Tumwater School District projects tighter budget after state changes, eyes levy certification as enrollment falls

Tumwater School District staff told the board at a May work session that preliminary, pre-OSPI budget estimates and changing enrollment patterns leave the district facing continued cash pressure and push the board to decide whether to certify a levy increase already authorized by voters.

The presentation outlined why the district cannot wait for final Office of Superintendent of Public Instruction (OSPI) calculations before moving forward with budget planning: staff used legislative outcomes and local enrollment data to produce a best-faith projection of revenues and expenses for 2025–26 and said the numbers could change when OSPI publishes final figures.

Staff presented the most immediate problem as a decline in average daily membership: the district reported a net drop of about 65 full-time-equivalent (FTE) K–12 students compared with the same month last year, driven primarily by losses at the secondary level and by students moving into programs such as Running Start, New Market, and ALE. Staff said the K–12 decline reduces state revenue tied to FTE and has an outsized effect because where students are served (regular schools versus alternative/college programs) affects funding streams.

On potential new revenue, staff said the legislature’s changes allow the district to collect an additional $500 per student in the 2025–26 certification cycle; staff estimated that capturing the full levy lift would yield about $1.7 million next year. Staff also projected a 3.3% CPI-based levy increase worth roughly $350,000 and identified other state funding changes — including increases in special-education multipliers and adjustments to MSOC (materials, supplies and operating costs) rates — that together add several hundred thousand dollars to more than a million dollars in new revenue for specific programs.

At the same time, staff emphasized those increases do not close the district’s structural gap. Staff presented an end-of-year revenue projection of about $115.4 million and an expense projection near $116 million for the upcoming year, and said district leaders have already eliminated roughly $6.6 million through staffing and program changes earlier in the process. The district’s target is to regain a minimum 6% ending fund balance (presented as roughly $8–8.5 million). Staff said one feasible scenario is adding approximately $3 million to reserves and maintaining disciplined operations to reach that target over time if assumptions hold.

Staff also reviewed several program- and policy-level impacts from the legislative session: (1) changes to special-education funding that raise the excess-cost multiplier and lower the Safety Net threshold — staff noted a current Safety Net claim of about $1.48 million and said the lower threshold should make it easier to claim additional expenses in future years; (2) a technical preschool/TK (transitional kindergarten) funding cap tied to claimed FTE, which will limit the district to the 17 FTE it reported this year even though it served 32 TK students in practice; and (3) modest increases in CTE, Running Start and other program rates, which are recorded as revenue and matching expense but do not necessarily improve net position because much of that money flows back out as payments to partners such as community colleges.

Board members and staff discussed the district’s interfund loan: staff confirmed the loan will require interest payments (the loan interest was described in discussion as roughly 3–3.6%), and noted the district is tracking cash flow both with and without that loan. Staff said the district will need to repay certain interfund loans by the end of the school year (August 31) and recommended continued monitoring of cash collections, including levy receipts that historically include a large May payment.

Staff outlined process steps and timing. After the work session staff planned two public hearings in June and recommended the board consider certifying the levy amount before final budget adoption — certification would formally set collection levels the district can seek from taxpayers and, staff said, would be consistent with the legislature’s authorization that allows the district to collect the additional $500 per student. No formal motions or votes were recorded during the work session.

Board members raised operational concerns tied to enrollment shifts: several members asked whether districts can recapture students lost to Running Start or career-technical programs by offering more integrated CTE and flexibility at district high schools. Staff said these are district planning questions for a longer-term discussion and noted that some changes in where students are served can persistently change revenue flows and staffing needs, particularly at secondary schools.

The presentation closed with staff warning that the projections are preliminary and contingent on OSPI’s final data and on legislative follow-up. Staff asked the board to weigh the options presented — balancing short-term cash management (including possible interfund borrowing) with the goal of rebuilding reserves to the 6% policy level.