Search This Blog

Tuesday, February 1, 2011

An Important Discussion About A School District's Fund Balance

From the Lucas' Blog:

Our fund balance ...

There seems to be a lot of misunderstanding regarding a school district’s fund balance. That’s apparent in some of the reports I saw yesterday in the print media and this morning on TV. Here’s an explanation regarding such balances in our school district:

You need to think of the fund balance like your monthly checking account. At the first of the month you have a healthier balance because you’ve been paid; however, by the last day of the month the account is somewhat depleted if you’ve paid your bills for the month.

The School District of Oconee County operates the same way. There’s one difference, however, that is important to understand: Districts operate on a yearly cycle rather than a monthly cycle like the average person.

June 30 of the year represents a snapshot in time when the district has received most of its revenue and been reimbursed for its expenditures it had to pay upfront for the state and the federal government.

Our balance on June 30, 2010, was approximately $23 million. We had received most property tax revenues from the county and reimbursements from the state and federal government for programs they finance. Because of the budget shortfalls, the Oconee School Board planned to use $2 million of the fund balance for the FY11 budget.

Our district’s payroll is about $6 million a month, so we had a little over 3 months of salary available on June 30. Beginning July 1 money begins to be paid out by the district. We pay salaries and for programs that are to be financed by the state and federal government; however, we will not receive most funds until later in the year to reimburse us for this cost of schooling children. As I write this, it’s February 1st and we have not received reimbursement from the federal government for funds expended for Title I and special education.

Our “fund balance” is pretty much depleted each fall, and we have to borrow money (by Tax Anticipation Notes) to continue to pay bills and employee salaries. This fall we borrowed approximately $5 million to make ends meet until we received property tax revenues.

So, the fund balance is not something like a savings or rainy day account in our district. It is money that has to be used (and is depleted) by the end of the calendar year.

The fund balance is also used in rating our credit worthiness. Standards and Poor’s, as well as Moody’s, monitors this balance and uses it in setting our interest rates for bonds.

Please understand that our fund balance is not a savings account or reserve account that can be readily accessed. It is already being used to fund programs, make payroll, and cover all expenses until we receive additional revenues from property taxes in January.

I also posted a blog entry about appearances being deceiving (see below), and I guess that applies to fund balances, too. People have the wrong impression about such funds. Without them school districts could not operate efficiently.
Michael Lucas serves as Superintendent in the School District of Oconee County (SC))

No comments:

Blog Archive


Subscribe Now: Feed Icon