Dear BISD Community,

I am very sorry to report that I have some unexpected news to share regarding BISD’s Budget for 2024-25. While BISD had hoped to reach the end of its budget surprises, we continue to feel the lasting impacts of fiscal mismanagement. Like many challenges, this is nuanced and the ramifications play out in multiple ways. However, it is important that you understand the current situation and what I am recommending to address it. I will attempt to outline things as clearly as possible, and there are also opportunities for in-person meetings to discuss this further. 

ISSUE:

At the end of September, the first payroll for the 2024-25 school year was processed. During the week of October 10th, BISD’s Finance and Human Resources Departments analyzed the annual payroll report against the 2024-25 budget and noticed that employee retirement benefits were incorrectly entered when preparing the budget.  During the week of October 17th, BISD consulted with Puget Sound Education Service District (PSESD) in order to receive assistance in analyzing the budget, and PSESD confirmed that the analysis was correct.

The result is our actual payroll expenses for 2024-25 are $1.5 million more this year than initially projected.

HOW DID THIS HAPPEN?:

Because district budgets for the last two fiscal years were inaccurate and mismanaged, and because the gap between the projected expenditures and revenues was reasonably close to what was expected, this error was not flagged when the Human Resources budget (i.e., payroll, benefits, etc.) was built in July and August. 

• Typically, a district’s HR budget will be completed in June to allow for ample time for analysis and review

• Because of the extensive amount of time needed in the spring of 2024 to identify various budgetary and processing errors, the HR budget was not completed until late August

• Due to the inaccuracies found in reviewing the budgets from previous fiscal years (totaling millions of dollars), it was not possible to make an accurate year-to-year comparison

IMPORTANT TO NOTE: If the calculation error had not occurred, we would have been alerted to this situation earlier (in July or August) and faced the same budget forecast as we do today. The error itself did not create an additional $1,500,000; it just uncovered that our expenditures were much higher than we knew.

FUND BALANCE & CASH FLOW

When reviewing the figures below, it is imperative to understand that this is a snapshot in time. Numbers will fluctuate as BISD continues to unravel the previous years' financials and perform deeper analyses of the current year and future projections.

Fund Balance:

Figure 1 shows the BISD budget projection for 2024-25 (shared at the August 29, 2024 School Board Meeting for board approval). 

Figure 1

Figure 2 shows our updated budget projection, including the recent $1,500,000 payroll finding, changes in unbudgeted expenditures and a decrease in our revenue.  

Figure 2

*Staffing to support student safety needs, overload payments, contractual obligations, audit for leave balance error situation

The updated budget projection shows that we would end the 2024-25 school year with a fund balance of around $28,054  — an alarmingly low amount. Immediate short-term changes need to occur to keep us from dropping so dangerously low to zero. 

Cash Flow

Our trajectory indicates that cash flow will be an issue until the fund balance is restored. What does this mean? The BISD General Fund (which pays for the vast majority of BISD salaries) will likely need to borrow twice from the Capital Projects Fund (which provides funding for BISD facilities) to cover payroll for the second half of the year. We estimate borrowing up to approximately $3.5 million (in total), which must be paid back (with interest) in 12 months. 

WHAT  IS BEING DONE TO ADDRESS THE MOST RECENT BUDGET DEVELOPMENT?:

BISD is committed to doing all we can to avoid going into binding conditions. School districts in Washington state enter into binding conditions with OSPI when they cannot produce balanced budgets such that they end the year in a negative financial position. Binding conditions provide additional state oversight and counsel to support districts' return to financially healthy positions. 

To prevent BISD from entering binding conditions, I recommend taking the actions outlined below. Before reviewing the steps, please note that school closure is not being recommended as a way to create a balanced budget. It is very clear from our work last year that, at this time, school closure is not the correct course of action for the BISD. 

1. PAUSE ON PAID DISTRICT-DIRECTED COMMITTEE WORK: With the exception of the District Budget Advisory Committee, BISD is pausing all non-grant-funded committee work. We cannot afford to pay staff for additional time to participate in committees. If you are currently serving on a committee, the lead administrator will contact you about potential next steps. 

2. FREEZE SPENDING, HIRING & TRAVEL: Only essential materials and supplies will be purchased, no additional positions will be added (an exception would be if it is an essential position vacated this school year by an employee who will need to be replaced for student safety or supervision for the remainder of the school year) and no district-funded staff travel.

3. LIMIT STAFF EXTRA TIME: Unless obligated by collective bargaining agreements, staff will not be asked nor will be able to perform duties outside of their regular contracted hours. 

4. POSTPONE BOND/LEVY PLANNING: Evaluate postponing a large capital request until the fund balance is stable and/or revisit earthquake safety retrofits for Commodore Options School and Ordway Elementary School.

5. ROLL THE CURRENT DISTRICT IMPROVEMENT PLAN FORWARD BY ONE YEAR: Because we are pausing on district-level committee work, I recommend the school board extend our current District Improvement Plan through 2026. 

6. PLANNING MEETINGS DECEMBER 2024-APRIL 2025: Stakeholder and focus group conversations to identify ways to help BISD operate within our revenues for 2025-26 and beyond. 

We will continually analyze how the changes outlined in steps 1-5 impact our bottom line and adjust our course if necessary. 

OPPORTUNITIES FOR QUESTIONS & ANSWERS:

I recognize this is a lot to process, and you may have a number of questions. You are encouraged to submit them via this form. In addition, we are holding an optional in-person community meeting on November 6th from 6-7:30 p.m. in the BHS Library. 

After our very difficult year last year, I know this is a time of trust-building. I want to reiterate that I am committed to continuing to address mistakes when they are discovered, share information in a timely and transparent manner, and work together to find solutions.   One of the very best parts of the BISD is our ability to come together in times of great need. I have no doubt that we will find a way to ensure the BISD continues to be an amazing place to learn, work and grow!   

Sincerely,

Amii Thompson
BISD Superintendent