Peninsula School District wades through murky McCleary funds

Karen Andersen, the Peninsula School District Chief Financial Officer, is not taking a summer break.

Instead she is navigating through new territory since the McCleary eduction-funding legislation was adopted during the most recent legislative session, making changes to this year’s budgeting process.

Andersen and her employees have been working hard the past couple months and will continue to work on the 2018-19 Peninsula School District budget, which will be adopted on Aug. 21.

McCleary refers to a 2012 Washington Supreme Court Decision where the court ordered the state to fully fund K-12 public schools as required by Article IX of the state constitution.

“Part of that discussion is, ‘What is basic education?’” Andersen said. “So the Legislature wrestled with that for a long time. What does it mean by fully funding?”

The McCleary legislation sets aside more money for “basic education” programs.

“Anything we are not getting state dollars for and anything over that state allocation, we are considering ‘enrichment,’” Andersen said. “We are playing it loose right now.”

Programs such as special education, athletics and clubs are being considered enrichment and will be funded by federal and levy dollars.

The district also faces another challenge since the district’s maintenance-and-operation levy is going to expire in 2020. The tax rate of the levy in 2019 will be $150 per $100,000 taxable home value. Since the failure of the $220 million bond in April, if no other capital measures pass by 2020, the district’s tax rate will be $32 per $100,000 taxable home value.

Andersen said McCleary does not fund facilities, new building projects or physical maintenance on current facilities.

Bargaining with teachers

The biggest change the district is dealing with is the state’s teacher salary schedule, which dictates how much teachers are paid based on experience, time at the district and level of education.

The district has allocated 2018-19 teacher contracts, without a stated salary, which has sparked some controversy in the district. Andersen said the norm for the Peninsula School District is to include salary amounts on contracts, but since the change in funding and the need for a new salary schedule, this year’s contracts did not include a dollar amount.

The Peninsula School District Board of Directors and the district’s administrators have heard complaints from teachers and the Peninsula Education Association, the local teacher union, about the lack of concrete salaries. Andersen said salaries are not required to be a part of teacher contracts, and since the district has to decide on a new pay schedule, adding salaries to the contracts was premature.

“We used the schedule to compete with other districts or to maintain and retain good teachers,” Andersen said. “There is no more state salary schedule, so we all have to create our own salary schedules.”

In the past maintenance-and-operation levy money was used to pay teacher and other staff salaries, Andersen said. It was used to maintain school programs as well. While the state funded a certain number of full-time teacher and staff members, based on the district’s number of students, the actual number of teachers and staff was higher. Also the pay rate the state offers teachers, an average of $50,000 to $60,000 a year, was lower than market salaries. Meaning the money the state sent was only funding part of the salaries. So the district used levy money to pay for those teachers.

“We pay for more staff than what we get,” Andersen said. “A perfect example is custodians. Say we get 23 state funded, but we have 56 in our buildings. That’s just an estimate. Then the difference is funded out of the levy. But because of the rate of pay the state sets, they are only paying for 11 full-time custodians.”

Right now the district is bargaining salaries and contracts with teachers while simultaneously creating a new salary schedule.

“It depends on what we value,” Andersen said. “The legislature gave us some parameters, so there is a minimum salary, and after five years, you have to be receiving 10 percent above that. And there is a maximum salary. But what is in between that? That’s what we have to work on.”

Working through the transition

Andersen said the other big challenge while creating this budget is creating a brand new “sub-fund” which will be used to track all local revenues, including local levy dollars.

“We have to link up expenditures to those revenues,” Anderson said.

State education auditors created this requirement for this year, which the state calls a “transition” year, to see how local revenue is being spent and what sources of local revenue the district receives.

Auditors are now asking the districts to begin projecting what it will cost to run the district three years out, another new step in the budgeting process.

“This was supposed to be a transition year,” Anderson said. “So in 2019-2020, they were going to give us the new money. So we were going to have time to develop a salary schedule and get ready for 2019-20. The Supreme Court said the legislature needed to support basic education by Aug. 1 2018. So we have all these additional funds, but this is still being considered a transition year.”

Andersen said preliminary budgets have been set, but the board will not adopt the official budget until Aug. 21 during a public meeting.

Preliminary budget numbers

The Peninsula School District has not completed a preliminary budget for the 2018-19 general fund, but presented a preliminary budget for the district’s four sub funds during the June 28 regular meeting.

The Capital Projects Fund, which supports building and maintenance projects, had a preliminary budget set for $4.5 million, a drop from the $5.8 million in the 2017-18 budget. After 2019 the Capital Funds Budget is expected to drop to $1.6 million. In the 2020-21 estimated budget, the Capital Projects Fund will potentially drop to almost $631,000 and in the 2021-22 budget it is expected to drop to just over $142,000.

The preliminary Debt Service Fund budget, used to make payments on past bond measures including interest and principal, is set for $3.09 million, more than the $2.8 million from the previous year. The fund is expected to rise again to $3.19 million in the 2019-20 budget and then drop to $920,000 in the 2020-21 and 2021-22 budgets.

The preliminary Associated Student Body Fund, which gives money to student clubs and activities, is estimated to be $793,000 for the 2018-19 school year. This is a drop from the $751,000 budgeted for the 2017-18 school year. The budget is expected to rise to $860,000 for the next three years.

The Transportation Vehicle Fund, which is used by the district to purchase and repair school buses, preliminary 2018-19 budget for $1.05 million, a drop from the $1.23 million in the 2018-19 school budget. The district estimates the budget will drop to $753,000 by the 2021-22 school year.