The dangers of spending down the Kent School District\u2019s fund balance outweigh the benefits of dipping into it too deeply as a way to patch the budget, according to district officials who hosted a presentation Wednesday about the consequences of such a draw down.<\/p>\n
With a budget hole that could approach an estimated $16 million, the district\u2019s fund balance has been called into question during the process.<\/p>\n
But according to school officials, using the money as a stopgap measure may end up creating more problems than it\u2019s worth.<\/p>\n
Because members of the community and the Kent Education Association, the union representing teachers in the Kent School District, have openly questioned the district\u2019s numbers, the board this past week hosted a presentation during its meeting explaining the numbers and why they oppose using the money.<\/p>\n
The fund balance is a combination of designated and undesignated funds, which at the end of the last fiscal year in August, was estimated at approximately $18.3 million.<\/p>\n
Of that money, $5.9 million of those dollars are considered \u201cdesignated\u201d money, while $12.6 million is \u201cundesignated,\u201d meaning it is money that has yet to be targeted at specific costs.<\/p>\n<\/p>\n
Fund is a savings account<\/p>\n
Kent School Board policy dictates a fund balance of 5 percent, or approximately $12.4 million, to act as a savings account for the district, as well as to provide investment income and to stabilize Kent\u2019s bond rating.<\/p>\n
The fund balance was built over over a several-year period when the economy was better, but in the past two years, expenditures have outpaced revenues, causing the district to dip into the fund to the tune of $6.7 million, bringing the fund balance down to its current level.<\/p>\n
Not all of it is in actual dollars, either.<\/p>\n
Of the designated funds, about $350,000 is actually the cash equivalent of food items.<\/p>\n
\u201cIt\u2019s more represented by the frozen peas and canned stuff we have at the food-service building,\u201d Assistant Superintendent of Business Services Fred High told the board.<\/p>\n
Another $1.3 million of the fund-balance pot sits in the district\u2019s insurance reserves, in case of employee termination or an injury claim against the district.<\/p>\n
According to High there would be little to no benefit in dipping into those funds, while spending the insurance money actually may cause the district to violate state regulations, which require the district to maintain a self-insured worker\u2019s compensation reserve.<\/p>\n
The insurance reserves also give the district an investment return of $13,000 every year, which would be lost, if those reserves were used elsewhere.<\/p>\n<\/p>\n
Money covers unfilled orders<\/p>\n
The rest of the \u201cundesignated\u201d amount, approximately $4 million, is categorized as \u201ccarryover reserves.\u201d<\/p>\n
According to High, the money in those accounts falls into four categories: unfilled purchase orders, such as library books that may be on back order when the fiscal year ends; unfinished projects, including smaller maintenance projects that may not be complete by Aug. 31; school and district savings for big-ticket items that can\u2019t be purchased with a single year\u2019s funds, such as copiers or textbooks; and savings from schools that have not spent all of the money budgeted to them.<\/p>\n
High said items on back order happens \u201cmore often than not on big orders,\u201d and added that projects on which the money is spent are things that cannot wait for a bond measure, such as roof or boiler repairs.<\/p>\n
In his presentation, High said he saw no advantage to spending the money, but noted several consequences, including that schools would spend their entire budgeted amount, simply to not lose the funding, as well as to prevent savings for larger items.<\/p>\n
High further explained that if expenditures continue to outpace revenues, the balance would continue to drop, leaving the fund empty within a few years and the district unable to meet its funding obligations without cutting services and programs.<\/p>\n
\u201cIt\u2019s basically a temporary fix,\u201d he said of carving into the fund balance. \u201cAs long as there\u2019s no additional money you are constantly drawing down.\u201d<\/p>\n<\/p>\n
Could affect bond rating<\/p>\n
High also argued that the district\u2019s high bond rating is predicated on a fund balance of 5 percent, meaning that reducing the balance would lead to higher interest rates for the district.<\/p>\n
\u201cIt means either less construction or higher taxes,\u201d he said.<\/p>\n
High also addressed questions raised by a KEA handout from the February work session which stated the district\u2019s fund balance at $23.3 million. While the number is an accurate accounting of the district\u2019s December fund balance, High insisted that December\u2019s number is always higher because of the way the district receives tax money from the state, but noting the money would be spent through the year.<\/p>\n
\u201cDecember is not a particularly good measure,\u201d he said. \u201cWhat we\u2019re measured on is our performance on the year.<\/p>\n
\u201cWe have an awful lot to pay for over the next eight months,\u201d he said.<\/p>\n
In an interview last week, KEA officials stood by their number, saying it was an accurate accounting of the money the district had in December, though the handout implies it is the district\u2019s final number instead of a partial one.<\/p>\n
\u201cKEA uses the most current information posted by the district,\u201d KEA Representative Mike McNett said. \u201cIn December, that number was $23.4 million.\u201d<\/p>\n
McNett said the association would now switch to January\u2019s number of $22.8 million and said the numbers show the district is on track to end the year with at least the same amount of money with which it ended the 2007-2008 fiscal year.<\/p>\n
The board will receive its final report on the budget March 25 and will make a final decision soon after.<\/p>\n","protected":false},"excerpt":{"rendered":"
The dangers of spending down the Kent School District\u2019s fund balance outweigh the benefits of dipping into it too deeply as a way to patch the budget, according to district officials who hosted a presentation Wednesday about the consequences of such a draw down.<\/p>\n","protected":false},"author":223,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"yst_prominent_words":[],"class_list":["post-10373","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/posts\/10373"}],"collection":[{"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/users\/223"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/comments?post=10373"}],"version-history":[{"count":0,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/posts\/10373\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/media?parent=10373"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/categories?post=10373"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/tags?post=10373"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.kentreporter.com\/wp-json\/wp\/v2\/yst_prominent_words?post=10373"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}