A letter send out April 12 to all South Kitsap School District staff by Interim Superintendent Bev Cheney, tells of the potential budget situation for 2013-14 school year.

During the School Board’s public meeting April 24, the financial challenges facing the district mentioned in the letter were highlighted.

The district reported the upcoming budget needs to be reduced about $2.5 million.

During a presentation, the district reported a $634,000 ending fund balance shortfall going into the 2012-13 school year. The district also reported it lost between 80 and 100 students for a nearly $500,000 shortfall and decreased the district’s reserve from 3 to 2.5 percent to cover the $1.1 million revenue shortfall.

For 2013-14, the district is facing a projected 2.5-percent decline in enrollment, exhaustion of local funds to sustain programs and positions previously state funded, and impact of sequestration on federal funds and the local economy.

In Cheney’s letter, she wrote the district would eliminate 26 previously state-funded certified positions that have been locally funded, but would not meet the goal of reducing the budget by $2.5 million.

She said new superintendent Michelle Reid revised the District Office organizational structure in                                 order to save money. Two administrative positions — director of School and Family Support and director of Special Programs — will not be filled, along with a classified position for executive assistant to School and Family Support.

Cheney said the positions were vacated due to retirement and a person returning to a previous position.

The district also will have increased cost in special education services, fuel, utility, healthcare and pensions to consider, along with restoring the district’s reserve to 3 percent by August 2014.

“We need to get our fund balance up,” School Board President Keith Garton said. “We need to put some money back into our savings (reserve) account. We are taking a risk of the district not being able to pay their bills.”

The State Auditor’s Office warned the district it is at risk of sanction because of its’ low reserve.

Districts must retain at least 3 percent of its total budget in the reserve fund so there’s money to pay bills between disbursements of property taxes during the school year.

The district estimates an ending reserve balance of $4.2 million on Aug. 31.

Since 2007, the district’s expenditures have remained steady, while the fund balance peaks only during tax collection period of October and April.

Also for the upcoming year, the district will have to negotiate five contracts for teachers and employees.

Garton said the district is hoping the State can come through and fully fund education as a results of the McCleary decision by the U.S. Supreme Court — but it’s not likely.

“The State has been promising to come through for many years now,” Garton said. “We have the Supreme Court behind us, but the State is still dragging their heels.

Cheney said she will make a recommendation to the board May 8 to find $2.5 million in reductions.

Cheney said she’s looked at the district’s Leadership Team — building, department and administrative heads — for input.

“They have the responsibility to carry out the vision and mission of the district and managing their programs,” she said.

She said the levy, which passed earlier this year, makes up 22 percent of the district’s operating budget.

Cheney said she’ll meet with union presidents and discuss the budget challenges before bring a recommendation to the board.

In the letter send to employees, Cheney asked employees who are planning to retire this year to submit their notice to the district’s Human Resource Department no later than April 30.

Previously bridging the gap

Garton said since 2007, the district has cut its budget. He noted a combination of the state eliminating I-728, enhanced K-5 staffing, revenue for salary increase cost the district $9.5 million. Also, revenue reduction due to Basic Education Act adjustments and enrollment decline resulted in a $1 million loss, but the district has experienced increasing costs in pension, healthcare, utilities and fuel.

Garton said the board looks at the district’s “guiding principles” such vision, growth, achievement and building community.

“As we had to cut the budget, everything we’ve done, we’ve tried to stay away from the classroom, from the child and from student,” Garton said. “Where can we get the money from other places so we don’t have to go to the classroom.

Cheney said the district has diverted funds from other areas in order to focus on the district’s vision.

From 2007-12, the district cut $3.2 million in facility projects and the print shop. During the same period, the district cut 11 positions in administrated support, eight custodian jobs, six teachers and a high school dean.

The district also reduced curriculum budget, delayed curriculum adoptions, technology equipment replacement, furniture and school supply budgets, and time for school nurses and bus mechanics.

“All these funds were used to bridge that gap so we could continue our focus on student achievement and out mission on the whole child,” Cheney said.

She also noted that many of the schools have been recognized for student success and $9 million in scholarships were awarded in the previous five years.