Othello School District projects multi‑year deficit, urges levy vote to blunt shortfall

Othello School District Superintendent Dr. Perez on Thursday presented a 2025-26 budget that projects a falling fund balance over a four-year forecast and warns the district could run into cash‑flow problems without additional revenue or continued reductions in staff and expenses.

Dr. Perez told the board the district's beginning fund balance in the budget is $13,800,000 and that the proposed 2025-26 revenues of roughly $84.5 million minus planned expenditures would reduce the ending fund balance by about $2,600,000. The presentation included a four‑year forecast showing the district's ending fund balance dropping to an estimated $319,000 by 2028-29 in a scenario that assumes current staffing and that a supplemental levy passes.

The nut graf: the board was shown that without structural change or new, sustained revenue the district's reserves would fall below recommended levels and could trigger binding conditions under state rules. Dr. Perez said the district currently projects 46 operating days of reserve in 2025-26 and could fall to 1.2 days by 2028-29 if no action is taken — well below the State Auditor's recommendation of about 60 operating days.

Key details from the presentation: the 2.5% implicit price deflator (IPD) set by OSPI accounts for part of a roughly $2.3 million revenue increase in 2025-26, but rising personnel costs (including step increases) and declining federal grant carryover reduce that benefit. The district noted a $7.4 million debt service balance as of Dec. 31, 2024, and said no transfers between funds are planned for 2025-26.

Finance staff and board members traced the shortfall to a combination of declining enrollment and rising personnel and benefits costs. The presentation highlighted that the district expects enrollment of about 4,023 students in 2025-26, down from recent years, and that while the district has reduced roughly 17.5 certificated full‑time equivalent positions compared with last year, payroll and benefit increases mean total expenditures decline only modestly.

"This budget reflects the really hard choices that we have made the past couple of years, and this one coming year is gonna be even harder," Dr. Perez said.

The superintendent and finance staff explained several revenue factors: a temporary boost under House Bill 2049 tied to local effort assistance if a levy passes, limitations on carryover of federal grants, and the prototypical funding model used by OSPI. They also noted uncertainty in federal funding given congressional activity in Washington, D.C., that could reduce federal special‑purpose revenues.

Board discussion acknowledged the district has used reserves and one-time ESSER resources in recent years to smooth the transition from higher staffing levels following pandemic‑era funding. Several directors emphasized that the district must continue rightsizing staff while protecting instruction.

The board was told next steps: a public budget hearing scheduled for Aug. 25, a formal budget resolution that night, and an Aug. 31 submission deadline to the Office of Superintendent of Public Instruction (OSPI). Dr. Perez said the Educational Service District (ESD) has reviewed the budget.

Ending: the presentation concluded with a multi‑year forecast and a clear choice presented to the board: reduce staffing and recurring costs further, seek contractual concessions, or rely on additional state or local revenue. The finance team asked the board to share the materials with community members ahead of the Aug. 25 hearing so residents can review the forecast and levy implications.