Kent School District budget update: federal funding eases 2025‑26 shortfall but long‑term structural deficits remain

Kent School District finance leaders presented a revised multi‑year forecast at a special board work session, saying closing of the 2024‑25 books and newly confirmed federal funds improved the near‑term position but did not eliminate a structural deficit that grows in later years.

Executive Director of Finance Raul Parangay told the board the district closed 2024‑25 with 23,902 students, 43 fewer than projected, and reported that revenues were roughly 99.6% and expenditures 99.9% of what was budgeted. "Our ending fund balance is about 97.7% of what we projected," he said, noting the unassigned ending fund balance declined by about $7 million.

Parangay said prior one‑time federal ESSER dollars (roughly $90 million from 2021–24) had supported surpluses in earlier years and that OSPI has confirmed the district will receive federal funding for 2025‑26 only, which restores about $6 million in the forecast. He cautioned, however, that federal funding beyond 2025‑26 remains uncertain.

The presentation highlighted that labor—salaries and benefits—accounts for the majority of general fund spending (about 82%, roughly $440 million) and that district expenditures have been growing faster than revenues. Parangay said several cost pressures are expected in coming years, including a projected workers’ compensation increase (about $3 million beginning in 2026‑27) and higher paid family and medical leave premiums.

A recent change in state sales‑tax law that may apply to labor was identified as a potential new cost. Parangay said the district spends roughly $20 million on agency staffing in 2024‑25 and that if those labor costs were taxed at about 10% it could mean an approximately $2 million budget hit; he said the district is seeking formal guidance from the Department of Revenue and noted legislative efforts to exempt school districts are under way. "There may be other labor that is subjected to this new sales tax," he said.

Parangay walked the board through a revised multi‑year scenario in which deficits grow through 2028‑29 and estimated minimum cumulative reductions needed to hold a 5% unassigned ending balance: about $35 million in 2026‑27, an additional $9 million in 2027‑28 and further significant cuts in 2028‑29. "These are minimum amounts that we need to be able to maintain 5%. This does not give us any flexibility for unplanned emergency expenditures," he warned.

Board members pressed staff for more transparent detail on the cuts already taken and those under consideration. Parangay and others said staff have identified $7.1 million of current‑year reductions (about $5.2M in operating expenditures and $1.9M from vacant positions) and are looking at renegotiating contracts, reducing licenses and re‑prioritizing deferred maintenance. The board asked staff to produce a department‑level breakdown of current‑year reductions by the Jan. 14 meeting so the district can explain to the community where reductions have been made and whether they will affect students.

The superintendent and finance team scheduled further planning work at a Jan. 7 retreat and emphasized key dates on the budget calendar, including an April 1 governor action deadline and a June 10 public hearing for the 2025‑26 budget. The district also noted the current EP & O levy will expire Dec. 31, 2027, and a special election would be required to renew it for funding that would take effect Jan. 1, 2028.

The board did not take formal action on the budget at the work session; staff said they will return with more detailed recommendations and a proposed budget for board review and public hearing.