Oak Harbor school officials will hack millions of dollars from the district’s budget over the next several months.

In order to deal with a serious projected budget shortfall.

Early figures show a $3.5 million shortfall in the school district’s 2007-2008 budget. A current estimate of next year’s budget isn’t available yet. The 2006-2007 budget stands at $45.48 million.

To deal with the shortfall, the school district is forming a committee to come up with a list of potential reductions. The committee will be comprised of teachers, support staff, principals, parents and administrators. They will have their recommendations ready by the end of March to give to the school board in time to make a decision on the potential cuts.

Administrators met with staff in all schools and maintenance buildings earlier this month to inform employees of the cuts that could be coming in the next several months.

The shortfall didn’t surprise school officials. In recent years they said the current budget couldn’t be sustained and that changes would eventually have to be made.

“We saw it coming,” said Rick Schulte, superintendent of schools.

A combination of factors are blamed for the current funding problem. School district fund reserves have been depleted, less money is coming in from state and federal government due to declining enrollment, and employee costs are increasing.

School officials have, for the past two years, been using more than $1 million a year from the fund reserve to deal with revenue losses. However, school policy prohibits the fund reserve from falling below its minimum level of $1.25 million.

Schulte said the school board built up the fund balance in recent years to tide them over during tight budget times.

“We were intentionally building a fund balance so we could use it during down times,” Schulte said.

The Oak Harbor School District receives state money based on enrollment counts, and that number has steadily declined over the past seven years. Officials are projecting 5,265 full-time equivalent students attending school in the 2007-2008 school year. That is 235 fewer students, and equates to a $1.05 million loss from the state.

Officials are also bracing for a $800,000 decrease in Federal Impact Aid.

While the school district has seen reductions in funding, it has seen an increase in employee costs. The Legislature sets a cost of living increase for school employees. However, the school district has to come up with money to pay raises for employees not funded by state dollars. Officials are bracing for an increase of $500,000.

Schulte, speaking at the Jan. 8 school board meeting, said the cuts will be made to more than employees — staff will have to make program cuts as well in the coming months.

He added that he doesn’t know exactly how much money the school district will receive from state and federal funding sources. However, even if funding increases, it won’t be enough to overcome the shortfall.

“We can’t wait to find out what they will do,” Schulte said.

Any potential funding increase from the state may require the school district to add programs. An example of this is the possibility of funding an all-day kindergarten, which would basically double the number of classes needed to serve those students.

The realization of possibly adding new classes while making cuts to other parts of the budget seemed to frustrate board members during Monday night’s school board meeting.

“We need to get our Legislature to fund what we currently have,” said school board member David McCool.

The shortfall comes as construction begins on a new stadium and planning continues on renovation of Oak Harbor High School. The bond proceeds that are paying for construction cannot be used to pay for the $3.5 million shortfall in the district’s general fund. The district is required by law to keep capital projects money separate from the general fund.

Resolving the budget shortfall comes as officials are talking about closing Clover Valley Elementary. Schulte said the possible closure parallels the budget discussion, but no decision, either way, has been made yet.

Closing an elementary school would save the school district approximately $550,000 a year. Schulte added that, if a school is closed, it would allow the school district to concentrate budget cuts at one school.

School districts are required to have a balanced budget approved by Aug. 31. Officials want the recommendations finished in March. That would allow time for a public input period and to make personnel changes.

The committee will form and start its work in late January.