Camas School District facing budget shortfall, dwindling reserves

The Camas School District’s four-year budget projection shows tough financial times ahead. “As we’ve known, our district’s financial health is on the decline,” Camas School District (CSD) Superintendent John Anzalone told the Camas School Board this week, blaming “rising costs, lagging revenues and a state-funding model that is not aligned with ... the real-world costs of running a school district.” “Actions must be taken to eliminate the 10 percent, or $14 million, gap,” Jasen McEathron, the district’s business services director, told the Camas School Board on Monday, Aug. 26. “We cannot spend more than we receive in revenues any longer. We are taking immediate cost-savings measures for 2024-25 ahead of more significant budget cuts to fiscal year 2025-26.” Anzalone said the district plans to use money from its general fund reserves to make up for a $7.2 million budget deficit heading into the 2024-25 school year, which begins Tuesday, Sept. 3, but is facing significant budget cuts to the 2025-26 budget to avoid going into what is known as “binding conditions” with the state. “Essentially, a district is bankrupt at this point,” McEathron said of going into binding conditions, explaining that, when a school district cannot balance its budget and has dipped too far into its reserves, it would look to binding conditions to help avoid a financial crisis. McEathron said Washington school districts rarely entered into this type of financial situation in the past, but that it is becoming more common as school districts across the state, including in Camas and Washougal, struggle to keep up with increasing costs and decreasing student populations. “Up until now, the situation has been exceedingly rare in Washington state,” McEathron said of districts going into binding conditions. Katy Payne, the chief communications officer for the Washington state Office of Superintendent of Public Instruction (OSPI), said there are “several districts that are facing known financial challenges” ahead of the 2025-26 school year, but that OSPI “anticipate(s) that the majority of those districts will make the cuts that they need to make without needing to be escalated to binding conditions.” Payne also said OSPI and educational service districts in Washington state do not “mandate specific actions for a district to take until they are much further along in the process,” adding that binding conditions do not happen until a school district is placed under enhanced financial oversight. “The state has only just reached that point with one school district after a year of the district being on binding conditions,” Payne said. Anzalone told school board members Monday that, to avoid binding conditions, the district must reduce its expenditures ahead of the 2025-26 school year. By the end of this school year, Anzalone said, the district’s general fund balance will have fallen into dangerous territory. “Our funding models have our fund balance under $5 million,” Anzalone said Monday. “To avoid binding conditions we have to act now and have a round of budget cuts.” The district has already cut $700,000 from its 2024-25 budget — with the cuts coming mostly from the district’s central administration office, Anzalone said. “We have already talked to affected staff. To save $700,000 going into the school year, my team and I have decided to eliminate six positions after a six-month runway. We asked (six employees) to sign a six-month contract with the intent to not renew the contract at the end of the six months,” Anzalone said. “That still falls in (the 2024-25) school year, but very late into the school year, and provides these employees a six-month window to look elsewhere.” Anzalone and some district managers also have agreed to take six unpaid furlough days during the upcoming school year, and the district will reduce overtime and stipends for central office staff. Other cuts ahead of the 2024-25 school year include reducing materials and supply budgets by 10%; restricting travel and meals or refreshments during meetings; and eliminating return bus transportation for student-athletes attending away games or meets in the Clark County region. “This is something that many of our coaches have been looking at for quite some time,” Anzalone said. “When students travel to (regional) road games, their parents will be asked to pick them up. From what I’ve heard, this won’t be a huge issue. And we’ll never leave a student stranded — we will make sure they have a ride back if needed.” McEathron said some Clark County school districts have already taken similar measures to help save money. “Some of the Clark County schools we compete with have implemented this already,” McEathron said of the no-return-bus policy. “It is kind of commonplace. We do have some large teams — track, for instance — and we’ll probably leave the bus there in those cases, since the chances of students needing a ride home would be greater.” According to a four-year budget projection the school district is facing a $7.2 million general fund shortfall in 2024-25, with its $131.6 in expenditures exceeding $124.4 million in revenues. “We’re down to pretty thin margins,” McEathron said. “We’ve deferred budget cuts by using fund balances as much as we could.” McEathron said the $7.2 million infusion from the district’s general fund balance to help bridge the budget gap in 2024-25 will take the reserves down lower than they’ve been since the 2008 Great Recession. “Our four-year budget projection assumes we are addressing the gap, with budget reductions to bring expenditures down so (they) are below our revenues,” McEathron said. “And we have to build our fund balance. We can’t survive on 4%. We can hardly survive on 5%.” McEathron said the vast majority of the district’s general fund expenses are tied to employee salaries and benefits. “Eighty-six percent of our costs are our employees,” he said, adding that number is “the highest in Clark County and the second highest amongst like-sized districts.” Likewise, the Camas School District also spends more of its budget on classroom teachers — nearly 74% — than any other school district in Clark County, McEathron said. “We’re covering the gap in 2024-25 with our fund balance,” he said. “But once you bring the fund balance down, you’re only left with budget reductions.” The district expects to have a $7.2 million gap between its $124.4 million in revenues and $131.6 million in expenditures during the upcoming 2024-25 school year, and will cover the budget deficit using $7.2 million from its general fund reserves, bringing the fund balance down to less than 4%. “Four percent is not sustainable,” McEathron said. “In future years, we must rebuild to eight percent.” McEathron said having a fund balance as low as 4% — compared to the district’s target of 8% — could make it difficult for the district to cover its cash flow expenses in the months before property taxes come in and state funds flow to school districts. “It’s tough,” he said. “It might be tough to make it out of September. … We need 5.5 to 6 percent to cover our cash-flow fluctuations. When you fall below that, you may have to do some short-term borrowing … but that is not a long-term solution.” McEathron also explained that the district has five distinct funds and cannot overlap how the money in these funds are spent. For instance, the district’s capital fund covers the cost of purchasing property to account for future growth in the district and pays for capital facility needs and maintenance, while the district’s transportation and vehicle fund can only be used to purchase and maintain the district’s fleet of school buses; the ASB fund is money collected and used by the Associated Student Body; and the debt service fund is to repay the district’s debts. “We are audited every single year to make sure we’re using this money as it is intended,” McEathron said, explaining why district leaders cannot borrow from the capital fund, for instance, to cover a budget shortfall in the general fund, which pays for things like teacher salaries and benefits and school supplies. “We have a history of clean audits, and I’d like to keep it that way.” ‘Not a Camas issue’ McEathron and Anzalone said Monday that the Camas School District is not alone in its budget woes. “School districts (across Washington state) are struggling to balance their budgets and are making significant cuts to staff and programs,” Anazlone said, pointing to a plan in Seattle that could shutter 20 elementary schools by the end of next school year — “one of the biggest one-time closures nationally in the last decade,” he said — and to the $35 million Vancouver Public Schools recently slashed from their budget and the nearby Evergreen School District’s projected $20 million revenue shortfall. “We’re not alone,” Anzalone said. “We’re doing our best and working really closely with our partners and bargaining groups to make sure we’re not leaving any stone unturned.” McEathron showed school districts around the state that are facing similar issues with dwindling general fund reserves and expenditures that are larger than their revenues. “We’re not alone, but the timing of the problem varies,” McEathron said, noting that Camas is about one year behind other school districts in having to implement major budget cuts. “This is not a Camas issue. It’s not a Clark County issue,” McEathron said. “It’s a state of Washington issue that a lot of districts are facing. It’s a challenge everywhere.” He added that a “common theme” was districts that, like Camas, have used general fund balances over the past few years to shore up budget gaps only to find themselves out of reserves and facing large budget reductions the year after their general fund balance dipped below that 5% “danger zone.” McEathron said the district must take action to “eliminate the 10 percent ($14 million) gap” ahead of the 2025-26 school year. “We cannot spend more than we receive in revenues any longer,” he said. School board members said Monday that the district’s financial situation is no surprise. “We have planned, but the way the state model is, it doesn’t allow us to fund what we’ve always been able to fund,” said board member Connie Hennessey. “We’ve been paying with our savings for the past four years. Now, our savings are gone, and we just don’t have money from the state to offer the services we as a district have come to expect.” Board Vice President Tracey Malone agreed. “We’ve been planning for this for years,” Malone said Monday. “That’s why we’ve had that fund balance. It gave us time to try to get more money from the state. It’s very alarming to me to see (the fund balance) get down below 4 percent, but we’re showing what we have to do to get back there.” Malone added that she appreciated Anzalone and other district leaders’ move to reduce $700,000 from the budget ahead of the 2024-25 school year. “I appreciate the proactiveness,” Malone said. “We have to look at every single dollar we’re spending this year. Next year, we’re short $14 million, so any dollar is going to help. … I appreciate that we’re making that effort this year to start doing what we can.” Teachers union leaders speak out During the Camas School Board’s budget hearing held Monday evening, two leaders of the Camas Education Association teachers union — Beth Ceron and Michael Sanchez, both teachers at Skyridge Middle School — spoke out about what they said was an unexpected email from district leaders detailing the district’s budget woes. “The email really was hard to stomach, and I’ve had a lot of people reaching out to me,” Ceron told the school board members Monday evening. “The biggest issue is transparency. You just hired a new assistant superintendent and we have budget cuts.” Ceron and Sanchez said district leaders canceled budget meetings last spring and that they had no idea the school district was facing such major budget issues. “To see (McEathron’s) graph showing the reduction in that fund balance — that was not something, as a regular member of (the budget committee) that I was prepared to see.” I feel bamboozled at this point,” Sanchez said. “We were given the impression that they were going to skate on through.” Sanchez said he has been a member of the district’s budget committee for several years, and feels district leaders were not transparent with the budget reductions facing the district. “What I saw on that graph is not supposed to happen,” Sanchez, the vice president of the Camas teachers union, said. “Our members have a lot of concerns. And stopping the budget committee meetings was really — I think it was a poor choice. We had no input at that point.” Caron said she also believed district leaders had not been transparent with the problems facing the district. “Your community and your staff are going to be watching everything you do,” she told the school board members and district leaders present at Monday night’s school board meeting. “When you cancel (budget) meetings, hire new administrators when we’re in a deficit? It’s really hard to stomach.” McEathron said “everything is on the table,” when it comes to stabilizing the district’s budget. “The process never stops until we get on a sustainable path,” he said. “”We’ve been reporting the trajectory and now have taken some tangible actions to reduce our costs until we can get this thing on a sustainable path. It involves a lot of brainstorming and this isn’t the first time we’ve had to do this. We learned from a few years ago when we did some budget reductions back then. … We’re really laying the groundwork for doing the largest and most significant reductions into the following fiscal year, and that’s going to take a lot of groundwork. We have a lot of stakeholders — internally and externally — to add to that.” Anzalone said he and other district leaders are continuing to work on legislative advocacy in the hopes that state officials will find more money for school districts across Washington. The district will hold a budget town hall this fall and district leaders will answer community members’ questions “in real time,” Anzalone said. “All of us need to stay informed and not be surprised by all of this,” Anzalone added. “We have an intelligent, informed community here and that helps.” Camas School Board President Corey McEnry added that school district officials have tried to alert the community to the district’s budget issues for the past several years, and warned that the state funding model was not keeping pace with school districts’ needs and costs. “We’ve been ringing alarm bells on this for the past couple years that this is what happens if nothing changes,” McEnry said Monday. “We’re here. Nothing has changed.” Editor's Note: This article was updated Tuesday, Sept. 3, to reflect new information from the Washington state Office of Superintendent of Public Instruction.

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