The finance director for Seattle Public Schools warned this week that the district could be fiscally insolvent as early as June 2006 if it doesn't restructure operations. But Seattle isn't the...

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The finance director for Seattle Public Schools warned this week that the district could be fiscally insolvent as early as June 2006 if it doesn’t restructure operations.

But Seattle isn’t the only Washington school district that’s complaining of inadequate state funding and warning of deeper cuts. Here are some answers to questions that have been raised.

Q: Is Seattle’s bleak financial forecast the result of Superintendent Raj Manhas’ administration not paying attention to revenue and spending?

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A: No, the district says. Since the 2002-03 year, Seattle has closed each financial year with a small surplus. District managers did this by cutting central administration jobs, using grants to pay for some essential functions and selling property. Now expenses for transportation, special education and utilities are projected to rise faster than revenues.

Q: Are other school districts facing similar gaps between revenue and spending?

A: Yes. A year ago, more than 200 superintendents endorsed the Ample School Funding Project, a study by the Washington Association of School Administrators. The study, which school officials say the Legislature has refused to undertake, will attempt to document how much state funding is needed for K-12 schools. And in October, a coalition of 11 school districts filed suit against the state, alleging it has not lived up to its constitutional obligation to fully fund special education.

Q: Why aren’t other districts warning taxpayers about the possibility of fiscal insolvency?

A: Other large school districts may have bigger surpluses they can tap to close the revenue-spending gap.

The Seattle district says it already has spent most of its unrestricted reserves to balance several years’ budgets.

Q: What’s behind the $12.2 million gap in Seattle Public Schools’ 2005-06 budget?

A: The district says it’s a combination of higher costs and loss of revenue: Seattle supported about $5 million in needs this year with one-time monies and expects to lose about $700,000 because of a drop in enrollment and fewer grants.

Because of inadequate investment returns, the Legislature may also require school districts to increase their contributions to employees’ pensions, which would cost Seattle $3.5 million. Increases in labor, utilities and transportation costs likely will add $3.3 million to the gap and the district will lose $400,000 by not renewing an exclusive contract with Coca-Cola.

The district is setting aside $200,000 for School Board elections and $200,000 for kitchen equipment. This $13.3 million in costs will be offset by $1.1 million that became available after property-sale proceeds were used to pay off early an energy-retrofit loan and bonds on the district’s new headquarters.

Q: How will the district close the gap?

A: Manhas has proposed a mix of cuts and reallocations to cover $8.35 million of the gap: Spending $4.7 million of the $5.7 million in reserves built up over the past year, spending $2.1 million in leftover grant money, and a variety of small cuts. But that still leaves a $3.85 million hole.

Q: Won’t the financial gap vanish if the School Board abandons new spending in its five-year plan?

A: No. The gap for 2005-06 is based on a spending plan that maintains the current level of educational services.

Q: What did the board plan to carry out in its five-year plan?

A: Board members want to eliminate the gap in achievement between white students and students of color by 2009-10, meet state goals for performance on the Washington Assessment of Student Learning and stabilize finances.

To achieve these goals, their five-year plan proposes many strategies, including more instructional coaches in schools, more teacher training, and rigorous college and vocational programs at every high school. The staff wants the board to consider scaling back bus service and closing school buildings.

Q: How much would the district save by closing school buildings?

A: It’s hard to estimate net savings, because the School Board hasn’t agreed on any school-closure criteria. District staff say the initial cost savings would be $376,315 per elementary school and $892,974 per middle school. Staff members suggest the district could close about 15 elementary schools and 7 middle or K-8 schools and still meet current and future enrollment needs.

Q: How much extra space is there in the district’s 94 school buildings?

A: Not including portables, the district is using 89 percent of its elementary-school capacity, 74 percent of its middle-school capacity and 89 percent of its high-school capacity, officials say. With portables, the district uses 79 percent, 68 percent and 82 percent respectively. The capacity analysis is based on the following school sizes: 400 students per elementary, 800 per middle and 1,200 per high school.

Q: When does the state get involved in a district’s finances?

A: School districts are required by state law to have balanced budgets. If they finish any year in the red, they must send a letter to the Office of Superintendent of Public Instruction (OSPI) and the auditor’s office. They also must submit a balanced budget for the following year. If they can’t, state government takes a more active role, says Ron Stead, director of school financial services at OSPI.

Q: What kind of role?

A: OSPI would help a district figure out how to cut expenditures, or increase revenues, to return to a balanced budget, Stead said. The agency also can allow a district to borrow from the next year’s state allotment.

Roughly one school district each year is unable to submit a balanced budget, and OSPI has always been able to help get the bottom line back in the black, Stead said.

If OSPI allows a district to borrow from future years, then it places binding restrictions on the district’s finances.

Q: What if a district remains in the red?

A: If a district fails to comply with the binding restrictions, the state can withhold money. The matter also is turned over to the State Board of Education. But staff at the State Board can’t remember any district in that position over the past two decades.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com. Staff writer Linda Shaw contributed to this story.