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Committee hears bill allowing temporary capital-to-operating loans for districts under financial oversight
Summary
The Early Learning & K-12 Education Committee heard testimony on Senate Bill 5,412 on the option for temporary interfund loans that would allow school districts in binding conditions or enhanced financial oversight to borrow from capital projects to balance operating budgets.
The Early Learning & K-12 Education Committee heard testimony on Senate Bill 5,412 on the option for temporary interfund loans that would allow school districts in binding conditions or under enhanced financial oversight to borrow from their capital projects fund to balance operating budgets.
The bill would permit a qualifying district to take a temporary interfund loan from its capital projects fund and use those proceeds to balance a borrowing fund’s budget, provided the loan is repaid in full within one calendar year. Under the bill the loaning fund would not charge interest if the loan is repaid in that time, the loan balance must be included in district financial reports, and the district board must adopt a resolution to approve the loan; if the district is under enhanced oversight the special administrator must also approve the loan.
OSPI staff described the current statutory and rule framework for districts that cannot prepare a balanced budget, saying that when a district fails to produce a satisfactory plan after binding conditions it may enter enhanced financial oversight, which can include appointment of a special administrator, limits on hiring and contracting, and other controls. Alex Fair Fortune, committee staff, said current rule allows interfund loans between district funds but that state law bars using interfund loan proceeds to balance a borrowing fund’s budget; the bill would change that for districts in binding conditions or enhanced oversight.
Senator June Robinson, the bill’s prime sponsor, said the measure was brought to her attention by the Marysville School District, which she said is under enhanced financial oversight and has a special administrator employed by OSPI working alongside district leadership. Committee members asked for clarification about the selection and role of special administrators and for staff to provide more detail about the repayment timeframe and interest rules.
A fiscal note published the morning of the hearing estimated a rule‑writing fiscal impact of $21,000. No formal vote on the bill was recorded during the hearing; the remote witness list included one planned testifier who did not appear and the hearing was closed.
This hearing record does not include a committee vote on the bill; staff said they would follow up with additional details requested by members.
