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School Cash Balances Cant Solve Budget Shorfalls

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School Cash Balances Can't Solve Budget Shortfalls

"A 1 percent increase in district performance is associated with a 0.83 percent increase in spending. "--Legislative Post-Audit Report (2006)

In case you haven't heard, an assertion has recently been made by some lobbyists, a few legislators, and one state BOE member that schools have enough money on hand (cash balances) to handle funding cuts. Although it's true that school districts keep money on hand and transfer money from fund to fund, it is not at all true that cash balances can solve or, in many cases, even help budget shortfalls.

First, the largest cash balance school districts typically have available is Capital Outlay, which cannot be used for operating expenses (i.e. salaries, food, fuel, etc.). Capital Outlay can only be used for the construction and repair of facilities and purchasing equipment. For the most part, it is operating funds that are being cut by the state.

Our school district has about $ 1 million in our Capital Outlay fund. That sounds like a lot until you learn how much it costs to replace a school roof, bus, or computer lab. Also, like many districts, we are delaying bond elections as long as we can but if a classroom addition is needed in one of our schools we must have the Capital Outlay funds on hand to cover it.

Second, the next largest cash balance is typically "Bond and

Interest", which can only be used to make payments on bond issues. Not making those payments isn't an option unless the district wants to default on its debt, be sued, and lower their and the state's bond rating.

Third, many school districts have a Contingency Reserve fund for "emergency" operating expenses. Once this money is used it's gone unless the district can save from somewhere else. The most recent funding cut will deplete about half of our Contingency Fund unless we save money in other areas. We're being as frugal as possible, which is why we have healthy a Contingency Fund to begin with, but further cuts could wipe it out completely.

Since these funds can only be used once we will need to make up for this year's funding cuts (about $240,000) for next year with budget cuts, a Local Option Budget increase, or a combination of the two. Many if not most school districts can't raise their local taxes anymore because they're at the maximum allowable by law. We're at about 63% of the maximum.

Cutting funding during a school year leaves school districts with few options since over 80% of their budget goes to wages/salaries and benefits and most of that is contractually obligated for this year. Also, the state's cash flow problem has resulted in late payments to school districts that need to make payroll on time. Those are a few of the many good reasons to maintain a healthy Contingency Fund.

Finally, there are several, smaller funds that must have balances as well. This is because state funds do not reach school districts before they have to make payroll or cover other expenses. In other words, these are revolving funds that must always have money in them because it often goes out faster than it comes in. Saying that these cash balances can take care of funding cuts is like saying you can absorb a pay cut from your job right after you're paid because your mortgage and car loan haven't been deducted from your checking account yet.

The simple truth is that most school districts have cut all they can without doing serious, long-term damage to their student's education. As always, our state government will decide how much to help or hinder public education. If voters disagree with those decisions they have opportunities to say so--either directly to legislators or at the polls when they vote.



Copyright 2009 The Prairie Post, White City, Kansas. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2010 The Prairie Post White City, Kansas. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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