Woe is me, look at our budget numbers,” said KEA representative Mike McNett during a March 10 interview with KEA officials and a representative from the Washington Education Association (the state teachers’ union). “That reduces people’s expectations.”

The School Board and administration have been struggling for months with an estimated budget hole that could stretch to $16 million.

The gap is caused by three factors: Expenditures that outpace revenues, an expected decrease in state funding (based on projections in the governor’s proposed budget) and the desire to make teacher salaries in the district “competitive” with surrounding districts.

On average, Kent’s teachers are among the lowest paid in the region.

Of the projected $16 million budgetary gap, approximately $3.7 million is from an expected drop in state dollars and the remainder is for competitive staff salaries and under-funded programs, according to district presentations.

The School Board has directed the administration to prepare for a $12.7 million gap that would contain a 2 percent salary increase for all district staff.

Union officials said no formal proposals have been made on either side of the table at this point.

But according to both the state and Kent teacher unions, the outlook is not nearly as bleak as the district is making it out to be.

“We don’t acknowledge the district needs to cut,” said WEA Compensation/Finance Field Representative Andréa Hardy.

“Their numbers are misleading.”

“They’re not currently in a bad financial situation,” McNett echoed in a follow-up interview Wednesday.

“The way they are portraying the situation looks somewhat alarmist to me.”

Opposing viewpoints

One of the major differences between the district and the union is over the district’s fund balance – what’s left over at the end of the year after the district’s bills are paid.

Board policy dictates the district keep a fund balance of 5 percent of its budgeted expenses. Keeping the fund balance at that level allows the district 10 days of operating money and helps maintain a high bond rating.

But the union disagrees with several district points. First, Hardy said while they do not dispute the need for a fund balance, she recommends districts of Kent’s size keep between 3 and 5 percent in reserve, putting Kent at the high end of the spectrum.

The state and local unions also disagree with the distinction the district makes about “designated” and “undesignated” fund balances, often ignoring much of the “designated” number and using in handouts the monthly number (which can be higher than the final amount due to the way money flows into the the district), instead of the year end number used for budgeting purposes.

Funds considered “designated” are dollars that have been tagged for use, but have not yet been paid. “Undesignated” funds have not yet been identified for a specific purchase and function as a cash reserve for the district.

According to Hardy, the union uses the combined number because the state gives no guidance as to what is “designated” and what is not, leaving it up to the districts.

Union officials said they were unsure of exactly where the approximately $4 million of designated money is used and cannot be traced. According to the district, that money is made up mainly of carryover funds, which allow the district or individual schools to save money over several years for big-ticket purchases like copiers or textbooks.

Information ‘misleading’

On Wednesday, McNett said the district’s financial statements for this year indicate that the district is on pace to end the year with roughly the same fund balance with which it began.

Hardy also said it was “misleading” of the district to use 5 percent of budgeted spending as the balance, since Kent typically only spends abut 94 percent of the budgeted figure in a given year.

In the 2007-2008 budget, that meant budgeting $251,712,869 and spending $235,205,695.

“They never intended to spend $251 (million),” Hardy said.

When factored for the 5 percent policy, KEA’s numbers would free up roughly $500,000 that could be used in budgeting. The union also points to figures that show the largest gap between budget and expenditures is in “teaching,” where the district spent 11.6 percent less than it actually budgeted.

In an e-mail Tuesday, McNett repeated that the district is hanging onto money that should be used.

“The district’s monthly financial statements from the 2007-2008 school year show they saved money by not filling all the teaching positions they budgeted for,” he wrote. “If the full compliment of teachers had actually been hired in accordance with the budget, class sizes could have been smaller and perhaps additional courses could have been offered.”

But despite only spending 94 percent of its budget, the Kent School District last year spent approximately $4.7 million more than it collected in revenues, which it made up by dipping into its fund balance, dropping the “undesignated” number – or money that has not yet been marked for spending – down to within $2,500 of the 5 percent threshold.

According to Assistant Superintendent of Business Affairs Fred High, the district overestimates spending because Washington State law says that a district cannot spend any more than it budgets without passing a budget extension.

“For us that’s way too expensive to do whenever something changes,” High said Wednesday.

Spending cushion

High said the district builds in a spending cushion into the “teaching” section in case grants are received through the year and excess money comes in to be spent on new programs.

“But the bottom line still gets back to living within our means,” he said. “You’re going to have financial problems if your expenditures continue to exceed your revenues.”

High also said part of the issue was a salary increase factored in at the beginning of the 2008-2009 year that saw certificated staff receive a pay increase of 5.14 percent and classified staff received an increase of 4.4 percent.

High said while the increase was state mandated, the problem arises because state funding only increased for teachers paid through the state while the district is required to make the salary increase for all teachers, including those paid through levy dollars.

“Things get tighter and tighter every single year,” High said.

The unions offered no definite solutions on where the extra money would come from, except to cut more from administration money (the district has cut administration budgets in the past and will be cutting between $2 million and $4 million this year as well) or to use the fund balance, though the fund balance is a one-time source of funds that would be depleted the first year.

“We want the district to remain financially stable and I consider it my responsibility to put a reality check on every situation,” Hardy said. “But here they have money.”

McNett insisted the district would need to “re-prioritize” and would be able to find the money, though he did not outline what that re-prioritized spending should look like.

The unions also said that it is premature to jump to conclusions without seeing what money will come in the state Legislature’s budget, which they expect will outline more for schools than the governor’s budget.

However, estimates from the state show a state budget gap of nearly $8 billion, up $2 billion from the estimate when the governor’s budget was submitted, which worries district officials, and any layoff notifications must go out to teachers by May 15, though they may be rescinded if additional funds arrive.

“We have heard zero from everyone else that we’re going to be just fine,” High said, adding that they have yet to hear anything indicating there will not be a drop in state funding this year.

“We are currently not living within our means,” High continued. “Why would any rational person believe we’re exempt somehow from all these conditions?

“Something has to give,” he said.

A bargaining position

Union officials say, however, that the budget numbers put forth by the district are designed to “put a chill on bargaining before bargaining even begins” by scaring members into thinking layoffs are coming and therefore accepting less than the union is asking.

“It’s an initial bargaining statement,” McNett said. “It serves the effect of frightening people in the bargaining unit and lowering expectations.”

The Board will receive its final update and fiscal outlook March 25 and is expected to make a final budget decision soon after.