There’s a lot of activity in our school district right now. We are nearing the end of a very successful year. However, because the budget continues to be a problem to solve, I want to take some time to share what is happening with next year’s funds.

School districts all over Washington are receiving discouraging news around school financing.

On Vashon we are wrestling with a gap of $246,000 between expected revenue for the 2008-09 school year and annual operating costs, which we plan to resolve within the next few weeks.

The main reason we have this gap is the way the state Legislature awards Cost of Living Adjustments (COLAs) to staff. Because the state’s formula provides funding for only about two-thirds of the number of teachers needed to educate our kids, the remaining amount — including COLAs — has to come from local levies. That, coupled with a 32 percent increase in employee retirement costs, has forced many difficult decisions on the district.

We’ve come up with several solutions to bridge this gap. Most of the choices we’ve made will not impact the classroom directly. We’ve also had to make some tough decisions, like not filling some positions opened by retirement. When the dust settles, I hope we can find money to fill some of these highly valued positions.

In cases where cuts will affect teachers, like blending two grades into one classroom at Chautauqua, we have chosen some of the district’s most experienced and respected teachers to lead.

Now it’s time to look ahead. Over the past year, we’ve focused on creating long-term financial stability.

Our goal is to get the district back on track by staying within our annual budget and maintaining a healthy “rainy day” fund balance, which covers cash flow needs between tax collections and is our emergency fund for unexpected expenses.

The plan, over the next two years, is to grow and maintain an unreserved fund balance of 4 percent of the district’s annual operating budget.

To balance the budget and get us on track, we’ve made some changes in accounting practices, including:

• Establishing a budget committee consisting of parents and district employees to advise the school board and superintendent on budget, revenue, expenditures, timing of reports and reporting systems.

• Establishing a system of checks and balances for purchase orders at both the school and district level, which ensures that we are living within our means.

• Assigning a tracking code to each private donation we receive. For example, PTSA art donations have a different code from PTSA math curriculum donations. This helps ensure every donation is spent for its intended purpose.

• Temporarily suspending building carryover funds from year to year. In other words, money that is not spent goes back into the general fund at the end of each fiscal year. The only exceptions to this rule are fees, donations and grants where allowed.

When the district hires a contractor, the service cannot begin until the contract is signed and dated. And the service cannot go beyond the date the contract ends or above the amount specified in the contract.

In addition, the district is examining ways it can soften the blow to classrooms by moving general fund costs to the capital projects fund, maximizing transportation funding from the state, reducing co-curricular expenditures from the general fund and growing the unreserved fund balance more slowly than we anticipated.

We are working hard to make a good school district better. I would value your thoughts and comments on how we can achieve that goal.

— Terry Lindquist is superintendent of Vashon Island School District.