Pasco board hears $4.8 million midyear gap, directs staff to prepare levy planning

Kevin Hebden, head of financial services for Pasco School District, told the school board the district faces a projected $4.8 million shortfall against board-authorized expenditure authority for the 2024–25 fiscal year and outlined steps staff are taking to address that gap.

Hebden told the board the district has spent about $172.7 million in the first half of the year and that if spending patterns continued as in prior years the forecast would reach about $337.7 million, exceeding the board-authorized level by about $4.8 million. He cited rising insurance premiums, higher operating costs, the cap on local levies and state funding gaps for special education as drivers of “financial tension.”

The presentation included numbers Hebden and staff described as the current best estimates: health and liability premiums rose from roughly $2.3 million in 2020–21 to about $4.5 million in 2024–25, with staff citing a reported baseline 15% increase for next year that could push premiums toward $5.1 million. Special-education revenues for the year were shown at $39.3 million against estimated program costs of about $40.4 million, a roughly $1 million gap that staff said may be partly offset if the district qualifies for Special Education Safety Net funding later in the fiscal year.

Hebden described short-term measures already in motion: a targeted budget freeze, closer review of departmental spending plans and ongoing discussions with principals, budget managers and labor partners. He said recent state transportation safety-net funds and higher-than-expected grants increased projected revenues by roughly $1.8 million, but those gains did not eliminate the forecasted expenditure gap.

On longer-term options, Hebden reviewed reserve levels and the Washington State Auditor’s Office recommendation of a 60-day operating reserve. Pasco’s current total fund balance figures presented to the board included approximately $22.3 million in total fund balance with a 5% reserve target at about $16.5 million; staff acknowledged the SAO’s 60-day recommendation would require a materially larger reserve to reach the SAO benchmark.

Board members discussed tradeoffs between increasing reserves and preserving instructional funding. Several directors said they did not favor immediately adopting a 60-day target but supported a gradual move toward stronger reserves. After discussion, Director Brown asked whether the district should prepare for a replacement levy when the current levy expires in December 2026; Hebden asked for direction. The board provided a nonbinding head-nod consensus (informal direction) that staff should proceed with levy planning and return with specific levy and bond projections for later decision-making.

Hebden and Superintendent Michelle Whitney said staff will return with further detail, including the specific spending restrictions under the budget freeze and a clearer list of the short-term reductions being considered. They also committed to provide comparisons of reserve ratios from other districts and to clarify the auditor’s 60-day benchmark and its basis.

No formal board vote was taken on the levy; the board’s direction was recorded as consensus to prepare materials and options for future formal action.

Ending: Staff said they will provide more frequent budget updates through August, produce a clear list of proposed spending restrictions for board review, and present levy and bond scenario analyses for a future board decision.