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Federal Way schools brace for lean budget, House Bill 1776

As the legislative session gets ready to kick off on Monday, Federal Way School District officials are watching and waiting with baited breath.

They are looking closely at two major issues for the school district: The budget and the re-issuance of last year's House Bill 1776.

Already, the budget theories are kicking in about what will happen in the short session.

"It's probable and likely we will be looking at some significant cuts," said Sally McLean, chief financial officer for Federal Way schools.

The governor's proposed budget cuts would cost the district $12.1 million for the 2010-2011 school year, McLean said.

Those losses include:

• Cutting $3.8 million of the levy equalization (an additional cut of $1.6 million of that would be taken out the next year).

• $2.7 million from the class size enhancement fund for grades K-4.

• $2.8 million for I-728 funds.

• $1.1 million from all-day kindergarten.

• $300,000 from the teacher training day.

• $200,000 from the highly gifted program.

• The district will stand to lose another $500,000 in other small programs.

In addition, in the 2011-2012 school year, the district would lose $1 million in Title 1 funding, $1.8 million in special education funding, and potentially another $1.6 million in local effort assistance funds.

At some point too, McLean noted, the pension rates, which the state cut this year and which saved the district $2.1 million, will have to be paid back.

"It's looking pretty darn bleak," McLean said. "Now we've to this ugly little picture that looks like $12.1 million."

House Bill 1776

In addition to the budget woes, there is another bleak spot on the horizon for the district.

Last session, House Bill 1776 died at midnight when the session ended. However, McLean said she assumes the bill will quickly rise again, going into committee even on the first day.

"1776 will come back and be a hot, hot, hot issue," McLean said.

The idea behind the bill is that school districts would be able to raise their levies by 4 percent.

Last year, the Federal Way School Board passed a resolution against the bill.

"We already have folks in great need," board member Ed Barney said March 10. "We can't burden our community."

The bill is mainly beneficial for districts in wealthier areas, but could be problematic for low-income areas that already have difficulty passing a levy.

"The board believes that these bills, which do not affect levy equalization in a manner that has a positive impact on fair funding of local school districts, are furthermore — and most importantly — a distraction from the real work of our legislators this session: To redefine and fully fund basic education in Washington state," the board's letter to the legislators stated.

Currently, the state's levy "limit" is at 24 percent of the total state and federal revenue in a school district; however, many districts are grandfathered in at higher rates. Federal Way can collect a slightly higher rate of 24.9 percent. Other districts such as Bellevue and Mercer Island have percentage rates in the upper 20s and low 30s.

If the rates statewide were increased 4 percent, Federal Way's rate would move to 28.9 percent and according to the state, the district could collect around $48 million. However, Federal Way's current levy is locked in at a maximum of $42 million. Of this, local taxpayers currently pay for $36.2 million, and the rest is paid for by the state, in part by the levy equalization.

However, if the governor's proposed cuts go through, the levy equalization will go away and local taxpayers will have to pick up the $5.9 million the state currently pays.

Levies were originally brought around to pay for "extras" to education. However, that has changed: "85-90 percent of our levy budget is paying for basic education," Superintendent Tom Murphy said.

There is some good news for Federal Way. So far for this year's budget, the district has spent less than anticipated. Partly due to some cuts and money pinching by the transportation and nutrition department, the district should have an extra $1.5 million leftover, McLean said. This will help the district, which had lowered its reserve fund balance in this budget down to 2.39 percent (they normally don't go below 3 percent). The $1.5 million will bring that fund back up to around the 3 percent mark.

Additionally, the enrollment numbers are higher than expected. McLean estimates the school district will be about 300 students higher by the end of the year than anticipated, which brings in another $1.5 million. About half of that was going for teachers and benefits for the extra students, but that leaves another $750,000 unspent, McLean said.

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