Camas School Board addresses depleted reserves

Members of the Camas School Board are addressing the school district’s “critically low” general fund reserves and may soon adopt a new policy that would establish a minimum percentage of money that must be held over each year to cover ongoing and unexpected expenses.

“A fund balance is money remaining in our accounts from the previous fiscal year,” Jasen McEathron, the school district’s director of business services told school board members during their Nov. 12 workshop, adding that the district needs a certain amount of fund balance to cover normal expenses during months when its revenues from the state or from property taxes have not yet come in.

“This is money that carries you … if you have a drop in revenues or unexpected expenditures,” McEathron said.

Over the past 15 years, the school district’s general fund balance had remained relatively steady, hovering between 10% in 2017-18 and 17% in 2020-21, when the district received infusions of federal COVID-relief dollars. The fund balance has been rapidly depleting since its high of 17% in 2020-21, however, dropping to 16% in 2021-22, 13% in 2022-23, 9% in 2023-24 and to what McEathron has called a “critically low” level of 3% in 2024-25.

“Over the course of 12-plus years, the fund balance really didn’t change too much,” McEathron said. “Enrollment increased over 20 years and the district was getting bigger.”

That meant more per-student state revenues and the ability to carry over more funds for the following year. Two things — the state’s McCleary decision, which sought to end disparities among Washington’s poorer and wealthier school districts, and the COVID pandemic — “caused the latest volatility” to the district’s fund balance, McEathron said.

Decreases in enrollment, higher salary and benefit costs and an increase in other overhead costs have put the school district into a structural deficit, in which its revenues cannot keep pace with its expenditures. The Camas School Board has relied on its general fund balance money in recent years to help offset layoffs and other budget cuts, and had hoped state legislators would find a funding solution to help pay for increased transportation, special education and other school district costs.

“We settled into a new normal of using fund balance to make up for COVID-relief dollars, which were one-time relief revenues. And we used fund balance to cover that operational gap,” he said. “The longer you extend these things (the longer you can) offer the Legislature a runway to help along the way.”

Currently, the Camas School District’s general fund balance is expected to “reduce to a critically low level by August 2025,” McEathron told school board members this month. “The planned use of fund balance plus (a 1% decline in enrollment) plus exhausted use of one-time COVID relief revenues plus inflation and market pressures increasing expenditures have led to where we’re at,” McEathron said, adding that the school district must take action to shore up its general fund balance.

“Our sustainability plan is to restore our fund balance to a board-approved level and to reduce our expenditures by 10 to 12%,” he added. “We know we need to recover … our policy doesn’t state (a minimum fund balance) amount, so let’s provide an amount and provide a little more direction to staff.”

McEathron said the district’s budget committee had recommended the district keep a minimum of 8% in its general fund balance, but try to land at a “healthier” 10%.

“The reason for that was that 10% was where we were pre-McCleary, and the committee felt like this was a healthy fund balance size,” McEathron said. “If you do fall too far below that, you may not have enough cash on hand (to cover expenses during low-revenue months). When it gets below 3%, that’s our call to action. So, we’ve got to bring it back up.”

McEathron suggested the Board consider adopting in December a new fund balance policy that would target fund balances of 8% to 10% in its general fund, with 5% being considered “unassigned” fund balance that could be used to pay for unexpected expenditures.

The revised policy the Board is set to consider in December states:

“The district recognizes the importance of maintaining a prudent fund balance in the general fund to ensure operational cash flow needs are met, to set aside resources for known obligations and to help protect against unforeseen circumstances. Accordingly, the district adopts this policy in regards to those portions of fund balance that are in spendable form but are not legally restricted as to their use from outside sources.

Total targeted general fund balance in all budgeted accounts shall range from eight to ten percent (8%-10%) of the current year general fund budgeted expenditures. This shall include a budgeted unassigned fund balance account of five percent (5%) of the current general fund budgeted expenditures.

Staff must inform the Board in a timely manner if projections suggest the above targets cannot be maintained. Staff will be required to provide a sustainable plan that ensures targets are met or exceeded. The plan must include a four (4) year budget projection and is subject to Board approval.”

School Board member Matthew McBride said he also would like to see language in the minimum fund balance policy that spoke to the importance of maintaining the school district’s bond rating.

“The last bond we issued, we were seeking as high a rating as we could get,” McEathron said. “We were close to getting upgraded. (The credit rating agencies) look at the health of your fund balance and that was one of the attributes for that bond rating.”

McEathron added that his hope was, if the district can restore its general fund balance to a healthy level — and show the bond rating agencies that they have a plan in place — that the district may be able to still maintain its current bond rating.

“I call this out so that we understand this isn’t just about covering unforeseen (expenses) … but also about being prudent and getting the best rate when we do seek credit,” McBride said. “That could be a significant savings for us.”

Camas School District John Anzalone agreed with McBride’s assessment.

“Especially when you’re dealing with multi-million dollar transactions, even a fraction of a percentage could matter significantly,” Anzalone said of the district’s bond rating.

“It’s good to mention, and I think it will be looked at favorably by Moody’s,” McEathron added. “(Having a higher) credit rating means we don’t pay as much in interest, which means we don’t have to levy as much. … So, the bond rating is important. It impacts every taxpayer.”

The Board members will discuss approval of the new policy at their regular meeting in December. For more information, visit camas.wednet.edu/about-csd/school-board/meetings-minutes