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SKSD waiting on Legislature, make plans to meet payroll
The State Legislature was called back into extra special 30-day session July 12 and school districts across the state are evaluating their current financial status.
Legislators have 15 days to finalize a budget before the beginning of new two-year budget cycle. If no budget is approved by June 30, school districts will likely be forced to lay off employees.
During a June 13 meeting, South Kitsap School District officials discussed actions the district would need to take in case of a shutdown.
Interim Superintendent Bev Cheney told the board if the Legislature doesn’t pass a budget, SKSD may not be able to meet payroll in July.
Cheney told the board a public records request was made of the Office of Superintendent of Public Instruction for the names of districts who do not have bond capital funding to use to fill in a gap in state distributions.
SKSD is one of 115 districts who would need to apply for a line of credit to pay employees.
“Unlike other neighboring districts in the county that will not be able to meet payroll as well; however, unlike them we do not have any bond or capital funds,” said Cheney.
She said SKSD would need to borrow money if the State Legislature doesn’t pass a budget in order to make July’s payroll. The board gave Cheney approval to direct the district’s chief financial officer, Sandy Rotella, to move ahead with plans if SKSD needs to borrow money.
Rotella would work with the Olympic Education Service District on securing a loan or line of credit. The district could look at borrowing money for the next two months which could be between $3 to $4 million. SKSD will get some money from the state for May and June.
“Our operating expenses are more than $7 million a month,” Cheney said.
She said the state doesn’t allocate its funds to districts in equal amounts.
“We would see the highest amounts (from the state) in the July and August timeframe because the state will not give as much to districts when they are collecting property taxes,” she explained.
Cheney said SKSD has estimated $3 million, but $6 million is need for payroll.
“We only have about $1 million in capital and there is no other place to get it,” she said.
Cheney also recommended to the board that the district put a hiring freeze until SKSD finds out how much funding will be coming from the state.
Board member Greg Wall asked if the hiring freeze would affect employees who were recalled after the RIF (Reduction In Force) notice. Cheney said some employees could be affected by the hiring freeze.
“This issue with the government possibly shutting down or us having to borrow money, this is a total different area than we have ever been before,” Cheney said. “We need to be able to budget for stability in times of financial fluctuation, or whatever you want to call it.”
Cheney suggested they work with Dr. Michelle Reid — the incoming superintendent — on a short and long-term budget plan focused around SKSD’s beliefs and values, but also have some safeguards to maintain stableness in times of economic fluctuation.
Cheney said during her final weeks she’ll focus on the basic foundation of the overall plans which will be handed off to Reid to develop a 30- to 90-day plan and eventually a three- to five-year plan of budgeting and planning processes.
She told the board it needs to look at the putting reserves as high as 7 percent because it takes about $7 million a month to operate the school district.
“We need to make sure our employees are paid,” Cheney said.
She said until the state Legislature can create a budget, SKSD needs to post its budget by July 10.
Board member Kathryn Simpson said she wants the district to work on meeting July’s payroll on its own, but secure a loan for a two-month pay period if needed.
The board will later vote on a resolution concerning authorization to borrow money, if needed.
On June 10, Gov. Jay Inslee called another special session of the Legislature to finalize a state budget.
“If they (Legislature) haven’t figured this out by Sept. 1, I don’t think it’s prudent to start school,” Simpson noted. “We would be accruing payroll costs for next year with no budget. We have an obligation to every teacher and classified staff that worked through this school year, and that includes a July and August pay check. I want us to go out and get money to meet our obligations.”
The next school board meeting is July 2 because of the Fourth of July holiday.