Peninsula School District CFO warns of multi‑year shortfall; board directed comprehensive update

Ashley Murphy, Peninsula School District chief financial officer, told the board Tuesday that the district faces structural revenue shortfalls driven by declining enrollment, the end of federal ESSER funds and limits in the state prototypical funding formula. Murphy said the district would have been insolvent without prior rightsizing and that, absent further budget changes, the district would exhaust its fund balance within three years and risk state “binding conditions,” a form of financial oversight.

“Had we not done anything in 22–23, we would have ended last year with just over a 1% fund balance,” Murphy said. “This year right now, we would not have had a financially solvent district. This district would have had negative $4,800,000.”

Murphy walked the board and the public through how Washington’s prototypical staffing formula funds positions (CAS, CIS, CLS), the district’s current funded FTE versus actual staffing, and the resulting “overage” the district must cover locally. She said the state funds a staff “formula” rather than the district’s negotiated pay, noting Peninsula’s experienced workforce and negotiated wages sit well above state base allocations even when a regionalization factor is included.

Murphy also detailed other revenue pressures: potential reductions or uncertainty in federal Title I and Title II allocations, rising liability insurance costs, the legislative “step down” of experience funding, and an anticipated negative net impact of roughly $2.7 million going into the 2025–26 year after modest legislative increases. She said the district was budgeting to draw on fund balance this year by design, but warned that continually drawing down reserves is not sustainable.

As context, she explained how enrollment trends feed funding: Peninsula’s April FTE was 8,745, about 514 FTE lower than five years ago, and preliminary 2025–26 enrollment projections were 8,653 FTE. Murphy said the district has modeled a “do nothing” scenario that shows fund balance depletion and explained that even passing a future educational programs and operations (EP&O) levy likely would not be sufficient to avoid binding conditions without operational changes.

Superintendent Gretchen Barr and board members emphasized the need for clear communication with families and staff about decisions tied to these fiscal realities. Barr said the board has directed the superintendent and CFO to provide “a comprehensive presentation” on enrollment trends, staffing impact and the constraints the district faces so the community can see the data behind decisions.

Murphy identified contingencies and choices the district is using: retirements and natural attrition, involuntary “placements” to align staffing to shifting enrollment and program needs, and prioritizing elementary class‑size reductions in a small number of schools to avoid contractual overloads. She said the district had 34 retirements/resignations/non‑renewals counted for 2025–26 and was planning 24 involuntary teacher placements to preserve core program delivery while cutting overall costs.

The board did not take an immediate vote on specific staffing reductions during the presentation. Murphy said the district will continue monthly financial reporting and work with bargaining partners on timelines required by collective bargaining agreements.

The board and administration repeated that the district is not currently in binding conditions, but that the finance office is modeling the 3‑year scenario the state uses to determine insolvency. Murphy described the state process: if a district cannot restore solvency, an Educational Service District fiscal officer and a Financial Oversight Committee can be assigned and certain operational authority moves to the state.

Ending: Murphy and Barr urged continued community engagement and said the district would provide clearer site‑level and districtwide data in future briefings. The board signaled it will monitor the financial forecast closely and emphasized the district’s priority of maintaining educational programs where possible while ensuring fiscal viability.