When Will This District Start Following Its Own Policy on Fund Balances? That Is, Stop Taxing Us More Than Needed?

For a number of years I have gone before the Board to argue that more money was being kept for the general unreserved fund balance than was needed. My point was that every dollar they took into a fund balance beyond necessary was extra taxation — money that deserves to remain in taxpayers’ pockets.

I am not contending that the District should not keep a fund balance (a rainy-day account) — there are prudent reasons to maintain one, ranging from credit rating to unexpected financial situations etc. However, this District has consistently maintained more than is needed.

And it’s not simply me saying so. The Official Council Rock School Board Policy (No. 620) on this states that

The Board directs the Superintendent to maintain an unreserved, undesignated fund balance in the general fund with a target of four percent (4%) of the annual general fund budget.

In recent years, there have been numerous times where the fund balance budgeted amount was well over 4%. Now that might be fine if every time it went too high that meant they would lower taxes the following year and use that excess. But that’s not how they gamed the system. The policy also states that

any portion in excess of five percent (5%) must be reallocated…Excess funds shall first be applied to the Capital Reserve Fund for use in financing annual capital projects and future capital projects.

So this provides an incentive to the District to get more into the fund balance than is truly necessary as a fiscal safety net. After all, instead of having to return the excess money to taxpayers, they get to shift it so they can spend it elsewhere. With that kind of incentive, they can tax us more than necessary to keep the fund balance higher than it needs to be.

This method of transferring excess gives them the appearance that it never has gotten too high, since the excess is moved out of the public’s view.

So what do they have on tap for this year? The latest iteration of the budget that was discussed at last night’s Finance Committee meeting calls for property taxes to be hiked 4.19%.  It calls for a fund balance at the end of the next budget year of $9,944,376, with total expenditures projected at $201,396,076. That’s a fund balance target of 4.94%.

Going with a balance that close to 5% creates a likelihood that it could end up over that threshold and have money siphoned out into the Capital Reserve.  If the policy’s target of 4% were applied to the expenditure budget, the target balance would be $8,055,843.  So the target they have shown in the budget is $1,888,533 higher than their policy calls for.  That means the District wants to keep almost $1.9 million more of taxpayer money that their policy says is needed.

Now, even though the policy calls for a target of 4%, it also talks about not letting it fall below a 4% level (replenishing if that were to happen).  So I would not think aiming specifically for the exact 4% figure is required; however, it is clear that the District does not need to be aiming for as high as 4.94% either, since that is so close to the high end when they get to transfer that excess taxpayer money away.

The budget as of last night called for a property tax increase of 4.53 mills, or 4.19%.  The value of a mill is $1,178,030.  Given the fact that the target fund balance for next year is $1,888,533 higher than the 4% figure, the District could easily cut another mill out of the property tax hike for next year.  If you subtract a mill value out of that excess, the fund balance figure for next year would still end up $710,503 higher than the baseline 4%.

So instead of a target balance of $9,944,376 (4.94%), a more reasonable figure of $8,766,346 (4.35%) would be there.  That’s certainly enough wiggle room to stay above the 4% target in the Board’s policy.

And it would put over $1.1 million back into the hands of taxpayers, whose money this is.

It’s time for the School Board to stop taking more taxpayer money than needed to maintain a balance that is greater than needed. They should direct the Superintendent to immediately bring the projected 4.53 millage increase down to 3.53 mills (and continue to find other budget savings to drop the tax increase even lower). That would be fulfilling their fiscal agreement with taxpayers.