Good afternoon,

This is an update for all of our staff regarding the budget situation and planning process for 2008-09. With the adjournment of the Legislature last Thursday, we now know the details of the State budget that has been forwarded to the Governor for her signature.

The State’s recommended budget has several significant financial impacts for 2008-09 for school districts across the state:

approves a 4.4% Cost of Living Adjustment (COLA)
approves an average 2.64% increase in retirement contribution rates paid by the employer
eliminates funding for the Promoting Academic Success (PAS) program (extended support for struggling students)
makes numerous smaller adjustments in funding for specific categories of expenditures

What does it mean for Edmonds School District?

The largest share of our district general fund budget (over 86%) pays salaries, taxes, and benefits for staff. When salaries and related costs are increased, the impact to our general fund is significant.

When the biennial budget was adopted by the Legislature one year ago, the 2008-09 Cost of Living Adjustment (COLA) for school district employees was budgeted at 2.8%. With the budget approved last week, that COLA has been increased to 4.4% and mandatory employer retirement contribution rates increased by an average of 2.64% (our staff are members of 6 different retirement plans, and the rate increases vary by plan).

In our district and in most districts across the state, all employees receive the same COLA, regardless of whether their salary is funded by the state or not. Participation in the state retirement system is mandatory based on certain criteria, so employer contributions to the retirement system are also mandatory. You may remember from previous years that with each % increase in COLA and retirement rates approved by the Legislature, Edmonds School District bears the cost of providing those same increases for the employees that are not funded with state or federal monies. For the coming year, we calculate that every % increase in COLA and pension rates equates to an increased cost for us of $325,000. With the combined effect of 4.4% COLA and 2.64% retirement contributions, our 2008-09 budget needs to cover $2.28 million in local costs for increased salaries and taxes.

In addition, the elimination of state funding for the PAS program reduces our state revenue by $340,000.

What other factors are impacting our 2008-09 budget?

Our negotiated agreement with each employee group includes a commitment to make “mid-point” adjustments to salaries to bring compensation to the average level of a specified group of neighboring districts. Last week we completed the calculations of mid-point adjustments for 2007-08, and the total cost for all groups is $1.5 million. This amount is paid in 2007-08 and then becomes part of the base salary for 2008-09, so we need to add it to our list of expenditure impacts for the 2008-09 budget.

We are also projecting a continuation of the recent decline in enrollment, with 256 fewer students next year. Each student generates approximately $5,000 in state revenue.

The combined effect of the state COLA and pension rates, mid-point compensation, enrollment decline and other impacts is that we will need to reduce our expenditures for next year by roughly $4.2 million to cover increased costs, primarily in the area of compensation.

How are potential reductions being identified to balance the budget?

Superintendent’s Staff recommended and the School Board agreed in January we would NOT change the staffing ratios for basic education classroom teaching positions for next year.

All other areas of the General Fund are being carefully examined to determine the best way to reduce costs with the least impact to our students, while meeting our bargained commitments and other legal mandates.

What is the timeline and process for determining budget reductions?

Superintendent’s Staff has been reviewing the General Fund budget for the past several weeks and researching potential areas for reductions. The list developed by supt.’s staff will be forwarded to the Budget Advisory Council (BAC) for input and feedback, and then presented to the P-12 administrative team in April. BAC will refine the list of proposed reductions based on the feedback from P-12, and a recommendation will be made to the superintendent. The superintendent must ultimately recommend a balanced budget to the School Board in late June or early July, with final adoption of the budget required by state law by August 31^st.

Individuals whose positions may be affected by reductions will be notified by their supervisors, just as soon as possible. To the extent we can and still allow time for communicating first with those affected, we will share information as it becomes available.

In closing

In recent years we’ve experienced the compounding effects of declining enrollment, increasing personnel costs, and weaning our district from the intentional use of reserves to balance the budget. At times it is discouraging to work so hard, and still feel the uncertainty each year of having the financial resources necessary to support the incredibly important work of public education.

In spite of the difficulty all districts face with inadequate funding, it’s important to remember there has been demonstrable support from the people of Washington for public education in the past few years. Voters have approved increasing compensation through regular Cost of Living Adjustments, funding for I-728 and early learning programs, and allowing schools to pass local levies with a simple majority. Our local voters have supported our program/instructional levy, construction bonds, and capital/technology levy, and we’ll be asking them to renew the capital/tech levy again this May. These are important acknowledgements that most people in our state and local region support schools and appreciate the individual and collective efforts of public school employees. We just need the Legislature to adopt a more stable funding mechanism for essential state services. (Just a note: our District is still part of the group suing the State to adequately fund Basic Education . . . the case is now scheduled to begin hearings in March, 2009).

I’m sorry it’s another tough year for budget planning. It’s always challenging to make the adjustments necessary by June to implement decisions completed by the Legislature in March!

Thanks for all you do, and please feel free to share any ideas you think should be explored for balancing next year’s budget.

Marla Miller

Assistant Superintendent, Business and Operations

Ext. 7036