Marysville Pilchuck High School students talk with Snohomish County council members Jared Mead and Nate Nehring during a Civic Engagement Day at the county administration campus In January in Everett. (Olivia Vanni / The Herald file photo)

Marysville Pilchuck High School students talk with Snohomish County council members Jared Mead and Nate Nehring during a Civic Engagement Day at the county administration campus In January in Everett. (Olivia Vanni / The Herald file photo)

Editorial: Larger issue in Marysville schools’ budget woes

A gap in levy funding left the district $17.5 million in the hole, pointing to a systemic funding problem.

By The Herald Editorial Board

The message is blunt — and one for which Marysville School District officials would rather not be providing an example — but this is what comes of not voting for school levies under the current system of state support for K-12 education.

The Marysville School District adopted a budget at the end of August for the 2023-24 school year that totals $206 million but is short about $17.5 million in revenue, a deficit that will require it to borrow against future revenue and one that has placed it under tighter oversight by the state Office of the Superintendent of Public Instruction, as reported by The Herald’s Sydney Jackson last week.

Having made significant cuts to programs and teaching and support staff and increasing class sizes in recent years — following the failure of two levies in 2022 — the district has made the difficult choice to go to the county treasurer’s office to seek a loan — and incur interest costs — that will head off even more harmful cuts than already made. While the district did pass a levy this February, the failure to pass levies in 2022 means it will have gone a year without receiving funds from a district property tax levy. The Marysville School District won’t start collecting revenue from the most recent levy until May of 2024.

“Seventeen million dollars is a big number,” Dr. Zachary Robbins told the editorial board during a recent interview. “But there’s no way to cut positions, programs and services by that amount and wait for levy revenue to return.”

The gap in levy funding isn’t the sole reason for the deficit; the district has cited the end of federal covid funding, increased costs, the need to budget for pending raises, flat enrollment numbers and inadequate funding from the state for the deficit, but passage of a levy in 2022 would have headed off the need for a loan and the state’s additional scrutiny, called “binding conditions,” which could continue for two to three years.

District officials, including Lisa Gonzales, the district’s new financial director who started her job this summer, have set to finding savings and new revenue where they can.

The use of purchase cards, called p-cards, which allowed for convenient payments for expenses, has been drastically scaled back. Some 200 cards, used for purchase of goods and services, have been returned to the district office; five are now in use, with tighter controls in place, said Gonzales. The cards were used for legitimate expenses, but their convenience made it harder to track spending and look for cheaper alternatives, she said.

And the district is reviewing the fees it charges community groups and others for the use of school facilities. The district, in the past, has subsidized those uses by footing much of the bill for facility maintenance and other costs, but now has to put student needs ahead of providing that break, said Robbins, who started as superintendent in June of 2022, just weeks after the district’s second try at a levy had failed.

Robbins and Gonzales said the district is stepping up its efforts to increase transparency and share budget information with the community. They are also defending the district’s record of stewardship of taxpayer funds, pointing to recent audits by the state.

The Marysville district’s most recent state audit, released at the end of July, identified no significant or material deficiencies in the district’s internal controls for financial reporting, with two exceptions regarding the district’s oversight of spending of federal covid emergency funds, which the auditor’s office considered a material but not significant weakness.

One finding related to the hiring of contractors to complete heating, ventilation and air conditioning improvements to buildings necessary to prepare for students’ return. The other regarded an FCC internet connectivity grant that spent $1.1 million for the purchase of laptops and WiFi hot-spots for students and staff to allow classes to be held remotely or in hybrid situations during the pandemic.

Both findings related to insufficient internal controls that the state auditor’s office attributed to Marysville and other districts not receiving clear guidance from federal agencies on reporting requirements for the grants. The Everett School District and other districts and local governments received similar findings in their recent audits.

The office, the report concludes, “knows that in many cases, governments across Washington received significant pandemic-era federal funds without also receiving clear guidance on how to use them.” Still, the report says, the auditor’s office is mandated to report its findings and follow up on those findings in future reviews.

The bottom line for the Marysville School District is that the most recent state audit found no significant issues with its overall financial accounting practices.

But with levies routinely providing — for the Marysville district — about 16 percent to 18 percent of its revenue each year, a loss in regular levy funding can’t be absorbed, and it points to a systemic problem for many districts throughout the state in the funding they receive from the state.

“Levies are not supposed to be used for basic education. That’s what the McCleary (lawsuit and state Supreme Court mandate) was all about,” Robbins said. “Well, districts are absolutely dependent on levies passing in order to educate children.”

Marysville is the largest but not the only school district having to submit to the state OSPI’s scrutiny under “binding conditions.” The La Conner district in Skagit County and Mount Baker district in Whatcom county also recently submitted budgets with deficits, the Washington State Standard reported earlier this week.

While fewer than 20 such agreements with OSPI have occurred in the last two decades, seeing three districts in the same year come in with budget deficits is unusual, OSPI’s chief financial officer T.J. Kelly said. But those three may not be the last.

“I don’t want to speak to the probability of whether or not we’ll be sitting here a year from now with 10 to 12 districts on binding condition, but it could happen” Kelly told the Standard.

The message that Robbins and others already are relaying to state legislators, still months from the next session, is how much districts are still having to rely on levies to provide basic education, even after the changes to funding and investments that were made by the Legislature in 2018.

“I understand that there’s only a finite amount of money that any state has,” Robbins said. “But when you look at this seemingly systemic problem, and then you juxtapose that with the achievement levels that we are seeing in our state assessments, it is clear that something needs to change.”

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