Tri-Cities area school district faces WA intervention after $1M budget crisis
The state education department placed a Tri-Cities area school district on “binding conditions” this week after it approved a budget adjustment to end the 2025-26 school year with a negative fund balance of $989,000.
The financial woes at the Kiona-Benton City School District are primarily caused by last year’s double levy failure. At the same time, Ki-Be is also facing operational cost increases that are eating at its budget as declining student enrollment chips away at its major driver of revenue, apportionment.
The district serving 1,400 students in the lower Yakima Valley will now be under increased financial oversight by the Washington Office of Superintendent of Public Instruction to restore its budget health within three school fiscal years.
That includes monthly budget reports and meetings between OSPI and Educational Service District 123, and Ki-Be Superintendent Pete Peterson and district executive director of finance John Hassell. The district will modify its accounting practices and must meet specific spending requirements.
The school board also must adopt a “strategic financial plan” by Dec. 1 that details how it will rebuild reserves to 6% of annual expenditures.
“While the district reduced personnel and operating costs to address a portion of their levy revenue loss, the reductions were insufficient to offset increases in food services, transportation and insurance,” read a Tuesday letter from OSPI’s chief financial officer T.J. Kelly and ESD 123 Superintendent Steve McCullough.
.JPG "SHi_j0071(28).JPG")
“The district shared that they will be continuing to make reduction efforts in the 2026-27 school year to address both the loss of levy funding and a continued decline in district enrollment,” it continued.
On June 8, the Ki-Be School Board approved a budget extension, which is basically an adjustment giving the district authority to spend an extra $1.5 million to cover any unexpected expenses.
Peterson said at the meeting that it was not a blank check. Hassell said they did not expect to get close to spending all those dollars, but it would give them extra capacity.
Ki-Be originally budgeted to spend $22.5 million during the 2025-26 school year, but was approved to spend $24 million.
That budget extension included the negative ending fund balance of $989,000. In order to approve the budget extension, OSPI had to place the district on binding conditions.
If Ki-Be does not make progress on improving its budget health, it may be referred to a financial oversight committee that could exercise more “aggressive financial remedies,” up to and include dissolution.
Peterson previously told the Herald he does not believe it will come to that and he expects the district will show a growing fund balance in the coming months.
This story is breaking and will be updated with more information.
This story was originally published July 1, 2026 at 12:31 PM.
