Over the years, we’ve heard complaints about school districts’ cash balances or reserve funds. Our own experience has been that those lump funds hide specific needs or planned spending and varies throughout the year (i.e., you can look at the funds on one date and see a very high balance because of a planned outlay but if you look at a later date, you would see a very different picture). KASB explains cash balances in this helpful piece.
“Each July, Kansas school boards receive reports from their superintendents on the unencumbered cash balance of specific funds as of July 1. As districts struggle with tough choices as budgets get adopted over the next month, questions are expected to be raised about whether cash balances are too high.
“The facts are: school districts have actually been cutting cash balances compared to budgets, school balances are actually lower than comparable state balances, and districts continue to face uncertainty in state revenues.
“Districts have cash balances for three major reasons. The first is to have money on hand to pay expenses that come due before the income to pay for those expenses arrives. This is called ‘cash flow’…
“The second reason for cash balances is if income turns out to be less than expected, or expenses run higher than budgeted. This is called having money for contingencies…
“The third reason for cash balances is to allow for planned expenses in the future without borrowing…
“School district balances accelerated at exactly the time when districts faced delays in state aid payments, reductions in state funding levels and general uncertainty over future funding. In fact, the Kansas Senate passed a resolution specifically encouraging districts to build up reserves to address the revenue when federal economic stimulus funding ended in 2011. That is exactly what happened statewide…
“The choice local school boards face: whether their budget plans should reduce cash balances to avoid spending cuts now, or hold on to those balances in case the state makes additional reductions.”
Read more here: http://tallmankasb.blogspot.com/2015/07/are-school-district-ending-balances-too.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TallmanEducationReport+%28Tallman+Education+Report%29