Pasco district leaders propose temporary reserve cut and staffing attrition to close $6.9M shortfall

Pasco School District officials told the Board of Directors they are projecting a roughly $6.9 million shortfall this school year and recommended a multiyear strategy that would temporarily lower the board‑mandated unrestricted fund balance and pursue staffing reductions largely through voluntary attrition.

The steps matter because the proposed approach aims to avoid immediate layoffs while aligning district staffing and spending with a slower enrollment trend and rising operating costs, but it would reduce the district’s financial cushion and could affect credit ratings and future borrowing costs.

Executive Director of Fiscal Services (presenting as Dr. Castilleja) said enrollment came in lower than expected and several cost lines—utilities, insurance and fuel—have risen. “When all is said and done, the long and short of it is, the projections at this point, it's looking at like we will be short about $6,900,000 on our budget when we're all done with the 20 four‑twenty 5 school year,” he said.

Castilleja outlined the district’s fund‑balance picture: a total fund balance of about $24.2 million, with a board‑directed unrestricted portion of roughly $16.5 million (5% of operating revenues) and about $7.8 million held as designated assignments for specific purposes. The staff proposal illustrated reducing the unrestricted reserve to 2.5% (about $8.2 million) temporarily while pursuing $4–5 million a year in staffing reductions through attrition.

Assistant Superintendent Sarah Thornton said staffing is roughly 86% of district expenditures and explained why the district favors a phased attrition approach over immediate layoffs. “Addressing staffing through voluntary attrition is less disruptive overall to the economic health of the community and the families that we serve,” she said, noting historical attrition patterns that have yielded certificated and classified departures in prior years.

District presenters noted additional fiscal factors: a potential infusion of one‑time state legislative funds (roughly $50 per pupil statewide) and uncertainty around federal grant funding that currently pays for about 164 staff positions. Staff also flagged that the district’s upcoming levy planning will affect 2025–26 revenue; slides presented projected levy growth from about $29.68 million in 2025 to $34.13 million in 2026 as a positive contributor to the next fiscal year.

What the board will be asked to decide: district staff said they will return to the board at the May 27 meeting seeking direction on which of two narrowly defined options to use to close out 2024–25: (1) reduce designated assignment balances, or (2) temporarily reduce the board‑mandated unrestricted fund balance from 5% to 2.5% (the staff recommendation). The district emphasized the recommendation is temporary and that staff would return annually to reassess.

Potential consequences: board members asked about credit rating implications (a lower reserve can affect future bond interest rates), and staff acknowledged that a permanent spend‑down of designated savings would take longer to rebuild than a temporary reduction in the unrestricted reserve. Staff also cautioned that if federal funding were sharply reduced, the attrition strategy would not be sufficient and more immediate personnel actions could be required.

Formal action: None. The board did not vote; staff will present a request for direction at a future meeting.

Next steps: staff will return with a formal request for direction on May 27, provide more detailed scenarios for 2025–26 budget development and continue outreach about levy planning and community communication.