Public school funding trends seem to be taking a positive turn, though Alabama’s schools aren’t receiving anywhere near the amount of money they did in FY08.
Here’s a quick visual, depicting nominal and real (deflated) dollars, which takes into account the time value of money, of state funding for public schools from FY01 to FY13.
School officials are justifiably concerned about having enough money in their General Fund to cover unexpected hits in funding. And the reality of the Rolling Reserve Act’s capping of additional distributions of state revenue over and above the most-recent-15-years’ average growth in Education Trust Fund (ETF) receipts has put a damper on any school district looking for a rapid rise in state-appropriated funding.
As a result, it appears that many districts are working to build their reserve funds above and beyond the one-month’s-worth required by the School Fiscal Accountability Act of 2006 and enforced by the Alabama State Department of Education (ALSDE).
The most recent data available shows that 22 school districts did not have the required one month of operating expenses in their general fund. The financial data is from FY13 (fiscal year ended September 30, 2013), analyzed in January 2014 by the ALSDE. Certainly financial positions have changed since January, but the new review will not be available until January 2015.
A table of these values is available at the end of this article.
What About Those Districts That Have Lots of Months of Operating Expenses in the General Fund?
Well, that’s a different story. At the Alabama Association of School Boards’ March 2013 conference, then-Chief of Staff Dr. Craig Pouncey, speaking to about 300 school board members, said that districts should aim to keep one to three months of operating expenses in their general fund.
He added that if boards have a whole lot of months of operating expenses in reserve, they might ought to consider whether those funds should be being put to use in the schools in their community, considering that the community sends the board that money to actually use to educate students.
Weathering a Storm, Building Up a Capital Fund, and Just Hoarding Large Cash Balances
We all agree that public education is weathering a financial storm. Whether it is due to lower tax revenues or to set asides for tax credits for scholarships for private schools, school boards across the state are having to make difficult decisions, with many of them continuing to dip into “reserves” for operating expenditures.
But what about those 31 districts with three or more months of operating expenditures in their General Fund? Why are they piling up cash?
Only your board of education and your Chief School Financial Officer (CSFO) can answer that question for you.
Maybe they have some capital needs, as in renovations, additions, repairs, or even new schools. Check out your district’s latest Capital Plan at this link.
If your board’s capital plans seem a little unclear or if you can’t figure out quite why your board is hoarding piles of cash, ask them directly.
And if your board and your CSFO can’t delineate exactly why they’re hanging on to that cash, perhaps you could suggest that they look at and even lower the fees that they’re charging families for dues and fees.
Here’s a look at districts in FY13 that held three or more months of operating expenses in their General Fund, juxtaposed with the amount of dues and fees charged per grade 6 through 12 student for FY13. While there appears to be no correlation between the amount of money charged in dues and fees and the number of months of operating expenses in a district’s General Fund, it is at least worth a review for those districts hanging on to piles of cash.
Here’s the table depicting how many months of operating expenses were in each district’s General Fund when the analysis was conducted in January 2014.