Things are looking pretty bleak for education finance, state officials said last week.

Dozens turned out to hear Jennifer Priddy, the assistant superintendent of K-12 Fiscal Services and Policy for the Office of the Superintendent of Public Instruction talk at the Issaquah School District Administration Office on Thursday.

The presentation, entitled, “K-12 Finance: Depth, Breadth and Causes of a Looming Finance Crisis,” brought little good news.

“Revenue is growing more slowly then cost,” Priddy said. “The levy returns don’t grow fast enough. All of that goes in the wrong direction.”

One of the problems is that in the early 1990s, the pension fund was overfunded due to its stocks doing well in a good economy. So, for the last few years, the state has required less funding because they could just use the extra balance. Now that the market has fallen however, the state has to raise pension rates to pay for them.

Statewide, school budgets have increased $38 million this year. In one item alone out of the about dozen or so categories the state looks at — the amount districts have to fund for utilities went up about $11 million — almost a third of the total increase amount.

“Schools are having to use more of the end balance,” Priddy said. “Twenty percent of students are in a district with very little ending fund balance.”

Some larger districts, Priddy said, have less than half a percent of their ending fund balance.

Issaquah School Board policy states that the district cannot dip below 3 percent for its unreserved ending fund balance. For the close of the 2007-08 school year, the district’s total unrestricted reserve was 4.4 percent of the General Fund budget, spokeswoman Sara Niegowski said.

In Priddy’s two decades in education, she said she has never had more than two districts at once in binding conditions, where the state has to step in and watch the budget of a school. This year there are about half a dozen already in binding conditions and another half dozen on the watch list.

“If you are under 2 percent, you have a cash flow problem,” Priddy said.

“I have other bad news to share with you,” she said. “I don’t think it’s disputed that the state is underfunding basic education.”

The problem is that the state has not updated the definition of basic education in 30 years, so many things that should be funded by basic education, aren’t actually in the definition and therefore aren’t funded. Districts, along with help from PTSAs, foundations and other groups, have to pick up all the slack.

“The state funds either light or heat — but not both,” Priddy joked.

Rising costs in basics have also hit the state education program hard.

“For every 1 cent that goes up in gas, the state pays $100,000 more,” Priddy said. “That’s the equivalent of one and a half teachers.”

However, despite all the glum talk, state officials are working on a solution for improving education. An education task force is generating a proposal, and the Office Of Superintendent of Public Instruction is also working on a proposal.

The OSPI proposal focuses on working a budget around staffing and getting the ratios of staff to student at an actual representation of the classroom.

The current ratio funds one staff member for every 18.8 students in kindergarten through fourth grades, and one staff member for every 21.7 students in grades five through 12. But that isn’t the actual class ratio. This ratio includes teachers but also instructional coaches, nurses, counselors, librarians and all other support. That means that in most cases the class sizes and class ratio of teacher to student is much larger.

The current ratio usually means that for grades kindergarten through five, the ratio of teacher to students is one for every 24.7 students, and for grades six through 12, it’s 1:29. There is one instructional coach for every 1,250 students, one librarian for every 786 students, one counselor for every 462 students and one nurse for every 2,659 students, she said.

Officials with OSPI are proposing to work the funding around creating smaller classes, moving the overall ratio down to one staff for every 15.89 students in kindergarten through fifth grades, and one staff for every 18.43 for 6-12. This would result in class sizes of 21.2 for K-5 and 25.5 for 6-12. Instructional coaches would be one for every 1,000 students, librarians one for every 500, guidance counselors one for every 403 and nurses would be one for every 750.

The state also underfunds classified staff, Priddy said, causing districts to spend millions making up the difference. Officials are recommending that the state pay for more of the classified staff. They also propose that the state equalize pay between districts, and that the state should go up to the Everett School District level of pay. Also the state needs to adopt a new salary schedule with higher lifetime earnings and increases for certification-based demonstration of excellence.

Officials at OSPI recommend that the state define basic education as $1,101 per student rather than the current $468. This amount would fully fund operating costs that related to education, and includes $126 per student for curriculum to be adopted every six years. Some schools can’t afford new curriculum and are stuck in the last century, officials said.

They would also like the improve special education and learning assistance by reducing class sizes in poverty districts, hire teachers for small group tutoring, add programs for administrative support and buy more instructional material.

“The next few years are going to be very difficult for the state Legislature,” Priddy said,

To check out State Superintendent Terry Bergeson’s full proposal, visit www.k12.wa.us/communications/basicEdFundingTaskForce.aspx.