$41 million deficit possible for Seattle schools

The budget deficit facing Seattle Public Schools could grow to $41 million by 2008 without severe cuts or substantial increases in revenue, new projections show.

The grim news was presented this week during a meeting of an advisory committee formed by schools Superintendent Raj Manhas to address the district's financial challenges.

The group, which includes high-profile business leaders and representatives from City Hall, projects a 2006-07 shortfall of $15 million in the district's budget of roughly $450 million, slightly higher than the district's estimate of $13 million.

But left unaddressed, the deficit would skyrocket to a projected $25 million the following year and $41 million in 2008-09, underlining a need to aggressively attack the problem before it compounds.

The projections, much higher than what district officials have publicly stated, highlight the financial challenges for the district created by rising costs that are far outpacing revenue increases.

Committee members and district officials attribute the anticipated deficits to a combination of factors -- inadequate state funding, high busing costs, too many schools for the number of students and pay increases for teachers.

"They have what we would call a rate of change problem," said Mary Jean Ryan, a committee member and a policy adviser to Seattle Mayor Greg Nickels. "The revenues are going up much slower than their expenses. That's what's causing this deficit to widen."

Both Ryan and Manhas were quick to defend planned salary raises for teachers, who receive the lowest wages of 12 school districts around Puget Sound.

But the dire financial picture again raises the likelihood that the 46,000-student district may have to consider closing schools and sharply cutting back transportation to save money.

The district's "open choice" enrollment policy allows students to attend schools anywhere in the district, with free busing provided to any school within a large geographic "cluster." The price of that arrangement is $24 million a year, about half of it paid by the state.

Seattle Public Schools also faces the question of how to pay for its ambitious five-year strategic plan, whose central imperative is closing the achievement gap between white and minority students.

Fulfilling the objectives of the plan will cost an estimated $47 million -- more than one-tenth of the district's operating budget.

The state ranks 34th in the nation in per-pupil funding, according to a study spearheaded by state school administrators last year. Ryan said the dim funding scenario means the district must analyze its spending closer than ever.

"You can't do it anymore by formula," she said. "If you have the size of the problem they have, you can't do business as usual. This calls for a re-examination, a budgeting process that is more of a start from the ground up."

The district has maintained balanced budgets for the past few years, following shortfalls totaling $35 million that were uncovered in 2002 and led to the resignation of former Superintendent Joseph Olchefske.

Manhas said Wednesday the district may have to dip into a $5 million reserve fund to close next year's gap, but he's optimistic that the Legislature will come through with more education money for 2007-09.

"We still have to be prepared," he said. "We have become very conservative, and I want to continue to be like that. I don't want to end up in a situation like we were in two or three years ago."

School Board President Brita Butler-Wall said she had not yet seen the committee's projections and could not comment on them.

In December, the 14-member Community Advisory Committee on Investing for Educational Excellence plans to present Manhas with its preliminary recommendations on addressing the district's financial issues and improving academics.

A final report is expected Feb. 10. Ryan said while the recommendations around how the district develops its budget are still in the early stages, it is clear that more scrutiny will be needed to solve its massive financial problems.

"In most large organizations, if things are going along fairly well ... they're not going to examine every single cost every year, because it's a huge time consuming process that may not be warranted every single year," she said.

"But I guess we're thinking in a preliminary sense that at this time, it is warranted because of the challenges that they have on both sides -- to put their operation on solid footing again, and to make sure we're driving the money in the best way possible for children's academic achievement."

P-I reporter Deborah Bach can be reached at 206-448-8197 or deborahbach@seattlepi.com.

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