Kalispell Public Schools approves final budget under looming shortfall

Kalispell Public Schools elementary district has $41.2 million and the high school district $42.6 million to operate with for the 2024-25 school year. 

The revenue, a combination of state and taxpayer money, falls short of covering district expenses, though. 

The expected shortfall is due to a combination of factors such as salary and health insurance increases, inflation, failed levies and the expiration of Elementary and Secondary School Emergency Relief Fund money issued during the pandemic. 

There are two factors yet unaccounted for in finalizing expenditures, which could be in the range of $2 to $3 million. 

A collective bargaining agreement hasn’t been reached between the district and Kalispell Education Association. The two sides resumed talks Monday after pausing negotiations for the summer break. The next negotiations meeting is set for Sept. 30.  

Teachers are currently operating on the 2023-24 contract. The union represents about 460 certified staff (namely teachers), school nurses, psychologists and speech-language pathologists. 

The other variable is underfunded departments, said Superintendent Matt Jensen during an August school board meeting where trustees approved the final budget. School boards are required by law to adopt final budgets by the third week of August to submit to the Montana Office of Public Instruction. 

Once a final deficit amount is reached, work can begin on how to remedy it, according to Jensen. During that Aug. 20 meeting, trustees pressed Jensen on the ramifications of a shortfall. The district has informed the school board of the anticipated deficit since November 2023, when preliminary numbers were presented. 

“To be super clear ... this will result in significant reductions in staff,” Jensen told trustees. 

This could include a combination of leaving vacant positions open and reducing the district’s workforce. Last school year, the district offered a retirement incentive to staff.  

In May, the district went to taxpayers with a $700,000 high school general fund levy and a more than $1 million technology levy for the elementary district. Voters shot down the high school general fund levy while narrowly approving the elementary tech levy.  

The high school levy would have generated revenue for the district’s largest fund, which goes toward salaries and benefits in addition to the day-to-day costs of operating schools from utilities to textbooks.  

“We’ve been operating for a long time where we’ve pulled from other areas to not reduce staff. We have underfunded areas because of that. So, we’ve basically reached the point where we can’t keep pulling from those areas because there’s nothing left to pull from,” Jensen said. 

“What we’re focused on as an administrative team is coming up with solutions that give us stability,” he added. 

Any recommendations go before the school board for final approval. 

In past years, former finance directors have cautioned the school board on using one-time money, namely interlocal funds, or pulling from other funds as “kicking the can down the road.” Jensen offered a similar sentiment. 

“We’ve watched other districts go through this and I think chasing a negative number through a sort of piecemeal approach might solve the problem from this year to the next but actually doesn’t solve the problem in the amount of staff you can have for the budget that you have. So, it recreates the same problem year over year versus addressing the fundamental funding structures,” Jensen said.  

Efforts are underway to evaluate staffing levels in schools to assess efficiency. 

School funding is also on the docket at the Legislative level regarding the funding formula, but school officials aren’t banking on changes that will bail them out anytime soon. And District Finance Director Chris Campbell told the Inter Lake that the existing funding formula is difficult to get a grasp on without prior experience working with it. 

“The current funding formula, first off, is incredibly complex, so much so that I think oftentimes a lot of well-intended legislation has adverse consequences because the complexity of school finance makes it very difficult for any person who doesn’t work in school finance full-time to understand the implications,” Campbell said. “It’s very challenging in that way.” 

Campbell said the state’s funding structure has not kept up with inflation “in a way that is adequate.” 

“The inflationary increase that the state offers, and the max amount they can offer per current law, is insignificant to our operation,” Campbell said about the district’s bottom line. “It all needs to be reworked and rethought.” 

Kalispell Public Schools is the largest district in Flathead County with a staff of more than 750 and about 6,359 K-12 students. Enrollment numbers remained flat over the last school year. 

Campbell also touched on the increasing cost of living in relation to wages, which is not accounted for in the funding formula. It puts districts in a bind, he said. 

“There are some key areas in the state, Flathead County being one of them, where the cost of living, primarily the cost of housing, has increased so significantly that the wages we pay are not adequate for somebody moving here and taking a job teaching to live on,” Campbell said. 

“I think our goal is to pay teachers as competitively as we can and balance that with staffing our buildings and positions in our district,” he added. 

The $41.2 million and $42.6 million encompass 11 budgeted funds both in the elementary district and high school district. State funding and taxpayer money are the primary sources of revenue for the district’s budgeted funds. 

State funding is directly tied to student enrollment. Property taxes accounted for about 34.6% of funding for the elementary district budget and 31.5% of the high school budget. 

New to the high school district’s budget is $700,000 to open two charter schools within Flathead and Glacier high schools. The charter school budgets must be tracked separately from Flathead and Glacier, but teachers may have a workload that includes both traditional and charter classes.  

“We’ve been proactive in reaching out to both OPI [and the] Board of Public Education and it’s very, very limited on the guidance they have for us right now,” Campbell said. “They’re going to have to start making some rules here soon.” 

In addition to budgeted funds there are cash funds, which fluctuate over time, and cover food service, student activities, traffic education the district’s self-health insurance, for example. Elementary and Secondary School Emergency Relief money, once held in the cash funds, has been spent. All Montana districts must spend any remaining Elementary and Secondary School Emergency Relief money by the end of the month. 

Another cash fund called the interlocal fund currently contains about $5.8 million.  

“And $5.8 million is certainly a lot of money, however, that represents 6% of our total spend from last year, so essentially, that’s 22 days of operating reserves, less than one month,” Campbell said, explaining how the Finance Department views an appropriate reserve balance versus an excess reserve balance. “At this point, we wouldn’t consider the reserve balance to be excessive by any metric,” 

The interlocal fund contains year-end money from the elementary and high school districts and may be spent on various projects with board approval. Kalispell Public Schools ended the 2023-24 school year without a transfer as in previous years. 

Since the interlocal fund was put into place in 2011, the district has used it like a savings account of sorts to accumulate money over time to fund large projects or purchases as opposed to going out for a bond or getting a loan. In previous years, the district used the one-time money to cover costs to build the transportation facility, meet technology costs, purchase land and float a million loan to the district’s self-funded insurance plan. 

Interlocal money has also been earmarked for upcoming curriculum purchases and other future expenses such as replacing the artificial turf and track at Legends Stadium when needed. 

The Office of Public Instruction itself has fallen into financial hot water. Last week, the Daily Montanan reported on auditors uncovered $67.5 million in “questionable spending of federal pass-through money,” that didn’t have proper documentation or meet federal programming parameters. According to the Sept. 11 article, some districts were cut out of funding while others may have been overpaid. Campbell said Kalispell Public Schools is not directly affected by the issue. 

Reporter Hilary Matheson may be reached at 758-4431 or hmatheson@dailyinterlake.com.