After having cut $2.6 million from its operating budget for the 2008-2009 school year, the Kent School District is facing further cuts in the future as expenditures continue to outstrip revenues and the district’s fund balance continues to shrink.

With a presentation subtitled “Living Within Our Means,” executive director of Finance John Knutson painted a gloomy portrait of district finances in his multi-year budget forecast during the Sept. 24 School Board meeting.

Several Kent schools have Renton addresses, including Kentridge High School.

This past year, the district had to rely on the unreserved fund balance for $4.5 million to help balance the books. Without expenditure cuts, draw downs to the fund balance of nearly $6.3 million will be necessary, forcing it below the 5 percent mandated by board policy.

“No district can survive a continuous drawdown of fund balance,” Knutson told the board.

Knutson said the fund balance is designed for emergency costs, not continuing costs. This year, for example, the district had to cover a $655,000 investment loss.

The fund balance also contributes to the district’s bond rating.

According to Knutson the decline in revenues is due to cost increases that outpace local levy funds, cost-of-living increases in salaries, benefits and pensions and a decrease in revenue from Initiative 728 funding, passed by voters in 2000 as a way to reduce class sizes.

Knutson said numbers provided by the state indicate that cost-of-living allowance rates over the next the years will be 3.4, 2.4, and 2.5 percent, though they may change due to a “gloomy state revenue forecast.”

Though state money will pay for increases on most teachers, those hired by the district on local levy dollars also will receive the increases. According to Knutson, however, the district levy is currently at the legal limit, meaning cuts are the only way to balance the budget.

The board’s next step is to begin meeting with the community to discuss and identify priorities to begin looking for places to cut.

“We definitely have our work cut out for us,” said Board Member Debbie Strauss.

Knutson agreed.

“We don’t want to paint a worst-possible case of doom and gloom,” he said, “but this is pretty bad and we have our work cut out for us.”

Brian Beckley can be reached at 253-437-6012 or bbeckley@kentreporter.com