Interfund loans/schools

AN ACT Relating to temporary interfund loans for school districts 1
in binding conditions or under enhanced financial oversight; amending 2
RCW 28A.505.130 and 28A.315.221; reenacting and amending RCW 3
28A.320.330; and adding a new section to chapter 28A.320 RCW.4
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:5
NEW SECTION. Sec. 1. A new section is added to chapter 28A.320 6
RCW under the subchapter heading "deposit, investment, and use of 7
proceeds" to read as follows: 8
(1) A school district that is in binding conditions pursuant to 9
RCW 28A.505.110 or under enhanced financial oversight pursuant to RCW 10
28A.315.221 may take a temporary interfund loan from its capital 11
projects fund, subject to the following conditions:12
(a) The borrowing fund must repay the full loan amount to the 13
loaning capital projects fund within one calendar year;14
(b) The loaning capital projects fund may not charge interest on 15
the amounts loaned; 16
(c) The loan may not be made to the detriment of any function or 17
project for which the loaning capital projects fund was established;18
(d) The school district's financial reports, including monthly 19
financial reports provided to the board of directors of the district, 20
must specify all outstanding interfund loan balances.21
S-0701.1
SENATE BILL 5412
State of Washington 69th Legislature 2025 Regular Session
By Senators Robinson, Chapman, Nobles, and Saldaña
Read first time 01/22/25. Referred to Committee on Early Learning &
K-12 Education.
p. 1 SB 5412
(2)(a) The board of directors of a qualifying school district 1
must adopt a resolution to approve a temporary interfund loan 2
transaction. The resolution must contain the exact amount of the 3
loan, the funds involved, the specific source of funds for repayment, 4
and the schedule for repayment. 5
(b) If a school district is under enhanced financial oversight 6
pursuant to RCW 28A.315.221, the temporary interfund loan transaction 7
must additionally be approved by the special administrator appointed 8
to oversee and carry out financial conditions imposed on the district 9
as recommended by the financial oversight committee.10
(3) The office of the superintendent of public instruction shall 11
adopt rules as necessary to implement this section.12
Sec. 2. RCW 28A.320.330 and 2023 c 474 s 8022 and 2023 c 402 s 1 13
are each reenacted and amended to read as follows:14
School districts shall establish the following funds in addition 15
to those provided elsewhere by law: 16
(1)(a) A general fund for the school district to account for all 17
financial operations of the school district except those required to 18
be accounted for in another fund. 19
(b) By the 2018-19 school year, a local revenue subfund of its 20
general fund to account for the financial operations of a school 21
district that are paid from local revenues. The local revenues that 22
must be deposited in the local revenue subfund are enrichment levies 23
and transportation vehicle levies collected under RCW 84.52.053, 24
local effort assistance funding received under chapter 28A.500 RCW, 25
and other school district local revenues including, but not limited 26
to, grants, donations, and state and federal payments in lieu of 27
taxes, but do not include other federal revenues, or local revenues 28
that operate as an offset to the district's basic education 29
allocation under RCW 28A.150.250. School districts must track 30
expenditures from this subfund separately to account for the 31
expenditure of each of these streams of revenue by source, and must 32
provide the supplemental expenditure schedule under (c) of this 33
subsection, and any other supplemental expenditure schedules required 34
by the superintendent of public instruction or state auditor, for 35
purposes of RCW 43.09.2856. 36
(c) Beginning in the 2019-20 school year, the superintendent of 37
public instruction must require school districts to provide a 38
supplemental expenditure schedule by revenue source that identifies 39
p. 2 SB 5412
the amount expended by object for each of the following supplementary 1
enrichment activities beyond the state funded amount:2
(i) Minimum instructional offerings under RCW 28A.150.220 or 3
28A.150.260 not otherwise included on other lines; 4
(ii) Staffing ratios or program components under RCW 28A.150.260, 5
including providing additional staff for class size reduction beyond 6
class sizes allocated in the prototypical school model and additional 7
staff beyond the staffing ratios allocated in the prototypical school 8
formula; 9
(iii) Program components under RCW 28A.150.200, 28A.150.220, or 10
28A.150.260, not otherwise included on other lines;11
(iv) Program components to support students in the program of 12
special education; 13
(v) Program components of professional learning, as defined by 14
RCW 28A.415.430, beyond that allocated under RCW 28A.150.415;15
(vi) Extracurricular activities; 16
(vii) Extended school days or an extended school year;17
(viii) Additional course offerings beyond the minimum 18
instructional program established in the state's statutory program of 19
basic education; 20
(ix) Activities associated with early learning programs;21
(x) Activities associated with providing the student 22
transportation program; 23
(xi) Any additional salary costs attributable to the provision or 24
administration of the enrichment activities allowed under RCW 25
28A.150.276; 26
(xii) Additional activities or enhancements that the office of 27
the superintendent of public instruction determines to be a 28
documented and demonstrated enrichment of the state's statutory 29
program of basic education under RCW 28A.150.276; and30
(xiii) All other costs not otherwise identified in other line 31
items. 32
(d) For any salary and related benefit costs identified in 33
(c)(xi), (xii), and (xiii) of this subsection, the school district 34
shall maintain a record describing how these expenditures are 35
documented and demonstrated enrichment of the state's statutory 36
program of basic education. School districts shall maintain these 37
records until the state auditor has completed the audit under RCW 38
43.09.2856. 39
p. 3 SB 5412
(e) For school districts of the second class as defined ((by 1
[in])) in RCW 28A.300.065, a depreciation subfund for the school 2
district to reserve funds for future facility and equipment needs. Up 3
to two percent of a second class school district's general fund may 4
be deposited each fiscal year into the depreciation subfund for the 5
purpose of preventative maintenance or emergency facility needs. The 6
preventative maintenance must be necessary to realize the originally 7
anticipated useful life of a building or facility and include: 8
Exterior painting of facilities; replacement or renovation of 9
roofing, exterior walls, windows, heating, air conditioning and 10
ventilation systems, floor coverings in classrooms and common areas, 11
and electrical and plumbing systems; and renovation of playfields, 12
athletic facilities, and other district real property. School 13
districts of the second class, subject to applicable public works bid 14
limits, may use school district employees to perform preventative 15
maintenance with moneys from the depreciation subfund, but moneys 16
from the depreciation subfund may not be used for employee 17
compensation that is unrelated to this subsection (1)(e).18
(2) A capital projects fund shall be established for major 19
capital purposes. All statutory references to a "building fund" shall 20
mean the capital projects fund so established. Money to be deposited 21
into the capital projects fund shall include, but not be limited to, 22
bond proceeds, proceeds from excess levies authorized by RCW 23
84.52.053, state apportionment proceeds as authorized by RCW 24
28A.150.270, earnings from capital projects fund investments as 25
authorized by RCW 28A.320.310 and 28A.320.320, and state forest 26
revenues transferred pursuant to subsection (3) of this section.27
Money derived from the sale of bonds, including interest earnings 28
thereof, may only be used for those purposes described in RCW 29
28A.530.010, except that accrued interest paid for bonds shall be 30
deposited in the debt service fund. 31
Money to be deposited into the capital projects fund shall 32
include but not be limited to rental and lease proceeds as authorized 33
by RCW 28A.335.060, and proceeds from the sale of real property as 34
authorized by RCW 28A.335.130. 35
Money legally deposited into the capital projects fund from other 36
sources may be used for the purposes described in RCW 28A.530.010, 37
and for the purposes of: 38
(a) Major renovation and replacement of facilities and systems 39
where periodical repairs are no longer economical or extend the 40
p. 4 SB 5412
useful life of the facility or system beyond its original planned 1
useful life. Such renovation and replacement shall include, but shall 2
not be limited to, major repairs, exterior painting of facilities, 3
replacement and refurbishment of roofing, exterior walls, windows, 4
heating and ventilating systems, floor covering in classrooms and 5
public or common areas, and electrical and plumbing systems.6
(b) Renovation and rehabilitation of playfields, athletic fields, 7
and other district real property. 8
(c) The conduct of preliminary energy audits and energy audits of 9
school district buildings. For the purpose of this section:10
(i) "Preliminary energy audits" means a determination of the 11
energy consumption characteristics of a building, including the size, 12
type, rate of energy consumption, and major energy using systems of 13
the building. 14
(ii) "Energy audit" means a survey of a building or complex which 15
identifies the type, size, energy use level, and major energy using 16
systems; which determines appropriate energy conservation maintenance 17
or operating procedures and assesses any need for the acquisition and 18
installation of energy conservation measures, including solar energy 19
and renewable resource measures. 20
(iii) "Energy capital improvement" means the installation, or 21
modification of the installation, of energy conservation measures in 22
a building which measures are primarily intended to reduce energy 23
consumption or allow the use of an alternative energy source.24
(d) Those energy capital improvements which are identified as 25
being cost-effective in the audits authorized by this section.26
(e) Purchase or installation of additional major items of 27
equipment and furniture: PROVIDED, That vehicles shall not be 28
purchased with capital projects fund money. 29
(f)(i) Costs associated with implementing technology systems, 30
facilities, and projects, including acquiring hardware, licensing 31
software, and online applications and training related to the 32
installation of the foregoing. However, the software or applications 33
must be an integral part of the district's technology systems, 34
facilities, or projects. 35
(ii) Costs associated with the application and modernization of 36
technology systems for operations and instruction including, but not 37
limited to, the ongoing fees for online applications, subscriptions, 38
or software licenses, including upgrades and incidental services, and 39
ongoing training related to the installation and integration of these 40
p. 5 SB 5412
products and services. However, to the extent the funds are used for 1
the purpose under this subsection (2)(f)(ii), the school district 2
shall transfer to the district's general fund the portion of the 3
capital projects fund used for this purpose. The office of the 4
superintendent of public instruction shall develop accounting 5
guidelines for these transfers in accordance with internal revenue 6
service regulations. 7
(g) Major equipment repair, painting of facilities, and other 8
major preventative maintenance purposes. However, to the extent the 9
funds are used for the purpose under this subsection (2)(g), the 10
school district shall transfer to the district's general fund the 11
portion of the capital projects fund used for this purpose. The 12
office of the superintendent of public instruction shall develop 13
accounting guidelines for these transfers in accordance with internal 14
revenue service regulations. Based on the district's most recent two-15
year history of general fund maintenance expenditures, funds used for 16
this purpose may not replace routine annual preventive maintenance 17
expenditures made from the district's general fund.18
(h) ((During the 2021-2023 fiscal biennium, renovation and 19
replacement of facilities and systems, purchase or installation of 20
items of equipment and furniture, including maintenance vehicles and 21
machinery, and other preventative maintenance or infrastructure 22
improvement purposes.)) Temporary interfund loans as authorized under 23
section 1 of this act.24
(i) During the 2023-2025 fiscal biennium, for moneys in the 25
capital projects fund not attributable to capital levies, moving of 26
equipment and furniture between buildings and warehouses for storage, 27
moving of the content of teachers' classrooms between buildings, and 28
furniture purchases, when these costs are due to the following 29
activities: Construction, remodeling, replacement, temporary 30
placement, consolidation, or directed transfer. 31
(3) A debt service fund to provide for tax proceeds, other 32
revenues, and disbursements as authorized in chapter 39.44 RCW. State 33
forestland revenues that are deposited in a school district's debt 34
service fund pursuant to RCW 79.64.110 and to the extent not 35
necessary for payment of debt service on school district bonds may be 36
transferred by the school district into the district's capital 37
projects fund. 38
(4) An associated student body fund as authorized by RCW 39
28A.325.030. 40
p. 6 SB 5412
(5) Advance refunding bond funds and refunded bond funds to 1
provide for the proceeds and disbursements as authorized in chapter 2
39.53 RCW. 3
Sec. 3. RCW 28A.505.130 and 2023 c 435 s 11 are each amended to 4
read as follows: 5
(1) For each fund contained in the school district budget the 6
estimated expenditures for the budgeted fiscal year must not be 7
greater than the total of the estimated revenues for the budgeted 8
fiscal year, the estimated fund balance at the beginning of the 9
budgeted fiscal year less the estimated reserve fund balance at the 10
end of the budgeted fiscal year, and the projected revenue from 11
receivables collectible on future years as approved by the 12
superintendent of public instruction for inclusion in the budget.13
(2) The proceeds of any interfund loan must not be used to 14
balance the budget of the borrowing fund, except in the following 15
circumstances:16
(a) In fiscal year 2024 when such loans may be used to address 17
budget destabilization in the aftermath of the COVID-19 pandemic. 18
Interfund loans in fiscal year 2024 may be for a duration of two 19
years; and20
(b) As authorized under section 1 of this act.21
Sec. 4. RCW 28A.315.221 and 2012 c 186 s 8 are each amended to 22
read as follows: 23
(1) The superintendent of public instruction shall convene a 24
financial oversight committee: 25
(a) At the request of the board of directors of a financially 26
insolvent district; 27
(b) When the superintendent of public instruction determines a 28
district is financially insolvent, after first consulting with the 29
educational service district where the district is located and 30
notifying the district the committee will be convened; or31
(c) When a district has been on binding conditions pursuant to 32
RCW 28A.505.110 for two consecutive years and does not have a 33
satisfactory financial plan. 34
(2) The financial oversight committee comprises two 35
representatives from the office of the superintendent of public 36
instruction, one representative from an educational service district 37
where a financially insolvent school district is not located, and one 38
p. 7 SB 5412
nonvoting representative from the educational service district where 1
the financially insolvent school district is located.2
(3) The financial oversight committee shall review the financial 3
condition of a financially insolvent school district. In conducting 4
its review, the committee shall hold a public hearing in the 5
financially insolvent school district or educational service district 6
in order to receive public comment on any proposed financial plans. 7
If the financial oversight committee feels that dissolution of the 8
financially insolvent school district is a valid option, it shall 9
receive input at the public hearing on options for dissolving said 10
school district. 11
(4) After holding a public hearing as provided in subsection (3) 12
of this section, the financial oversight committee must make a 13
recommendation to the superintendent of public instruction to either 14
dissolve a financially insolvent school district or to place a 15
district under enhanced financial monitoring to reduce the risk of 16
dissolution due to insolvency. The superintendent of public 17
instruction must implement financial oversight committee 18
recommendations via enhanced financial oversight, which will be 19
monitored by the educational service district. 20
(5) Enhanced financial oversight may include, but is not limited 21
to, the following types of actions, which the superintendent of 22
public instruction is expressly authorized to implement and enforce:23
(a) Appointment of a special administrator to ((oversee)): 24
Oversee and carry out financial conditions imposed on the district as 25
recommended by the financial oversight committee ; and approve 26
temporary interfund loan transactions authorized under section 1 of 27
this act as appropriate; 28
(b) Review, approval, and limitations on a school district's 29
authority to enter into contracts; 30
(c) Review, approval, and limitations on hiring and personnel 31
actions; and 32
(d) Liquidation or disposition of fixed assets and contractual 33
liabilities by any reasonable and documented method provided the 34
liquidation or disposition of fixed assets and contractual 35
liabilities is reasonably necessary before filing a dissolution 36
petition. 37
(6) Any new, amended, or renewed contract entered into by a 38
school district that is subject to enhanced financial monitoring that 39
has not been approved by the educational service district or special 40
p. 8 SB 5412
administrator, or that is inconsistent with conditions imposed on the 1
district pursuant to this section, is null and void.2
(7) Any action taken by a school district subject to enhanced 3
financial monitoring that is likely to affect the district's finances 4
is null and void if the action was not approved by the educational 5
service district or special administrator or if the action is 6
inconsistent with conditions imposed on the district pursuant to this 7
section. 8
(8) The superintendent of public instruction shall adopt rules to 9
carry out the provisions in this section, which may include, but are 10
not limited to, identifying the responsibilities and authority of the 11
financial oversight committee, the educational service district, the 12
special administrator, and the school district and the implementation 13
of enhanced financial oversight. 14
--- END ---
p. 9 SB 5412