Is TSD in a Budget Crisis?

Well that depends on your definition of crisis.  Under current law, Districts are required to provide a rolling 4 year budget forecast.  As with all forecasts, the 4 year budget is based upon projections, the biggest one of which is enrollment. Here is a recent 4 year forecast produced by TSD:

TSD projections moving forward are bleak.  In each year, with the current budget and projected enrollments, TSD is projecting expenditures that greatly exceed expected revenue, on average about $5 million per year.  This model is obviously not sustainable.  It is possible the legislature will provide more revenue, and enrollment numbers will certainly change to some degree, which will affect revenue and expenses.  

If the enrollment projections TSD is using are correct, the 4 year forecast is likely the reality we are facing. 

WHAT DID MCCLEARY DO?

The McCleary lawsuit was all about the source of the funding, not the quantum of money.  Past practice was to allow local communities broad discretion to determine how much money was needed for funding education.  If the taxpayers were up for supplementing basic education funds, so be it.  As part of the McCleary decision, the Supreme Court found this was inequitable.  The primary effect of the McCleary decision is that the State is now required to fully fund basic education from state coffers, and cannot shift the burden to the local communities.  Of some concern, the McCleary court decision did not dictate, or even offer much guidance, as to how this was to be done.  That task was left to the legislature. 

WHERE DOES TSD REVENUE COME FROM UNDER THE NEW FUNDING MODEL?

School District budgets are complicated.  However, they are also relatively predictable.  The vast majority of the revenue for TSD comes from two sources: (1)State Money for basic education; and (2) Local Money for voter approved enhancements not falling within the basic education realm. 

The State money is based, almost exclusively, on enrollment, and makes up about 72% of the total TSD revenue.  The Local Money comes from voter approved levies and makes up about 10% of the total TSD revenue.  The remaining revenue comes from various sources that are, for the most part, pretty consistent and really do not create large variances in the budget. 

State Money.  Under current enrollment numbers, Tumwater receives about $58 million per year from the State to fund basic education.  The legislature has determined how much it should cost to fund basic education, and now divides up the money pretty much equally across the state.  The theory being that it should cost the same to educate a kid in Tumwater, as it does in Omak, as it does in Bellingham.  The money is actually allocated per staff “needed” which is determined by the number of kids enrolled.  For example, the State might say there should be 20 kids in a 4th grade class.  Therefore, if a District has 20 4th graders, it gets money for 1 teacher.  If the District has 30 4th graders, it gets money for 1.5 teachers—regardless of whether the District employs 1 or 2 teachers educating the 30 kids.  The same type of funding model is used for principals, counselors, nurses, janitor, etc.  How many a District needs is dependent on enrollment. 

  For what it is worth, TSD enrollment is down about 250 students this school year.  In very general terms, 250 fewer students probably equates to at least a $2 million revenue reduction.    

Local Money.  A few years ago, our voters approved a levy that allows TSD to collect roughly $16 million (roughly 3% of assessed property values) in property taxes per year from citizens that live within TSD boundaries.  However, with the new funding model, the legislature reduced the ability for local jurisdictions to tax citizens and supplement education funding, effectively capping the amount Tumwater can collect at 1.5% of assessed value.  The result is that TSD is set to receive an estimated $7 million less each year than the voters decided to give to TSD.  In addition, there are some pretty strict parameters as to how the levy money collected can be used.  See charts below. 

Many education leaders, including Tumwater’s own Chris Reykdal(Superintendent of Public Instruction), are putting forth creative “fixes” to allow districts to collect a larger share.    http://www.k12.wa.us/Communications/PressReleases2018/ProposedLegislation.aspx.  To date, I am unaware of any significant legislative changes to the funding model so we are stuck with the above reality for the forseeable future.   

WERE ALL DISTRICTS NEGATIVELY IMPACTED?

No, for some the new funding model provides more revenue.  Tumwater fell into a little bit of a perfect storm that was caused by two primary factors, and was among the hardest hit.

First, from a historical perspective, Tumwater citizens have been generous, and routinely supported education levies and bonds.  The new funding model is designed to prohibit local communities from funding basic education to any degree.  Thus, Tumwater is precluded from collecting money to fund basic education even if its citizens want to be generous or think doing so is worthwhile.   

Secondarily, the funding model provided some “make up” money based upon cost of living and teacher experience in certain districts. 

Unfortunately, at least on this go around, TSD missed the numerical thresholds in each category and is not receiving any of that money.  Notably, our neighbors in North Thurston and Olympia are each receiving extra funds.

IS THE STATE GIVING TSD ENOUGH MONEY TO FULLY FUND BASIC EDUCATION?

The answer is a clear and definitive “no,” at least not at the level Tumwater citizens have grown accustomed to in the past.  One of the most illustrative examples lies with the gaps in the funding model for employee costs.  Remember that the State has essentially prohibited the local collection of revenue for employee costs.  All money for employee costs is supposed to come from the State. 

According to TSD, the average teacher in Tumwater makes about $81,727 a year.  However, the state has allocated about $65,216 per teacher.  In TSD, principals earn, on average, about $118,000 per year.  The legislature is funding about $96,000 per principal.  The same type of deficiency is present for virtually every other category of employees as the chart below shows. 

It is true that TSD’s revenue increased under McCleary, probably in an amount that is pretty comparable to the increased expenses that were a byproduct of the new contracts for employees.  However, the State has now prohibited TSD’s practice of supplementing its expenses with money from the local levies. If TSD were able to collect local money, the budget, like most years, would have likely fallen into place, even with the increased employee costs.       

This practice is not unique to TSD and many districts are facing a similar situation.  For more information see https://www.esd112.org/schoolfunding/.

DOES TSD HAVE A RAINY DAY FUND?

Yes.  TSD maintains a “General Fund”—which is really a savings account.  Think of it as a cushion.  Charged with certain fiscal responsibilities, TSD cannot live paycheck to paycheck, spending what it has each month.  Thus, a rainy day fund is maintained.  The balance in the account fluctuates, but the average general fund balance over the past few years has been around $9 million.  The largest deposits occur in October and April. Notably, at a recent Board Meeting TSD elected to reduce the amount of funds required to be maintained in the general fund, and use some of the rainy day funds to make up the budget deficit this year.  This was a “band aid” to bridge the deficit for the 2018-19 school year.  With the reduced limit, the ongoing minimum general fund balance will likely be reduced to around $4 million.   

WHAT IS THE PLAN?

Just to be clear, the budget dilemma we are now facing was not caused solely by TSD and its employees reaching new contracts.  That being said, like many organizations, employee costs are one of the largest expenditures for TSD.  Accordingly, it would be disingenuous to argue that paying people more has not contributed to the budget dilemma. 

It is unfair for TEA(or WEA) to say that TSD has plenty of money.  It is also unfair for TSD, or anyone else, to blame the budget dilemma on the employees for negotiating labor agreements.  TSD and the labor unions entered into the agreements, and should have had a pretty good understanding at the time of the consequences.  The upside is that we can recruit and retain higher quality staff.  The downside is that, until a revised funding stream appears, we are going to have to cut some corners, be  creative, and figure out a way to use the limited resources we have to provide the best environment we can for our students.

It is a matter of priorities.  TSD’s revenue is limited, and insufficient to fully fund what we have historically funded.  We need to prioritize how we want to spend money.  Paying staff a fair and negotiated wage is a noble objective, as is having small class sizes, as is having up to date technology, as is having great extra-curricular activities, and so on and so on.  TSD needs to come together as a community, and make some pretty difficult decisions, at least in the short term. 

At recent meetings, the TSD Board has discussed proposed cuts, and some of the decisions will need to be made within the next 60-90 days.   Meeting minutes can be located here.  https://www.tumwater.k12.wa.us/Page/8625

We are hopeful TSD, TEA and the rest of the Tumwater community will work together and engage in thought provoking brainstorming sessions where an exchange of ideas can occur to reach a solution that works best for the Tumwater community.   We would love to hear your questions and/comments.  We will continue our investigative work and update periodically. 

The information appearing in this blog was primarily compiled from the following sources: (1) TSD presentations at Board Meetings; (2)OSPI; and (3) knowledge gleaned during my tenure on the TSD budget committee.   

We are always looking for feedback, suggested topics or guest articles.  Feel free to email me at contactus@citizensfortumwaterschools.com

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