Kalispell Public Schools has begun the long, painful process of building its budget for the 2010-11 school year.

At a board of trustees’ work session Tuesday night, district Clerk Todd Watkins outlined the process the district’s central office will use to build a budget next year, when Kalispell Public Schools faces significant shortfalls in its elementary and high school districts.

The process involves prioritizing every program and service in the district, from classroom instruction to extracurricular activities, to figure out what can be trimmed or cut.

Based on Watkins’ early estimates, the elementary district needs a $16.5 million budget next year. The high school district needs $17.7 million. These figures are a 4 percent increase over this year’s budget.

Most of that increase, Watkins told trustees Tuesday, will be to cover contractual raises and raises on base pay that were negotiated in spring 2008.

Unless the district makes cuts, however, there will not be enough money in Kalispell’s coffers to cover the increase. Final numbers won’t be available until March, but based on Watkins’ early projections, the school district could face a shortfall ranging from $889,000 to $1.1 million.

The shortfall depends largely on enrollment. Student head counts in October and February are used to calculate the amount of money a school district receives from the state.

Watkins said Tuesday that he didn’t anticipate elementary enrollment would change much by February from the October count of 2,144 students. High school enrollment could fluctuate more; at 2,754 students, it’s already up nearly 40 students from October.

Enrollment will determine how much money the district gets from the state for its general fund budget. Watkins’ early estimates suggest that state money won’t be enough to run the district next year, which leaves Kalispell Public Schools with three options: make cuts, ask taxpayers to approve an extra tax levy or both.

The district and school board will decide over the next few months which option to pursue.

School districts are allotted general fund money on an annual basis. Unlike a company in the private sector, that money must be spent during the year and can’t be set aside for future use.

“You can’t run a school district like a business,” Watkins explained in an interview earlier this month.

School districts also are limited by a state-mandated budget cap. Kalispell’s elementary budget cap next year is about $11,700 less than its general fund budget. The high school cap is about $543,000 more than the projected budget.

General fund money is divided between several categories, ranging from instructional services to extracurricular athletics and activities. In the elementary district, 56 percent of the general fund goes to instruction. At the high school level, instruction is 46 percent of the general fund budget.

The difference between the two exists largely because extracurricular sports and activities play a larger role in high school than at the elementary level, Watkins explained Tuesday. Less than 2 percent of the elementary budget goes to extracurriculars, but 7 percent of the high school budget is designated for sports and activities.

Regardless of the category the money falls under, most of the general fund budget goes toward wages and benefits. It’s a typical configuration in a people-heavy organization like a school district, but it leaves little for the actual expenses of running a district. Those expenses include everything from utilities to routine maintenance to school supplies.

About $1.2 million of the elementary district’s $15.6 million budget this year was used for something other than paying employees. A little over $2.2 million of the nearly $16.8 million high school budget was not designated for wages and benefits.

This could make a levy request — if the school board decides to run an election in May — a tough sell, Watkins said Tuesday.

“The place that we’ll struggle when we run a levy is [when people ask] what is it for? Why do you need it? The honest answer is pretty much wages and benefits,” he said.

If no cuts were made to next year’s budget and voters approved levies in both districts, the annual property tax impact would be around $100 a year for a home with a $200,000 taxable value. A high school levy likely would cost less than $20 a year for a $200,000 home.

But even that could be too expensive for many voting taxpayers in the Kalispell district.

“When you start breaking it down, it’s not a lot — but it is a lot for some folks living in our community right now,” Watkins said.

At the elementary level, nearly 90 percent of this year’s budget is wages and benefits. Eighty-three percent of the high school general fund budget pays salaries and benefits.

Those percentages will increase next year to cover the negotiated and contractual raises. Teachers receive a raise every year as they gain more experience and education. The Kalispell Education Association also negotiates raises on their base salaries.

Kalispell teacher salaries this year range from $31,100 to $73,300.

The teachers’ union negotiated a 2 percent raise on the base each year for two years in spring 2008. Watkins, who knew budgets would be tight during the 2009-10 and 2010-11 school years, had recommended a 0 to 1 percent raise.

The negotiations took place before the Montana Legislature decided to use federal stimulus money to help fund schools, Kalispell Education Association President John Hughes said. At the time, it appeared schools would receive a certain amount of funding from the state and an as-yet-undetermined amount of one-time-only stimulus money on top of that.

Instead, the Legislature decided to use stimulus money to backfill the money already promised to schools, Hughes said.

“It was a different set of numbers that we were looking at” during negotiations, Hughes said. “Everybody was just kind of guessing or hoping for the best. It’s not like we went in there and drove some terribly hard bargain.”

He acknowledged that the deficit the district faces next year is due to wages and benefits.

While “I understand it hurts, my job really is to try to get what I can for the teachers,” Hughes said. “I believe they deserve [the raise] no more than anybody else does, and that everybody should be compensated adequately for the job that they do.”

“If I could help everybody out there get a raise I would,” he added. “I’m only responsible for leading the union and negotiating the best increases we can.”

Teachers aren’t the only ones with raises that must be covered in next year’s budget. Nearly everyone in the district negotiated a 2 percent raise over two years, and some without union representation — including school principals and most employees in the district’s central office — also got a 2 percent salary increase.

Administrators, including Watkins, Superintendent Darlene Schottle and building principals, historically have received the same raise as the teachers’ union.

“Each year, that window [the gap between teachers’ salaries and administrators’ pay] narrows a bit” because most teachers’ salaries automatically increase as they add years of experience and education, Schottle said.

“Administrative contracts don’t have that. When they’re given a raise, it’s a pure raise.”

By giving administrators raises that mimic other staff salary increases, the district acknowledges “that you have to keep at minimum administrative salaries some small step ahead of certified [teacher] salaries,” Schottle said.

The lowest-paid administrator, Dallas Stuker (Kalispell Middle School dean of students and athletic director) makes $65,280 — less than the district’s highest-paid teachers. Other full-time building administrators’ wages range from $74,889, just above the highest-paid teachers, to Glacier High School Principal Callie Langohr’s $93,500 salary.

Schottle will make nearly $116,000 this year.

Those salaries will all go up next year, causing the general fund budget’s approximately 4 percent increase. The impact will be helped somewhat by federal stimulus money, which also helped this year’s budget.

But even stimulus funds can’t totally make up the deficit the district faces. And in 2011-12, when those one-time-only funds are gone, this year’s budget problems will seem like a minor headache.

“If we don’t have that [stimulus money], then we’re in dire straits,” Watkins said Tuesday.

Unless the board decides to ask the public to foot the bill for the entire deficit — an unlikely scenario after voters last month shot down a $4.1 million high school building reserve levy request — cuts will have to be made. But determining where the cuts come from won’t be easy.

To help with the decision-making process, the district will turn to a new rubric that will help them determine where cuts can take place.

State and federal mandates require certain programs and classroom configurations, which limits cuts in some areas. The rubric will show administrators and school board members what budgeted items are required and will help them rank programs in terms of necessity.

Some things aren’t required by law but are still considered necessities by many. That’s when administrators and trustees have to look at how much those programs cost, Watkins said.

Some members of the public have suggested the district cut “unnecessary” programs such as athletics and activities. Extracurricular activities account for more than $1.1 million of the high school general fund budget.

But many of those programs are considered integral parts of the school district, as Watkins pointed out at Tuesday’s meeting. Trustee Jean Barragan said it might not be the board’s job to figure out where to make cuts; instead, she suggested district administrators figure out where reductions should happen and make a recommendation to the board.

The suggestion didn’t appeal to Watkins.

“As you look at those activities, particularly music in this valley ... I can’t even imagine having that discussion [to cut music programs] in this valley,” he said. “And you want me to come forward and make a music recommendation?”

Using the rubric will help the district decide “what’s the least important of the most important” items in the budget — and they’re all important, Schottle said. “Whatever we decide is going to be difficult. There’s no question about that.”

On the Web:

www.sd5.k12.mt.us

Reporter Kristi Albertson may be reached at 758-4438 or by e-mail at kalbertson@dailyinterlake.com