Superintendent's Preliminary Recommendation

Questions and Answers

SECTION C: Budget and Finance

1. What is the status of the school district's budget?

In Washington State, public schools are required by law to provide a free education for all students. Public schools must provide a number of specific services as well, including support for regular, special education, and bilingual students, as well as transportation for special education and homeless students, and some students attending low performing schools. Public schools must also ensure that all students attain certain academic levels under the federal government's No Child Left Behind Act (NCLB).

State and federal governments provide insufficient revenue to meet these requirements. In Seattle Public Schools, cuts must be made to existing services, or new revenue must be found to meet our legal and contractual obligations and to produce yearly balanced budgets. Since new revenues have not kept up with increasing costs, continued cuts must be made.

In addition to the crisis we face through federal and state underfunding of public education, for several years the district added to its own fiscal problems by building local programs and allowing ongoing expenditures to exceed revenues. These practices culminated in a $34 million budget problem that surfaced in the 2001-2002 fiscal year. The State Auditor reviewed the district's records and fiscal practices for any sign of misappropriation, and determined that no money had been stolen. During the fiscal years of 2000-01 and 2001-02, Seattle Public Schools spent more money than it could afford. As a result of an external audit of the district's financial practices, fiscal controls have been established to ensure that Seattle Public Schools always has a balanced budget. The School Board has also adopted polices on fiscal controls and on rebuilding the fund balance.

Our commitment to fiscal integrity obligates the Board and management to regularly and carefully review our fiscal condition. Given our current spending practices and our projected revenue stream, we know that we have a budget which is not sustainable over the long term.

2. What does the school district spend its money on?

Seattle Public Schools spends almost 59 percent of its money on direct teaching activities. These include teachers' salaries and benefits; instructional assistants; textbooks; classroom supplies; and extracurricular activities. An additional 9 percent is spent on teaching support. This amount encompasses expenditures for libraries; guidance and counseling; psychological, speech and hearing services; and health services.

A little over 7 percent consists of costs for activities related to the general direction, regulation and control of the affairs of the school district that are organization-wide. These include the School Board; the Superintendent's Office; legal services; human resources, payroll, and external relations; the business office; the supervision of food services, maintenance, custodial, and transportation services; and district-wide instructional programs.

Approximately 18 percent is spent on support activities such as student meals; maintenance, and custodial services; pupil transportation; information services, and warehousing.

The remaining 7 percent is spent on school administration, which includes salaries for principals; other school administrators; and school office support.

3. How big is the budget gap for 2006-07?

Based on current projections, the financial gap between anticipated revenues and expenses is $20.7 million for fiscal year (FY) 2006-07. Several large items contribute to this gap. One of the largest contributors is the use of $7.1 million of one-time funds, which include district reserves and grant carry-forwards from previous years. These funds are being used to balance the FY 2005-06 budget. Once expended, they will not be available to cover the same costs for FY 2005-06.

Another large contributor to the financial gap is $5.1 million for a negotiated pay raise for Seattle teachers, which is intended to create salary schedules which are more in line with those in neighboring school districts. Further, we expect that pension costs and salary step increments for all non-state funded positions will cost the district an additional $3.5 million.

Because it is still early to begin forecasting for FY 2006-07, another $5 million will be set aside for inflation and legislative changes. These costs typically include price increases for bus fuel, utilities, medical costs, pay increases authorized by the state, and other student program increases required by the state which are not fully funded. Historically, these costs have run between $4.5 million and $6.5 million each year.

School districts throughout the United States face similar financial challenges, and are consolidating schools or reducing their programs and services to function within their means.

4. Why are you considering school consolidation at this time?

School consolidation, beginning in the fall of 2006, is being considered as one strategy to reduce overhead costs and redirect resources to the classroom.

With an ongoing projected shortfall of revenues to expenditures, we are required to review every aspect of how we spend our money. In comparison to neighboring school districts as well as urban districts nationwide, Seattle Public Schools spends millions more than average on supporting small schools.

5. What other options are you considering besides school consolidation?

The district has been exploring both new revenues that might be available as well as expenses that might be reduced or eliminated to balance the district's budget. Current expenditures have been reviewed from several perspectives. Since many of the funds the district receives have specific requirements for expenditure, we began dividing the budget into what items could be eliminated to help balance the budget, and what services would result in revenue losses if they were no longer provided.

The result of this approach was a view of how flexible the district's budget is. We divided the budget into categories such as mandated programs and services (activities required by law), grants which are restricted to certain activities, items required by union agreements, and programs that generate revenue. The remaining areas in the budget were reviewed in detail to find activities or programs that, although valued by the district, were a lower priority than other items. This provided a starting point to identify which items could be eliminated or reduced to aid in balancing the budget.

Using this process, we have made significant cuts to central administrative services over the past three years. Items that are still possible to eliminate or reduce have been placed on a list called "Options for Building a Balanced Budget." This list, which includes school consolidations, transportation changes, and other ideas provided by staff, community members and Board members, is available for public comment on the district's website under the section on Shaping the Future of Seattle Public Schools. A tool is available on this site which allows the user to combine items and suggest ways to reduce the $20.7 million budget gap anticipated for 2006-07.

6. How much money would consolidation save overall?

School consolidation savings vary from building to building; variables include transportation costs, utility costs, staff costs, mothballing and other use costs and revenues. On average, we project that closing an elementary school would provide long-term savings of about $400,000 per year. Closing a middle school would save approximately $750,000 per year, and closing a high school would save about $1,000,000 annually.

7. How would school consolidation affect the Weighted Student Formula (WSF)?

Rebuilding fiscal integrity and making all schools quality schools will require us to change the way resources are allocated. Seattle Public Schools uses a unique allocation model, called the Weighted Student Formula (WSF). With declining revenues and increasing expenditures, the WSF has proven to be fiscally unsustainable. Therefore, modifications must be made to the way schools receive resources. To that end, the WSF is being reviewed for potential changes.