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Internal audit on horizon as rainy day funds wiped out to cover budget shortfalls

After pleas from teachers and parents to use reserves to cover a multi-million dollar budget shortfall, Beaverton School District says it will dig deeply into its rainy day funds, leaving enough behind to cover some operation expenses.

Precisely: Just two days of operating expenses.

BSD's budget committee, which includes the school board, voted unanimously Monday, June 17, to recommend approval of a nearly $982.8 million annual budget that would transfer $18.4 million from the district's rainy day reserves to cover budget gaps for teaching staff. The revised budget requires final approval from the school board, which is slated to vote Monday, June 24.

PMG FILE PHOTO - Superintendent Don Grotting said guesstimations of the district's budget helped lead to a massive shortfall and upcoming layoffs.The state recommendation for operating reserves is two months' worth of funds, staff acknowledged, but noted the district has other reserve and contingency funds for emergencies.

Even after raiding its umbrella funds, the district still anticipates cutting 140 positions, some of which currently are unfilled.

"We are deficit spending," school board member Becky Tymchuk said. "We are dipping into the rainy day fund just to tread water. There is something wrong with that model, that the best we can do is to keep treading water."

It's unclear exactly how many layoffs are in store, as district officials said Monday that they anticipate more than 100 staffers will retire or leave the district.

In May 2018, Beaverton voters approved the renewal of a local option levy, which guarantees funding for 300 teachers. Responding to questions pitched by community members, district staff said those positions are still being funded, and if not for the levy money, talks of staffing cuts would have been much greater.

"This budget is going to be a very tight budget," Superintendent Don Grotting said. "It's going to need to be reviewed, it's ongoing."

Budget talks have been heated for the past two months, after the district announced it faced a $35 million shortfall in the face of increased employee retirement costs, less funding for schools allocated in the state's budget, and a heavy drop in enrollment of English-language learners and other students that trigger additional federal funds for the district.

Hints of budget woes came in January, when finance staff told of a $12 million mid-year budget deficit. By April, that anticipated shortage for the 2019-20 school year ballooned into an estimated $35 million.

Initially the district announced it was preparing to cut roughly 300 positions because of the shortage. Then, it got a hail Mary from the 2019 Oregon Legislature, via the passage of the Student Success Act, which will allocate an additional $2 billion to the state's public schools over the next two years.

Still, Beaverton's money problems rivaled that of neighboring districts, leaving many to question why top administrators didn't see the writing on the wall sooner, or at least use more modest budgeting assumptions.

"A whole bunch of things have led up to having all of these things happen at one time," the district's interim chief financial officer, Jim Scherzinger, said Monday. "This is the perfect storm result of that. It's the result of having some budget errors that were made ... and flattening enrollment."

Scherzinger temporarily replaced Gayellyn Jacobson who abruptly resigned in May; in the middle of the budget-crafting season. Jacobson had held the school district's top financial post. District officials have not confirmed that Jacobson's ouster was directly related to the budget shortfall.

But this week, Grotting said he'd like to see the district's budgeting process revamped, citing "too much guesstimation" in the current approach, which led to bad enrollment estimates and other miscalculations.

Grotting said Scherzinger, who came on to work temporarily for Beaverton after retiring as a state finance expert, is working to audit the district's budgeting practices and to create a "system of checks and balances" to prevent major budget errors from happening again.

PMG PHOTO: COURTNEY VAUGHN - Beaverton School Board member Tom Colett talks about the need to use reserves and problems with doing so, during a budget committe meeting Monday, June 17."For me, this budget (process) has been an emotional roller coaster," school board member Tom Colett said Monday, before voting to approve the revised 2019-20 budget. "Key to my support of this budget is the need to balance the next year's fiscal needs against the needs for the future."

Colett said the budget being considered wasn't "the budget our students deserve," but said it made sense for the circumstances.

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