Finances

Each year the budget process begins in December and January, when the School Board establishes broad parameters for budget development guidelines. The administration follows the board’s parameters and reinforces these parameters during actual budget development. These guidelines are available on pages 6-8 of the Guide to Understanding the Budget; they were observed and incorporated into the 2024-25 budget.

State revenue as a percentage of total revenue comprises 68.6% of the district’s operating revenue, an increase of 1.03% over the prior fiscal year (67.9%). This is 3.92% below the 2018-2019 historical peak in state funding as a percentage of total operating revenue (71.4%).

The state legislature has continued to increase education funding pursuant to the McCleary decision; however, a large portion of this “new” revenue comes in the form of salary and benefit allocations, making the funds less flexible than local levy dollars.

The legislature implemented significant structural changes to the education funding for 2019-20 and beyond, which included a decrease in local levy authority (capped at $2,500 per student or $2.50/1,000, whichever is less and adjusted by the consumer price index [CPI] annually). This drop in local levy funding is coupled with new restrictions on what and how local levy funds can be used to support and supplement basic education.

The district has a voter approved 2024 Educational Programs and Operations (EP&O) levy amount of $64M. However, the district can no longer use 2019-20 school year enrollment in the calculation for enrichment levy authority and is estimating to collect $60.4M based on current enrollment.

Noteworthy legislative changes impacting revenue for the 2024-25 budget include:

• A 3.7% cost of living increase, also called the implicit price deflator (IPD), which measures inflation.
• Special Services Safety Net applications cannot be rejected for simple errors.
• An increase in Materials, Supplies and Operating Costs (MSOC) funding by $21 per student, resulting in an estimated increase of $382,000.
• An increase in prototypical school staffing to better meet students' needs for paraeducators, office support and non-instructional aides by 0.076, resulting in an estimated increase of $650,000.

These adjustments make some progress towards addressing the increased costs of salaries, materials, supplies, and operating expenses (MSOC). However, these costs continue to rise. The 2024-25 budget reflects $394 million in revenues and $409 million in expenditures. The state revenue increased approximately $10.3 million with $6.2 million for IPD, $1 million in MSOC and $3.1 million in prototypical adjustments. The growth in expenses through negotiated increases above IPD, the number of school staff necessary to meet student need, new legislative mandates, and inflation are outpacing the increase in state revenues. This growing gap puts more pressure on local levy dollars. However, if a district is experiencing decreased or plateaued enrollment, local levy dollars will mostly flatten while the costs continue to increase each year.

To keep staff and community informed and seek input, we offer several communication avenues. We maintain a budget website with a timeline and ongoing updates; the School Board scheduled time at each business meeting for legislative and budget updates (the meetings are available for the public to attend in person or watch online), administrators met with key groups such as the PTSA to provide updates; and the district shared regular updates about budget information via the 411 Weekly Bulletin.

The district receives funding from three primary sources. The State of Washington provides approximately 68.6% of the funding for general operating costs; 15.5% is generated from the Educational Programs and Operations Levy (EP&O); and 9.4% comes from local fees, tuition and gifts.

Across Washington State, 295 school districts and 25 other Local Education Agencies receive public education funding. Based on total revenue per student, our district ranks 150 out of 320 statewide. During the 2024–25 school year, Issaquah School District received $19,854 per student, ranking 9th out of 18 King County districts in per-pupil revenue.

• Projected enrollment: 18,910
  • Decline of 174 students, equivalent to 0.91% or approximately $2 million (based on prior year average comparison to projection)
• Increases from the State Legislature:
  • 3.7% cost of living ($6.9 million)
  • 0.076 allocation for paraprofessionals, office support and non-instructional aides ($650,000)
  • $21 per student for materials, supplies and operating costs ($382,000)
  • MSOC inflationary increase and other prototypical model adjustments ($4.1 million)
• Local levy collection $626,000 increase
• Final year of prototypical schools model increase for physical, social and emotional support allocation

Budget development is a year-round process that involves the school board, schools, and departments. Initial enrollment projections are gathered in the fall and each winter the formal budget process begins with the Board establishing broad parameters for budget development (Adopted Jan. 11th, 2024). The Administration follows the Board’s parameters and reinforces these parameters during budget development. These guidelines have been observed and incorporated into the 2024-25 Budget. Financial planning must also adhere to 6001 – Budget and Program Planning throughout the budget process.

To keep staff and the community informed and to seek input, we offer several communication avenues: The district maintains a budget website with ongoing updates and contact information for comments; the School Board allocates time at business meetings for legislative and budget updates, which are broadcast to the public, and holds budget-focused board retreats and work sessions as needed; we engage with principals and departments during budget development; hold cabinet mid-year budget reflection meetings; administrators meet with key groups, such as the Parent Teacher Student Association (PTSA), to provide updates; and the district shares information through bulletins and social media posts.

In addition, the district continued the expansion of the Financial Analysis Core Team (FACT) meetings to three times (Fall, Spring, Summer) during the 2024-25 budget development process. This team is made up of representatives from the board, certificated and classified staff, principals, and the community. These multiple meetings allowed for additional opportunities for analysis and feedback on the budget development process.

Expense management is key to sustaining financial stability during this phase of tightened enrollment. The district conducts an annual review to identify areas where new initiatives are needed, outdated practices can be discontinued, and successful programs can be expanded. Based on this review, the district makes strategic adjustments by reducing unnecessary expenditures and investing in high-priority areas. A sunset schedule is implemented to plan select expenditures with a clear timeline, ensuring they are temporary and purpose-driven. Additionally, staffing levels are aligned with student enrollment to maintain efficiency and effectiveness in our operations.

The 2024-25 budget development process was expanded to allow the district to adjust to a budget cycle without significant reductions. As part of this process, the district conducted an annual review to identify areas where new initiatives should start, outdated practices should stop, and successful programs should expand. Based on this review, strategic adjustments were made to reduce unnecessary expenditures and invest in high-priority areas.

The district also strengthened the internal control framework by adding a Controller and Capital Projects Accountant to the team. These additions aim to enhance overall financial internal controls, provide additional oversight for Capital Projects Fund compliance, and ensure the financial management of funds aligns with the approved purposes. With these new mechanisms for internal controls and expense management, the district has improved its stewardship and transparency of public resources.

Additionally, staffing levels were aligned with student enrollment to maintain operational efficiency and effectiveness. The district implemented a sunset schedule on select expenditures with clear timelines, ensuring they are temporary and purpose-driven. Although the fund balance is projected to decrease in 2024-25 due to the resumption of curriculum adoptions, the district will continue to manage expenditures with the preservation of the fund balance in mind.

The district extends its gratitude to the state for increased prototypical and MSOC allocations. We also thank the staff for their collaboration through the additional engagement opportunities this year. Finally, our appreciation goes to the Board of Directors for their direction, insight, and support during the 2024-25 budget development process.