MOSES LAKE — With the apparent failure of the replacement levy in the Aug. 3 primary election, the Moses Lake School District is facing a $7 million budget shortfall for the 2021-22 school year, which begins Sept. 1.

However, as school board members considered the district’s upcoming budget — which they must pass by the end of August — the draft proposal they were given for the next school year assumes the eventual passage of the three-year, $7-million-per-year levy.

“I would prefer to see a budget that reflects the reality of today, and the levy didn’t pass,” said board member Elliott Goodrich.

MLSD Business Manager Stefanie Lowry presented a draft general fund budget for 2021-22 that proposes spending $132.4 million on teaching and district operations, up 7% from the previous year’s budget of $123.8 million. Of that, the district is proposing to spend $57.6 million on certified salaries — mostly teachers and administrators — $20.4 million on classified salaries — para-educators and staff — and $30.7 million on employee benefits and payroll taxes.

The proposed budget also assumes a K-12 enrollment of 8,546 students, roughly the same as the previous school year, but down more than 200 students from 2019-20, according to figures Lowry presented during the meeting.

However, according to a monthly headcount report filed by the MLSD with the Office of the Superintendent of Public Instruction (OSPI) in Olympia, total district-wide attendance for the MLSD in the 2020-21 school year never exceeded 7,942 students (in November) and averaged 7,874 students per month for the entire September-to-June school year.

“We saw a 9% decrease in student enrollment last year, which led to a $4 million decrease in state funding,” Lowry told board members.

Lowry said a large portion of that decrease in per student apportionment was offset by federal relief money from the Elementary and Secondary School Emergency Relief (ESSER) fund, passed by Congress as part of the CARES Act in March 2020.

Under the proposed budget, the MLSD is set to receive nearly $10 million in ESSER funding in 2021-22, though it is not clear how the district can spend that money.

The proposed budget also includes a reserve of roughly $16.7 million – money saved and not spent on any existing programs.

Lowry also told board members MLSD’s breakfast and lunch programs are now completely funded by the federal government, which provided the district $2.5 million for school food service last school year and is budgeted to provide $3.1 million in the upcoming school year.

“All students now eat for free,” she said.

However, because of the apparent failure of the levy — at the last count, the “no” vote led the “yes” vote by 282 votes, with 150 remaining to be counted, and the election is certified on Tuesday — the district will fall short by roughly $7 million in the upcoming school year.

The current levy expires at the end of December, and will be collected until then. It is expected to raise around $3.5 million from district property owners, with another $3.5 million in matching funds from the state.

Once the local levy is no longer collected, the state won’t pay the matching funds, Lowry said. That will mean a budget shortfall of roughly $14 million for the 2022-23 and 2023-24 school years if the levy is not passed by voters in November.

Board members briefly considered what they could cut to meet the expected revenue, but then asked Lowry to prepare a second draft budget that takes into account the revenue loss. Much of the district’s state and federal funding goes to specific programs and cannot be moved around, Lowry said.

“We can’t really take anything out of regular instruction because that’s basic education,” board member Susan Freeman said. “So these are some pretty hard choices to make.”

“We need to do this because people need to see how the levy will affect things,” said board member Shannon Hintz.

Board members agreed to another special meeting on Friday to review the budget and make suggestions — something board president Vickey Melcher said they had done in previous years in July.

“We used to have a budget retreat,” she said.

The proposed budget also appropriates $909,775 in the Associated Student Body fund, which pays for extracurricular activities, $547,000 for the transportation fund, and $57.5 million in the capital projects fund, which will cover the construction of the new high school and modifications to the existing high school.

However, the capital fund budget anticipates an eventual sale of all remaining roughly $85 million in bonds, which the district is authorized to issue under the revised $135 million school construction bond approved by voters in February 2017.

Trevor Carlson, a managing director for public finance with bond underwriter Piper Sandler, told board members his organization is preparing to sell the next tranche of construction bonds, worth roughly $59 million, in late September.

Lowry said that would be enough to cover the remaining $39 million to finish construction on the new high school, $10 million for improvements to the existing high school, and another $10 million for other projects across the district.

That leaves around $26 million the district does not need to issue or spend, Goodrich said, because it has no projects it anticipates needing the money for.

“I take issue with selling bonds before projects have been developed and approved,” he said. “I’m not saying no to spending the money, I’m saying no to writing blank checks.”

Finally, board members also met in two separate executive sessions — a two-hour meeting prior to the open public meeting, and then another hour-long closed-door meeting after the end of the public meeting — but did not make any decisions nor say what the executive sessions were about.

The board had the first of a series of executive sessions last week, prompting an investigation into “financial concerns” and a “personnel matter,” but no one gave any details.