Seattle Schools and The Next Budget

I have not one, not two, but three budget analyses about SPS' budget. Finance is not my forte so I am very grateful for this in the weeds, in-depth work.

First to note is parent Albert Wong (and new advisor for the Board's Finance Committee) who has his own section on Reddit. 

He has two threads of interest there. One is his "SPS Simulator: Who or What Would You Axe (in the SPS budget)?

You TOO can DOGE the world. Cut the Superintendent first! Or just cut electricity.

What you'll find is that you can cut nearly ALL of central staff and only just start closing the budget deficit. You can do a little "better" if you just ignore the fact that our Economic Stablization Account is 0. Or you can disable the budget fill and just continue our dive into bankruptcy at the current rate. Whatever you want!

The key point: we clearly have bloat. But our deficit is HUGE. We need to pressure to remove the bloat, not just cause of money but cause it causes problems and is sorta blood boiling. But even if you remove it all, it cannot give people (teachers, paras, office staff) their due. Let's make sure we know where all we need to put pressure.

...oh, and it won't be closing schools (at least not until we fix Transportation funding).

Mr. Wong also has a blog on Medium with three meaty budget articles.

Cracking the Budget#1: Chronic Underspend (October 2025)

Cracking the Budget#2: The Central Office Grew. Cutting It Helps But It Won't Save Us (July 2026)

Cracking the Budget #3: Non-Compensation Spending (August 2026

The second budget analysis comes from a reader who will remain anonymous. This person explains what the budget just passed by the Board on Wednesday night reveals. (bold mine)

The SPS Board adopted the 2026-27 budget on August 26 via Resolution 2026/27-02. 

The General Fund is set at $1,338,853,189, down slightly from $1,352,858,641 budgeted the prior year. 

The Capital Fund is $487,879,635, Debt Service $3,489,927, and the Associated Student Body Fund $6,824,206.

The district describes it as a balanced budget but says plainly that the underlying structural deficit will persist without further changes. 

It closes the 2026-27 gap through a mix of measures: reducing centrally funded budgets, changing school staffing, transferring capital fund interest earnings to instructional and capital uses, delaying repayment of the economic stabilization (“rainy day”) fund, applying Inflation Reduction Act energy rebates, drawing down fund balance, and finding transportation efficiencies.

A significant piece of that gap-closing comes from capital-to-operating transfers: $67,252,773 moves from the Capital Fund to the General Fund for allowable maintenance, facility repairs, and technology costs, plus $2,061,927 to Debt Service, plus up to $3,500,000 in capital fund rental and lease revenue redirected to the General Fund. 

General Fund resources also include $25,751,214 in non-grant capacity reserves and $13,367,302 in grant capacity reserves — placeholders that will only be spent if additional actual revenue materializes.

Enrollment continues its long decline, budgeted at 48,204 AAFTE for 2026-27, though the four-year forecast projects a slight rebound to 49,268–48,812 range through 2029-30 — historically the district has consistently budgeted enrollment above what actually materializes. 

Teaching and Teaching Support together account for about 72% of General Fund spending; certificated salaries alone are $571,188,095, roughly 42.7% of the fund.

The district’s own fund balance projection (as of June 2026) shows the balance going negative by 2027-28 and continuing to decline through 2030-31, which sits in some tension with the more modest annual draws shown in the adopted four-year forecast table — the two documents don’t obviously reconcile on their face.

This directly bears on your capital-levy cross-subsidization and masked-insolvency theories, and there’s material here worth flagging.

The headline numbers: General Fund $1,338,853,189, Capital Fund $487,879,635, Debt Service $3,489,927, ASB $6,824,206. The BAR is dated June 8, 2026, introduced July 8, adopted August 26 — all consistent with the resolution and agenda.

On the capital-to-operating transfer theory, this document gives you the clearest current-year data point: the resolution authorizes $67,252,773 transferred from Capital Fund to General Fund “for allowable maintenance, facility repairs, and technology related expenditures” under RCW 28A.320.330, plus a separate $2,061,927 Capital-to-Debt-Service transfer, plus a new item — up to $3,500,000 of capital fund rental/lease revenue redirected to the General Fund under RCW 28A.335.060, justified by “evaluating the sufficiency of the school district’s capital projects fund for purposes of meeting demands for new construction.” 

That’s roughly $73M in capital-to-operating flow for a single fiscal year, and the rental/lease diversion is a new mechanism not present in the transfers you’d been tracking before — worth checking whether prior years’ resolutions included that clause or whether this is new for 2026-27.

(Editor's note: I believe that rental lease item is new but I will double-check.) 

The “Closes the Budget Gap” slide (slide 3) is a fairly unusual admission for a board document: it lists delaying rainy-day fund repayment, using fund balance, and the capital transfers as gap-closing measures in the same breath, then states plainly that “without additional changes, the structural deficit will persist.” That’s the district conceding a structural deficit in writing even while the BAR itself calls this a “balanced budget” — the two framings sit uneasily together and the concession line is worth pulling as a direct quote if you’re building a record.

On fund balance, there’s an internal inconsistency worth flagging: the Fund Balance Goal chart (slide 4/5) shows the district’s own “Updated Projection – June 2026” going negative by FY28 (–$23.6M) and worsening through FY31 (–$68.6M), using a $61,247,122 FY26 starting point. 

But the four-year forecast table in both the presentation (slide 23) and the adopted resolution itself shows only modest annual General Fund draws (–$21.2M, –$63.6M, –$15M, –$15M) that would leave a materially different — and not obviously negative — ending position if you just netted them against a $61M starting balance. 

Those two internal SPS documents, produced for the same budget cycle, don’t reconcile on their face. 

Also notable: the General Fund resources footnote on slide 9 states outright that “total resources did not cover total expenditures in 2025-26” and that the district “relied on partial support from the interfund loan received in 2024-25 to cover the anticipated deficit” — that’s a written admission, in a board-facing document, that the 2024-25 interfund loan was still being drawn on in 2025-26 to cover a resource shortfall.  

One more item: capacity reserves of $25.75M (non-grant) and $13.37M (grant) are described as “placeholders” not to be spent absent actual resources — that’s the AP/budget-versus-actual gap mechanism Albert Wong’s Medium piece flagged; this year’s document shows the district still budgeting substantial unfunded capacity into the adopted budget rather than a leaner true-up.

The next analysis comes from The Seattle Times Comment section on public education stories. There is a guy (and I'm certain it's a man) who calls himself OSPI Retired Professional. He gives quite lengthy but helpful comments. But he will also smack down anyone who disagrees with him on his theme OR any minor points. 

This comment brings much of what Wong and my anonymous reader are covering into a smaller view.

Actually, multiple SPS deficit buckets exist, and folks treat them like they’re interchangeable. They’re not.

SPS uses four deficit numbers:

- The $87M structural gap, 

- the $100M+ operating deficit, 

- the $40–50M ‘manageable’ deficit, 

- and the insolvency timeline.

Structural Deficit—the $87M

This is the recurring annual mismatch between ongoing revenue and ongoing costs:

• Enrollment decline→less state money
• Special‑ed underfunding→big general‑fund drain
• Too many buildings→fixed staffing costs
• ESSER expired→hole reappears 

This is the “real” deficit. It repeats every year unless SPS shrinks its footprint.

Operating Deficit—$100M–$120M

This is the number SPS uses when it wants to show the full budget problem, not just the structural gap. It includes:

• The $87M structural deficit
• Inflationary pressures
• Contractual step increases
• Special‑ed cost growth
• Enrollment projections for next year
• Program expansions already committed 

This is the “oh crap” number SPS uses in internal planning and some Board presentations. Folks often confuse this with the $87M, but it’s bigger because it includes future‑year cost growth, not just the structural mismatch.

Manageable Deficit—$40M–$50M

This is the number SPS uses when it wants to calm the public. It assumes:

• Temporary cuts
• One‑time funds
• Delayed hiring
• Vacancy savings
• Deferring maintenance
• Short‑term program reductions 

This is the “we can get through this year” number. It’s not sustainable. It’s basically SPS saying "we can limp through FY27 without collapsing." Folks who want to argue SPS is exaggerating use this number.

Fund Balance Risk—negative by 2027

This isn’t a deficit number, but the timeline to insolvency. If SPS does nothing:

• Fund balance goes negative
• State oversight kicks in
• SPS loses fiscal autonomy
• Forced closures and consolidations happen 

This is the number SPS uses when it wants to pressure SEA or our Legislature. It’s not a dollar amount, but a date.

Think of these like nested circles:

• $87M = structural deficit (core problem)
• $100M–$120M = operating deficit (structural + cost growth)
• $40M–$50M = manageable deficit (short‑term patchwork)
• Fund balance risk = insolvency timeline 

SPS switches between these depending on audience:

• Legislature→operating deficit
• Public→manageable deficit
• SEA→structural deficit
• Board→fund balance risk 

Folks think they’ve “found something” because SPS keeps swapping deficit buckets. It’s just shifting numbers, not discovery.

But at the negotiation table both sides use the $87M structural deficit. SPS saves the $120M operating deficit and insolvency talk for the public, the Board, and our Legislature. SEA sticks to the recurring number because raises hit recurring costs.

And so it goes...

• SEA’s message is “We bargain against the real recurring gap, not SPS’s PR numbers.”
• SPS’s message is “We can’t afford SEA’s asks because the recurring deficit is already $87M.”

I remind readers of that interesting sentence that is part of SEA's messaging - I paraphrase but it's something like:

Seattle Schools has a budget problem but also a budgeting problem.

Meaning, what does SPS value enough to include in the budget is that spending sustainable? truly needed? a pet project?