Yelm Community Schools (YCS) remains in a financially vulnerable position and could face a potential district dissolution if its financial condition does not improve, according to a letter from the Office of the Superintendent of Public Instruction (OSPI) to the district on Monday, Sept. 28.
TJ Kelly, OSPI Chief Financial Officer, has previously addressed YCS during board meetings and events related to the school district’s levy efforts. He signed the letter that was sent to YCS last month.
YCS has been under “binding conditions,” the lowest level of OSPI financial oversight, since Sept. 2024, when the district projected a negative ending fund balance for the 2024-25 school year. Specifically, the district projected an ending fund balance for the 2024-25 school year at negative $1,312,549.
Despite significant reductions in staffing and services, the district has continued to rely on one-time funding sources and remaining cash reserves to support ongoing expenses in the absence of local levy funding.
For the 2026-27 school year, Yelm is projecting an ending fund balance of $877,174, or about 0.9% of budgeted expenditures. That is well below the $2.8 million, or 3%, benchmark established by the state under the district’s binding conditions.
“The district continues to exhibit signs of financial instability and remains in a financially vulnerable position,” Kelly wrote.
The state is waiting to receive the 2025-26 financial statement from YCS, which is due Sunday, Nov. 15. The state is also waiting for the results of the proposed YCS levy, which will run in the Nov. 3, 2026, Thurston County general election at the rate of $1.50 per $1,000 of assessed property value.
If the district’s financial statement fails to meet targets outlined in a December 2025 binding-conditions update or voters reject the November levy, OSPI would convene a Financial Oversight Committee. The committee would require the district to develop a two-year financial plan demonstrating how it would restore and maintain its financial health while continuing to meet state basic education requirements.
The potential consequences could extend beyond the financial cuts already made by the district. Kelly noted that services such as transportation for general education students, after-school programs and athletics are not among the state’s minimum basic education requirements.
The Financial Oversight Committee (FOC) would review the district’s proposed plan and hold a public hearing to receive community input.
If the committee determines that Yelm Community Schools is not financially viable, it could recommend that the district be dissolved.
A dissolution recommendation would require an additional public hearing to gather input from students, families, staff and community members before it could be finalized.
