As Janet Suppes described last week, school districts, like most people, try to save for a rainy day — in case a school roof falls in and a new one is needed ASAP. The general rule of thumb is to have 5 percent or more of annual costs stocked away. In budget terms this is called "ending fund balance," more commonly we hear it referred to as "reserves." In the 2009-10 school year (most recent data available statewide), districts averaged reserve funds of 10 percent of operating costs. About half of reserve funds were set aside for specific reasons (e.g. inventory or debt services).
And then the state's economic situation went from bad to worse. Having just finished dealing with a $12 billion hole for 2009-11, the state was next faced with another large deficit for the 2011-13 biennium, this time totaling $6 billion. To make ends meet (Washington law requires a balanced budget), the Legislature made a number of cuts, which included reducing educator salaries by 1.9 percent.
But here's where it gets tricky, and how paragraph #2 relates to paragraph #1 — most districts have multi-year contracts with staff, signed prior to the passage of the 2011-13 budget and the 1.9 percent salary reduction. Included in these contracts are salary schedules for staff, which would not have included the 1.9 percent salary reduction. So what's a district to do?
As Beth Richer highlighted, districts are approaching the cuts in various ways. Some are reducing staff positions. Others are opting to open contracts and renegotiate pieces ranging from staff development days to salaries. But many are opting to augment at least some of the cuts from their own reserve coffers. For example:
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Federal Way Public Schools – Made up cuts through staff and program reductions, increases in class size and use of reserves. The use of reserves has drawn unrestricted reserves down to about 2 percent of operating expenditures (from 7 percent in 2009-10).
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Tacoma Public Schools – Made up cuts largely through use of reserves, drawing reserves (reserved and unreserved) down to less than 5 percent of operating expenditures (from 15 percent in 2009-10).
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Ferndale School District – Made up cuts through staff reductions and use of reserves. The school board has set a goal of maintaining undesignated reserves of $2 million (about 4 percent of operating expenditures) and kept that intact while drawing down other reserve funds, leaving the district with an overall reserve fund of 5 percent of operating expenditures (from 7 percent in 2009-10)
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Spokane Public Schools – Made up cuts through administrator staff and salary reductions, and use of reserves. The use of reserve funds draws down reserves to 5 percent of operating expenditures (from 8.5 percent in 2009-10).
This isn't to say the sky is falling…yet. When it does, will our districts be financially able to rebuild their way out of the rubble?
Heather Cope is the Policy Director for the League of Education Voters.
