A management and operational review of Vashon Island School District (VISD) finances has called VISD’s levels of spending on labor “not sustainable,” and recommended that VISD implement a range of measures including reducing staff, increasing class sizes in its high school and middle school, and increasing the cost of meals served by the district.

These actions, according to the report, would restore $900,000 to VISD’s 2023-2024 budget.

The report, prepared by Jacob Kuper, currently the financial chief of the Yakima School District and a consultant working on behalf of the Washington Association of School Administrators (WASA), was solicited from WASA at a cost of $6,600 to the district by VISD Superintendent Slade McSheehy this summer.

Kuper’s analysis of the district included both remote work, assessing financial data provided by VISD, and a day of in-person interviews with members of the district’s administrative and teaching leadership teams, as well as representatives of the district’s labor groups.

The school board examined the study at a work session on Oct. 13, at which Kuper personally presented his findings, via Zoom.

Kuper’s 20-page report to the board, viewable at tinyurl.com/y63x333e, examined trend lines in the district’s general fund balance — used for liquidity and unforeseen budget issues — and projected that if no corrective action was taken by the board, VISD’s fund balance would drop to 3.71% of district expenditures in 2023-24.

“The district has been deficit spending, i.e. spending more than it takes in in revenue, since 2020-21, with a projected decrease in [the] fund balance of approximately $800,000 from 2020-21 to 2023-24,” Kuper wrote in his report. “This will be a 44% reduction in reserved balances (almost halved). The current level of spending, assuming no additional revenue or budget reductions, is not sustainable.”

Kuper — noting the most recently compiled statewide financial data, from 2020-21, shows average fund balances of 14.7% of actual expenditures — advised that VISD increase its fund balance to a minimum of 6.5%, while also setting aside capital reserve amounts for emergency capital needs in excess of that amount.

“Labor costs should be reduced”

In his report, Kuper compared VISD’s labor expenses to four comparably sized and situated districts: Bainbridge Island, North Mason, Port Townsend and Meridian School Districts.

In 2021, he said, VISD’s budget expenditure for salaries and benefits was 83.8% — within industry standard, and below an 85% threshold considered as “the canary in the coal mine” of financial insolvency.

However, he noted that among the districts he had selected for comparison, VISD had the second-highest teacher salaries — with only Bainbridge Island’s exceeding VISD’s — as well as the lowest fund balance in the group.

“Labor costs should be reduced to allow the district to remain solvent and execute the program need to serve its students and stakeholders,” he wrote.

A chart in his report also noted each comparable district’s fund balance as well as the percentage of its “regionalization” reimbursement from the state — a varying amount received by districts for staffing, based on housing costs.

In the report, Kuper noted that he was aware VISD had selected other districts, in the past, to use for bargaining comparisons with different groups of staff members, but said that in this case, “the sole goal of the review is not for salary comparisons, [but] rather, overall financial health and district operations.”

In the group, only the Bainbridge school district, at 18%, topped Vashon’s 12% regionalization rate.

Recommendations for cuts to staffing

In his report, Kuper recommended reducing staff by 6.9 full-time employed (FTE) positions in the district, for a cost savings of $784,000 in its 2023-24 budget.

Specifically, he recommended the following cuts:

• The reduction of 1.3 FTE teaching position at McMurray Middle School, by increasing class sizes to 28 students, up from the current 25 students.
• The reduction of 2.1 FTE teaching positions at Vashon High School (VHS), also by increasing class sizes to 28, also up from the school’s current 25 students.
• Eliminating the position of assistant principal at Chautauqua Elementary School (CES).
• Reducing office staff at Vashon High School by one FTE position.
• Reducing paraeducator support for special education by one FTE position.
• Cutting morning and afternoon ferry monitor positions — employees who accompany elementary-aged commuter students in transit to and from school.

Kuper also recommended raising the cost of meals in the district by 50 cents per meal, to ensure the food service program would break even going forward and add another $116,000 to the district’s coffers in the 2023-24 school year. At the board workshop meeting, Zabette Macomber expressed opposition to the idea of cutting ferry monitor positions, which Kuper said would save the district $25,000 per year.

Other cost-saving/revenue-enhancing measures

Additionally, Kuper recommended other measures to increase VISD’s financial stability, including “thoughtfully” increasing the enrollment of commuter students.

“Increasing reliance on out-of-district enrollment can be risky financially, but may be needed if Vashon Island student enrollment continues to be flat or decline,” he said.

As another strategy, he also said the district should consider the need to rehire or not in all cases of staff turnover, including in administrative positions. Kuper noted his approval for McSheehy’s decision, this summer, to eliminate VISD’s position of Executive Director of Business, following the departure of Matt Sullivan, who resigned from that role in order to accept an offer to become the financial chief of the Mercer Island School District.

Kuper also suggested that the district should work with legislators to remedy VISD’s 12% regionalization rating — an effort that McSheehy, at the meeting, said was already underway, with VISD forming a coalition with other similarly disadvantaged districts.

Report follows rollout of pay raises

Kuper’s report comes on the heels of a reduction in force measure taken by the district last spring to cure what it then forecast as an almost $1.3 million deficit in its 2022-23 budget.

On a longer timeline, the report follows the approval by the school board of a rollout of pay raises across employment classifications — adjustments championed district-wide by Superintendent Slade McSheehy as a means to retain VISD’s talented staff by bringing their salaries more into alignment with those in nearby districts.

In May and June of 2021, the board approved packages of raises for top executives and other staff members in the district’s office, as well as a small group of full-time tech workers in the district, that came at a cost of $62,000 to the district.

This spring, the board approved a 5% raise for school administrators including principals, assistant principals and other learning leadership positions, as well as new three-year contracts for teachers and educational support staff members.

Those contracts gave those union-affiliated staff members a 7% raise in the first year. In the second and third years of the contract, they will receive raises according to the Implicit Price Deflator (IPD) — currently set at 5.5% but expected by some to rise due to current inflation — plus an additional 1%.

Another bargaining agreement, with members of the school’s Services Employees International Union — a group that includes custodial, food service and maintenance staff — was also approved by the board this spring. As a result of that agreement, district costs for these workers will rise 15% over the course of the next three years.

Finally, McSheehy also received raises in 2021 and 2022, bringing his base salary in those years up from $175,000 to $189,000. His 2022 raise was approved at the same meeting, in April, when the board first reviewed the reduction of force measure for the 2022-23 budget year.

Kuper praises staff, advises communication plan

Repeatedly during his presentation, and in his written report, Kuper praised VISD’s leadership, saying the district’s current financial woes were not due to mismanagement but rather, similar to those in many districts across the state and nation as “one-time” COVID relief funding expires and “inflation roars and student enrollments stagnate or decline.”

In closing his report, Kuper recommended that the district “create a communication plan that tells what the narrative is for why the district is in a position that reductions are needed.”

Kuper recommended that the plan include, for example, communicating that “Vashon Island is not unique and the structure of school finance in Washington state has changed. The district is not in this position due to mismanagement; in fact, aligning expenditures with current revenues with [its] current revenue stream is prudent.”

In a community email last week, signed by McSheehy and board chair Toby Holmes, and in a similarly-worded Beachcomber commentary this week signed by the entire school board (see page 6), the district leaders characterized VISD’s financial constraints as also being experienced by other regional districts each year — largely stemming from the state legislature’s chronic underfunding of public school budgets.

The commentary also announces that over the next six weeks, board and district administration, with collaboration from the VISD Budget Advisory Board and information from Kuper’s report, will develop a two-year solvency and sustainability plan.

The district’s efforts to align district expenditures more closely with state revenue sources, board members and McSheehy said, would be guided by the principles of “honoring VISD values and beliefs, increasing the district’s revenue sources, and maximizing the impact of every dollar.”

The board will take action on the solvency and sustainability plan at its regular December board meeting.