Peninsula School District previews 2025–26 budget; enrollment declines and state underfunding cited as drivers

Peninsula School District Chief Financial Officer Ashley Murphy and budget intern Logan presented the district’s proposed preliminary 2025–26 all‑funds budget during a public hearing on Aug. 19, detailing enrollment declines, revenue risks and spending pressures that the district says have driven the need for careful prioritization.

Murphy said the district’s K–12 funded enrollment used for the budget totals 8,208 students in 2025–26, down from 8,305 in the prior year. “That subtotal for K through 12 … is a pretty significant drop,” Murphy said, and she tied much of the loss to longer‑term demographic trends, including lower birth rates in the community.

The presentation said the district is projecting general‑fund revenues of $173.3 million and proposed expenditures of $178.8 million; budgeted beginning and ending fund balances shrink under the proposed numbers. Murphy said the district is projecting an estimated ending unrestricted/unreserved fund balance of about $7.4 million (roughly a 4.1 percent ending fund balance in the proposed budget), down from prior years. She told the board the district has used careful prioritization and one‑time funds to balance the budget for 2025–26 but emphasized that the current model is not sustainable without changes to state funding.

Key themes from the presentation:

- Enrollment mix and funding: The budget separates full‑funded K–12 enrollment (8,208) from categories that receive partial or no prototypical funding, such as Running Start and Open Doors, and from Alternative Learning Experience (ALE) students. Henderson Bay was noted to be transitioning to an ALE high‑school model in 2025–26; that changes how those students are counted and funded.

- Running Start and College in the Classroom: Murphy and staff said Running Start (students taking community college classes off campus) continues to reduce district apportionment dollars because the district must remit payments when the student takes college classes off campus. By contrast, “College in the Classroom” at high schools provides college credit on campus and preserves the student’s high‑school seat time and related funding. Staff said student scheduling preferences and asynchronous college schedules are major drivers of family choice between the two options.

- Federal funding uncertainty: Murphy said federal appropriated funds for Title programs and several grants were expected to be released for 2025–26 but that state and federal changes may convert some programs into block grants administered by OSPI in future years, which could reduce direct district allocations. “We were being told that we were not going to be receiving our federal appropriations… Here within the last 2 to 3 weeks the Federal government … decided to continue to pass them through,” Murphy said, while warning the allocation approach may change for 2026–27.

- MSOC underfunding and legislative context: Murphy explained that district spending on materials, supplies and operating costs has outpaced the state’s prototypical MSOC allocation by roughly $10.4 million and described recent legislative changes that added only modest per‑pupil increases. She said the district is active in statewide CFO and legislative groups pressing for formula changes.

- Staffing and contracting pressures: The presentation showed certificated FTE declining from 641.25 to 624.9 (budget‑to‑budget) while classified FTE rose in part because of newly created part‑time activity assistant positions. Murphy and Logan emphasized that shortages in specialized staff (e.g., OTs, PTs, nurses, SLPs) drive higher purchased‑services costs when the district must contract for services it cannot staff directly.

- SS&T transfer and accounting effects: The budget includes a $5 million transfer from the capital projects fund for safety, security and technology purchases; the transfer increases both general‑fund revenues and MSOC expenditures for 2025–26 and complicates simple salary/benefit percentage comparisons.

Murphy said the proposed general‑fund revenues increased by about $7 million from budget to budget, while expenditures increased by about $7.5 million. After the presentation the board opened a public hearing for comments and received none signed up on the budget; one parent later asked for follow‑up data on demographic transience and the effect of lost instructional seat time.

Murphy told the board the district will bring the final budget for approval at the next meeting (Aug. 26). No budget resolution was adopted Aug. 19; the public hearing was closed at the end of the presentation.