When the Seattle School Board ratified a five-year contract with the Seattle Education Association (SEA) last fall, district and union leaders hailed it as a "historic" agreement that put students and educators first.

The new contract promised Seattle teachers that they would be at least the fifth-highest paid in the region by 2009 and that they would get the resources they needed to close the gap in achievement between white and minority students. The contract, along with two other agreements with SEA-represented office staff and paraprofessionals, will cost about $25 million over five years, officials say.

Left unspoken was how the district would pay for it after the first two years. (The district is reshuffling some funds to cover higher salary and benefits in the early years.) The contract accounts for about one-quarter of the district's $20 million budget shortfall in 2006-07.

To overcome the deficit, Superintendent Raj Manhas has proposed closing 10 schools, moving some programs and limiting school choices.

Both Manhas and SEA leaders agreed in principle last fall that closing schools and reducing bus service would free up funds that could be used to improve learning conditions for students.

"Anybody in the administration or board who says this was a surprise, I don't know where they were in the conversation," said SEA Executive Director Steve Pulkkinen. "These were all possibilities ... There was no secret about that."

But the details of how that might look were unclear at the time.

Mark Green, the district's chief operating officer, said the administration and board knew that they would have to do "significant restructuring" in order to balance future budgets but didn't have an agreed-upon plan to cover the costs of the contract.

Board members say they couldn't in good conscience reject raising teacher pay. They also say that two things made the 2006-07 budget shortfall worse: a mandate from Olympia that placed a bigger burden on districts to subsidize health benefits for retired public employees, and the failure in November of Initiative 884, which would have raised $1 billion for public education.

Here's a breakdown of what the three SEA contracts will cost the district:

• Supplemental pay for teachers: about $21.3 million. Seattle teachers make less than most of their peers in the Puget Sound. Much of the increase starts to kick in after August 2006.

• Mandated state-retiree benefits: $2 million annually. The district is liquidating an insurance settlement that will pay for these costs in the first three years, but the district will need to find new funds starting in 2007-08.

• Bilingual instructional aides: about $1 million. Most of this will be used to hire more aides and reach a ratio of one per 28 students; the rest is directed at helping some become certified teachers and improve working conditions.

Goal strategies laid out

The School Board approved the SEA contracts with teachers and office staff on Sept. 7 and with paraprofessionals on Dec. 15. In the months leading up to those votes, the School Board and administration met with stakeholders to develop a five-year strategic plan.

That plan set five goals, including creating a financially sustainable school system. It also laid out possible strategies for accomplishing the goals, including "reviewing the cost of our current student assignment plan, the number of schools in operation, and the related transportation costs."

The SEA contracts gave the administration the labor support it needed to begin studying the costs and benefits of the restructuring strategies suggested in the five-year plan.

The board deferred action last winter on the five-year plan and is scheduled to vote on it Wednesday. The board will vote on Manhas' detailed school-closure plan in mid-July.

The board is deeply divided over what path to take. Three of the seven have said they're willing to close schools.

Board members say they knew the possibilities for funding the contract included reducing the number of small schools, scaling back bus service and lobbying the Legislature.

District reserves were out of the question: The board had already tapped almost $6 million to balance this year's budget, leaving little in the bank.

"We knew the contract would cost a lot and cost significantly increasing amounts in the third, fourth and fifth years," said board member Dick Lilly, who opposes closing any schools.

Board member Dick Lilly is against closures.

"Unless the state miraculously changed the entire tax system, we knew the long-term implication of the contract is that there would be layoffs," he said.

School closures weren't a foregone conclusion of the contract, Lilly added. "Even though the teachers union thinks we were required to do it, we were not," he said.

Board member Darlene Flynn says the board knew it was going to have to undertake "a major budget exercise," after passing the contract. Her fellow board members were aware that they would have to deal with the question of school closures, she said, because Manhas and even state lawmakers kept telling them that Seattle operates too many schools for its size.

Board member Sally Soriano, who wants the district to scrap its proposal and start over, said the district's leadership should have been more forthright with parents last summer about the consequences of the contract and more aggressive in mobilizing parents to lobby state lawmakers for more education funding.

"The discussion at the table was how important schools are to their communities," Soriano said, "and that closures should be taken very seriously if they had to happen."

From September to last month, Manhas' staff held public meetings to lay out progressively more-detailed options for reducing overhead spending on buses and buildings. Parents have criticized the district for not coming up with less-disruptive alternatives.

Manhas, Pulkkinen and the School Board blame the Legislature's failure to fund education for causing the crisis they see now. Washington ranks 42nd in per-pupil state spending. Some state lawmakers say the district needs to swallow the bitter pill and bring its number of schools in line with other districts.

Helen Sommers, chair of the state House Appropriations Committee, says the district will need to close some schools, as Highline and other districts are doing.

"The school district has to balance its budget. Maybe there are other ways to do it, but I'm not sure what that might be," said Sommers, D-Seattle. "I have compassion for what these School Board members are facing. They're facing a situation that has been building over time and that has been dropped on them. I understand what it's like to make tough, unpopular decisions."

Board President Brita Butler-Wall said that even if the district carries out Manhas' painful cuts in buildings and bus service, it will still be left with figuring out where to cut $15 million: the equivalent of about 214 teaching positions, or nearly 10 percent of the teacher corps.

That could force the district's high schools to return to five periods a day, a prospect Butler-Wall worries will drive the middle class out of Seattle public schools: "It's not going to be good for the state if Seattle School District implodes. We really want to invite people to help us solve this problem."

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com