Jacob Dimond / jake@yelmonline.com
Yelm Community Schools (YCS) has identified a total of $7.8 million that can be transferred from the district’s capital fund to its general balance ahead of the 2026-27 school year — providing much-needed temporary breathing room as its financial struggles continue.
Chris Woods, YCS Superintendent, spoke on the potential transfer of funds during a YCS Board of Directors meeting on Thursday, Feb. 26. He said the district has been doing everything within its power to offset its financial deficit due to the loss of levy dollars.
One of the methods that the district has identified, with help from the Office of the Superintendent of Public Instruction (OSPI) and the Educational Service District (ESD), is a one time transfer of funds from the YCS capital fund into its general fund.
“We have, so far, over $300,000 that we have taken out of capital,” Woods said. “Basically, they’re expenditures that we would normally take out of the general fund. They do qualify as expenditures to come out of the capital fund and we’ve done that for this year, given our financial situation.”
While the allocation of funds might be helpful to YCS short term, Woods acknowledged that this strategy is not sustainable nor something a district would do long term.
Additionally, while spending time with OSPI and ESD digging into the district’s capital fund, Woods said that’s the final place, other than cuts, where YCS can find any money to move into the general fund.
The superintendent also presented a history of transfers of money into the district’s capital fund throughout recent memory.
It included:
-$1 million in November of the 2015-16 school year
-$800,000 in July of the 2016-17 school year*
-$1 million in April of the 2016-17 school year*
-$1.5 million in May of the 2017-18 school year
-$1 million in April of the 2018-19 school year
-$1 million in August of the 2018-19 school year*
-$500,000 in August of the 2019-20 school year*
-$1 million in May of the 2020-21 school year
Grand total of $7.8 million moved in six year window
“Over this period of time, the district, each year, chose to take money out of the general fund and into the capital for a total of $7.8 million. A district would do that very intentionally for a number of reasons. I want to make sure that I share why,” Woods said. “Again, the general fund is more flexible in spending. You can use that on just about anything as where the capital fund is restricted.”
One of the primary reasons Woods believes the district was transferring that high volume of money into its capital fund was because YCS didn’t have an active bond throughout that window. Those transfers of money were saved to potentially purchase land, additional portables, construct facilities, replace field turf or field lights, replace rooms and emergency repairs.
“Typically, when a district does not have a bond, and during this chunk of time, it wasn’t until the very end there that the district was able to pass a bond. There were no transfers after the 2020-21 year,” Woods said. “What we’ve been talking about with OSPI, ESD, is we’ve been digging very deep, as you can see by going back to 2015 and 2016.”
Is YCS allowed to transfer funds from its capital balance back into its general fund?
Yes, according to Woods. He noted there are very specific guidelines on why districts can do this, and highlighted the very few reasons as to why it’s legally allowed.
“One of those is that first bullet point, whether the transfer resolution is included in the resolution to adopt the budget, or if it is a separate, independent board resolution, a copy must be sent to OSPI to approve the transfer,” he said.
After a transfer from the general fund to the capital fund occurs, the school board must approve a resolution. Additionally, Woods said each of the transfers had a board resolution to allow the transfer, but OSPI didn’t approve four specific transfers.
“The next step is that OSPI has to give approval for that transfer. That formal step did not happen. That step would typically happen at the district office. That is not a board duty. It’s not something board members would be involved in. That is something the district would do,” Woods said. “In this particular case, I can’t speak to why that didn’t happen but a total of $3.3 million was approved to be transferred, was transferred — but OSPI never gave the formal approval for that to happen. That money is sitting there.”
Because OSPI didn’t give formal approval for four transfers of funds, designated by asterisks in the chart above, YCS must transfer that balance back into the general fund — which was its original intended purpose.
Woods also noted that, specifically, there are “very prescribed reasons” in the 2025 School District Accounting Manual through OSPI in chapter three for these transfers.
“As I’ve been meeting with the ESD and OSPI, through a lot of digging and a lot of meetings with them, our district can move $7.8 million from capital over to the general fund. Our district has to move $3.3 million of it,” Woods said. “That’s the $3.3 million that wasn’t formally approved by OSPI. At the very least, we have to move that $3.3 million back. We are able to move that $7.8 million if we choose.”
Woods also painted a picture of the district’s financial standings for the conclusion of the 2025-26 and 2026-27 school years based on whether or not YCS transferred the $7.8 million into its general fund.
Without the $7.8 million transfer, YCS would conclude the 2025-26 school year with $338,085 in its general fund. It would finish the 2026-27 school year with a deficit of $8,298,323.
“If we did not do any transfer at the end of this school year, we would have $338,000 left,” Woods said. “Now, that is where you would start the next school year. So, if we don’t do anything…. we end the year at $338,000. We don’t transfer anything into the general fund. At the end of 2026-27, we would end the year at negative $6.3 million. That’s making the assumptions of all the things that we’ve done up to this date — September through January expenditures.”
With the transfer of $7.8 million, YCS would conclude the 2025-26 school year with $8,138,085 in its general fund. Additionally, it would finish the 2026-27 school year with $1,501,677 in its general fund.
“If we were to transfer the $7.8 million over to the general fund in March, for example, if we did a resolution in March, got approval through OSPI, we would, again, assuming the same reductions we’ve made, we would end the year with an $8.1 million ending fund balance,” Woods said. “If we were to go through next school year with that $8.1 million and all of the apportionment we get from the state, all the revenue we get from the state and we did no additional cuts, we would end next year with $1.5 million. That’s about $3.3 million less than our ending fund balance policy. Again, being in binding conditions, we’ve intentionally had to deviate from that because of our financial situation.”
Even with the potential movement of $7.8 million into the district’s general fund, Woods reiterated this would be a one time move and noted there would still be additional cuts to make in the future.
Additionally, the YCS capital fund currently sits at $14.5 million — prior to the potential transfer of $7.8 million.
“If we were to transfer $7.8 million over to the general fund, that would leave us with $6.7 million in the capital fund. What that means, for us, is we would solely be focused on emergency repairs and replacements,” Woods said. “If you think about a roof, for example, it’s at least $1 million to replace a roof. So right there, if you have to replace a roof — which we do have a cycle for all our roofs — every year we could do one easily. Just right there is $1 million, easily. Our focus would be shifting towards anything emergency, anything that is safety related.”
Woods believes the school district is fortunate to have the option of transferring funds from its capital balance into its general fund, as he said “most districts do not” have that opportunity.
“Majority of districts are borrowing from capital and paying back with interest if they’re not on binding conditions,” he said. “If they are on binding conditions, they can borrow from capital but they’ve also got to pay back in a year, but that’s without interest.”
Additionally, Woods said there are school districts near YCS that just passed levies but are still forced to borrow money from its capital fund.
“We are lucky. We have these dollars to help us. What does it do in the grand scheme of things? It kicks the problem down the road. We’re going to continue making cuts. We have to,” Woods said. “Of the $15 million to $16 million that we’ve lost to the levy, we’ve cut about half of that. You also have to think about what are we losing ground on with inflation but not getting funded back for? We take two steps forward and then we take one step back.”
Regardless of the decision to transfer the $7.8 million or not, Woods said budget cuts will continue district-wide.
Additionally, Woods said that YCS has to pass a levy next school year in order to avoid another round of cuts next spring.
