The Tahoma School District avoided a potential budget pitfall thanks to a few years of financial planning that will help it close a gap in the 2019-20 school year budget.
The Tahoma School District Board of Directors unanimously approved this year’s budget during a special meeting on Aug. 6. The budget will collect over $127 million in state, local and federal funds, but it will spend $130.5 million plus another $1.38 million on loan payments and technology. That left a $4.88 million difference. Tahoma School District Assistant Superintendent Lori Cloud said the efforts of the district to build up a fund-balance reserve is literally paying off, and will help balance this year’s budget.
Cloud has been with the district for 17 years and is also the district’ financial director.
“Think of it as your checking account balance,” Cloud said. “With the major changes we have been experiencing in Tahoma since … 2012, we started having these conversations about needing additional spaces and facilities. Once the bond measure passed (in 2013) we had to start planning on what those costs looked like. At the same time the legislature was making a lot of changes … so trying to be prudent in our spending we started building our fund-balance so we were able to respond and react.”
A large majority of the budget, 82 percent, is being spent on salaries and benefits for district staff, teachers and leaders.
According to budget documents, $107.16 million is being spent on salaries and benefits. Just over $23.3 million is budgeted for materials, supplies and “other costs” (MSOCS); another $1.38 million is budgeted for loan payments. The fund-balance reserve started with a total of $30.12 million and will end with an estimated $25.23 million for future budgets.
Growing staff, shrinking class sizes
Over the years the fund-balance has grown. Since 2013 Tahoma has built new school facilities, including the new high school, and the state has passed the McCleary Act, which created a list of challenges for districts across Washington.
Unlike some neighboring districts, which have faced staff cuts and growing class sizes, Tahoma has kept steady in turbulent waters and is now able to use the growing fund-balance to keep teachers and staff while also minimizing class sizes.
The district’s closest neighbors, Kent, has been grappling with a budget shortfall, teacher protests and more. According to the Kent Reporter, in May the district did not renew contracts for 21 provisional teachers while it faced a $9 million budget hole for the 2019-20 fiscal year.
Over in Tahoma, more families are moving towards a district already experiencing steady growth, which is filling the schools coffers a little bit more each time.
“Most of the district’s $106,782,194 in state revenue is based on student enrollment,” a school district press release states.
State apportionment is based on current enrollment numbers, Cloud said, and the district has seen predictable growth in the last three years.
“Maybe not in the areas we were expecting the growth to be, but it’s been steady,” Cloud said. “As growth continues that increases in our funding, which gives us additional revenue for staff.”
Another source of revenue, which cushioned the fund-balance reserve, had to do with K-3 funding. After the state decreased mandatory maximum class sizes for younger elementary students, it also gave an incentive by providing extra funding to districts.
“Until this year they provided that funding without requiring class sizes to be at that level,” Tahoma School District Spokesperson Kevin Patterson said. “We are not quite there yet, on average we are about one student per class above the state’s limit.”
The district may lose some funding in the future since it did not meet the requirements, but new staff hires will help attain that goal.
“We’ve hired additional teachers to bring class sizes down,” Patterson said. “We are getting most of the money but we are not 100 percent yet.”
How Tahoma handled the McCleary challenges
The McCleary Act affected school districts differently, but mainly it affected how much revenue districts can pull from local levies. Before McCleary was passed, districts like Kent and Tahoma had to rely on taxpayers to vote for levies and bonds to solely fund certain things like extra staffing, technology and maintenance.
“The parameters around how that money was spent was different than they are now,” Patterson said. “The state then placed limits on local levies. The max (a district) could collect until now was $1.50 per $1,000 (taxable home value).”
“McCleary was a complete reconfiguration in our funding model,” Cloud said.
Not only was the district forced to collect less money than voters approved, it was forced to use the money on anything but what the McCleary act defined as “basic education.” So far, many school leaders in Washington are still unclear on the state’s exact definition of “basic education.”
“We asked for that, we asked for clarification … clear definitions. Unfortunately, not only did definitions not come about, they also loosened the parameters on what levy dollars can be spent on. But they are not clear on what basic education is,” Cloud said.
During the most recent legislative session, state lawmakers listened to complaints from districts who were losing money and raised the levy cap from $1.50 per $1,000 to $2.50 per $1,000 of taxable home value.
“But there is still very strict parameters on where it can be spent,” Patterson said.
The Tahoma district is under a current EP&O Levy, and is only collecting $1.50 per $1,000 taxable home value. The school district is preparing to go to the voters for another levy in February, 2020, but the amount of the levy has yet to be determined.
Planning for Tahoma’s financial future
New state budgeting requirements also require districts to create three-year budget forecasts. With a potential levy in the works, and continued challenges at the state level, Cloud decided to be conservative with the district’s estimates. The board chose not to include potential revenue from a future levy in the estimates.
According to budget documents, Tahoma School District estimates it will receive $122.43 million in revenue in 2020-21 and will spend $134.22 million the same year, forcing the district to pull over $11.7 million from the fund-balance reserve. But in 2021-22, the district is estimating $119.98 million in revenue along with $139 million in expenditures, leaving a $19 million hole. If estimates are correct only $13.44 million will be available in the fund-balance reserve, which would still leave the district a $5.65 million gap. This could be solved with a future levy.
Cloud says another challenge, and possibly the biggest challenge, is how Tahoma will continue to compete with surrounding districts.
“With the $.150 (levy cap) we currently have and the capacity to go higher, a lot of the districts we compare ourselves with or compete with have the capacity to go out for the full $2.50 (levy cap). The whole idea behind McCleary was to make the field fair and equitable, but I don’t feel like its done that,” Cloud said.
Tahoma School District’s tax base is mostly residential, and includes a small boundary, which restricts how much it can raise.
“When we put a levy on the ballot, we ask people to tax themselves and it falls on homeowners,” Patterson said. “It’s not being shared, like it would in Renton, Federal Way or Kent, with a large commercial tax base. So homeowners pay a disproportionate amount of property taxes than others.”
One example is the Snoqualmie School District, which has similar boundary sizes to Tahoma. If both Tahoma and Snoqualmie taxed a levy at $1.50 per $1,000 taxable property value, Snoqualmie would collect more funding due to its larger tax base.
For now the board is looking at future numbers and deciding how much it wants to collect to off-set any future gaps in the budget.
This year Cloud and the district are shrugging off some budgeting tension, thanks to prudent financial planning which resulted in the cushioned fund-balance.