West Ada seeks path out of deficit spending

West Ada School District is still feeling the effects of the recession.

When state assistance to schools got cut, the district had to tap its savings account, which left it with a tough problem: annual operating deficits.

When trustees approved a $208.6 million budget for the state’s largest school district earlier this month, several board members had already expressed concern about the district’s reliance on its dwindling reserve account to prop up its operating budget.

District officials proposed using $4 million from their savings account, reducing the amount it expects to have in reserve at the end of the next school year to $5.8 million, well below what it believes its reserves for emergencies should be.

Is that the largest amount the district has had to pull from its reserve account?

No. At the height of the recession, as state education funding was sharply cut, West Ada put $8 million into district day-to-day operations, about half of what it had saved.

Continued reliance on reserve accounts comes with perils.

“Eventually, it runs out,” said Debbie Arstein, chief financial officer.

Sliding reserve funds also can affect bond ratings and leave a district without resources in case of emergency.

So how did West Ada get in this position?

As the U.S. economy tumbled beginning in 2008-2009, Idaho slashed education spending to help balance its budget. As state dollars evaporated, districts throughout the state, including West Ada, dipped into their savings to keep schools running. Like most other districts, West Ada also got voters to approve a supplemental property tax levy to help bolster revenue. West Ada got $14 million a year from its levy. It also channeled money it once paid for teachers to other daily expenses, which contributed to leaving the district 80 teachers short of the 2,005 the state is expected to allocate for 2016-2017.

Didn’t Idaho restore some funding for schools the past couple of years?

Yes. West Ada will get about $10.3 million additional dollars for next school year over last year from the state. Most of that goes directly to salaries. About $3.7 will go toward district operation expenses. The state made good on its pledge to restore school money for operations to 2009 levels for the upcoming year. But that’s a level from eight years ago, of course, and West Ada, like all districts, has continued to see expenses grow. In addition, West Ada hasn’t recouped all it lost in the recession. The district, for example, cut 1,500 bus stops and took 300,000 miles out of its transportation routes by moving bus stops to major arterial streets.

So what is contributing to the deficit?

A major factor for the upcoming school year is growth. Voters approved a $96 million construction bond in March 2015 to build three new schools, including Victory Middle and Hillsdale Elementary south of Interstate 84. But the building bond doesn’t pay for the new principals, vice principals, counselors and nurses.

The administrative and utilities tab for those two schools is about $1.8 million. (Those new schools won’t require additional teachers, who will move from overcrowded schools to the new ones.)

What about the $600,000 West Ada must pay to subsidize student fees?

That is also a factor, school officials say. West Ada, and many districts around the state, will make up for fees students once paid for credit-bearing courses, such as sciences and photography, following a successful lawsuit by a former West Ada trustee who argued that students and families shouldn’t have to pay those fees. Another increased cost: 7 percent in health insurance, about $1 million. All of these numbers come before a settlement of the ongoing teacher negotiations, which could add more expenses to the district.

Labor negotiations aren’t going well, said Superintendent Mary Ann Ranells. “I would say we just have some misunderstanding of what is possible and what isn’t possible,” she said. “We are being asked for more than the state gave us and are just not in a position right now to add more.”

Under the 2-year-old career ladder, many teachers are already scheduled to received an average 4 percent increase. Two calls seeking response from the teachers union were not returned.

What’s the problem with deficit spending?

1. Basic math: Sooner or later, you will run out of your reserves.

2. Extra bonding costs: Continually draining the district’s savings account can affect the bond rating when the district sells school construction bonds. It already has happened: West Ada’s bond rating fell in May 2014 as a result of a continually declining reserve fund. The ratings drop slightly increased the district’s $96 million bond interest and will cost taxpayers $300,000 to cover increased interest over 20 years, said Eric Heringer, managing director at the Boise office of Piper Jaffray, the investment firm that underwrites the district’s bonds.

3. Policy: West Ada School District’s policy is to keep its reserve account at 9 percent of its general fund budget, about $18.7 million. Median fund balances for school districts across the country ranged from 10.3 percent to 14.9 percent from 2008 to 2013, according to a report from the rating agency Moody’s. West Ada’s proposed fund balance for the end of next school year is at 2.5 percent. For comparison, Boise School District is at 9 percent, but anticipates using 1.5 percent in the next school year. Nampa School District expects to be at 3.5 percent at the end of the 2016-17 school year.

What is the way out of this problem?

Ranells set a goal of no deficit spending within three years. The district intends to get there by pinching pennies, tapping some of the state money it gets from increased enrollment — the district estimates 500 new students for next year, which will bring in about $3.7 million — and getting more operations money from the state. Administrators are hopeful they can end next year with more than the $5.8 million they project to have in the reserve account.