The dirty little secret of the recently-concluded “stimulus” fight in South Carolina was that far from being faced with cash shortfalls, the Palmetto State’s eighty-five school districts were – and still are – flush with cash.
Almost $800 million in carry-forward reserve funds, to be precise.
Of course, the mainstream media completely ignored the existence of this money, enabling politicians to dangle teacher firings and furloughs in the face of anyone daring to question the wisdom of our state spending every last dime of “stimulus” funding on recurring government programs.
House Speaker Bobby Harrell, for example, said that as many as 5,000 teachers would have been fired had South Carolina not applied for a controversial pot of stimulus money – which amounts to just 1.6% of this year’s $20.7 billion state budget, by the way, or less than half the amount our school districts currently have squirreled away.
So why was this $800 million pot of reserve funds ignored? Well, besides the fact that it would have made all that shrill, taxpayer-funded whining we heard over the last few months a little less believable?
“Good stewardship,” we were told six months ago.
School districts claimed that they were just being “responsible stewards” of our tax money, saving for a rainy day – which obviously ignored the fact that recessionary rainclouds had been dumping buckets of bad news on our heads at the time.
Also, prior to 1991 local governments and school districts were prohibited from maintaining reserve accounts altogether – which begs the question of how they managed to survive under the old system.
Another excuse offered by educrats was that these reserves were needed as collateral for massive infrastructure loans, which judging from the rapid growth of these accounts means that every district in the state must have embarked upon a massive new building program within the last five years.
After all, the amount of money in these carry-forward accounts has almost doubled since 2003.
Despite the dubiousness of these excuses, the mainstream media bought them hook, line and sinker – which is why dating back to first time we exclusively reported on these fund balances in January not a peep has been heard on them from any other news outlet.
But still we press on … if for no other reason than it’s just how we roll.
In fact, FITS has obtained some updated financial data from several Midlands, S.C. school districts showing that half of them are currently carrying-forward fund balances that represent a fifth of their annual budget.
KERSHAW COUNTY – 7.55%
LEXINGTON ONE – 11.04%
LEXINGTON TWO – 12.78%
LEXINGTON THREE – 21.44%
LEXINGTON FOUR - 19.44%
LEXINGTON FIVE – 20.65%
RICHLAND ONE – 19.45%
RICHLAND TWO – 9.55%
Of course, these reserve funds pale in comparison to the ones being maintained by Richland and Lexington counties – which come in at 39.3% and a whopping 57.1%, respectively.
Seriously, Lexington County. WTF?
By contrast, state government maintains about 5% of its budget in reserve – at least when those funds aren’t being raided lawmakers it to fund recurring spending.
What’s our point?
It’s simple – your bottom line may be hurting, but government continues to pad its reserves.
By Daniel Layfield June 7, 2009 at 6:47 pm
It would be interesting to see the bond covenants that require the reserves. That would pretty easily demonstrate whether they are actually “required” to keep these reserves.
By For real June 7, 2009 at 7:05 pm
Pretty sure they are required to keep a great deal in reserve per bonds…but I agree with the above, we should see them.
By Steve June 7, 2009 at 8:44 pm
Please keep in mind bond covenants are not the only reason to have reserve funds. Real property tax comes in once per year so local governments have a hefty account in February and will spend it down systematically over the next 10 months until real property taxes come due again. Without knowing the date the percentages were recorded and how much they spend down each month, it’s hard to know if that snapshot is excessive. It may well be so but is not necessarily so. The Government Finance Officer’s Association recommends maintaining about a 3 month (25%) operating reserve (this varies based on size of the government unit) for cash flow (tax anticipation borrowing is not a good thing) and emergencies, such as the crisis we now face. The 5% number sounds about right for what the state has but as Sic Willie reminds us often, the Ways and Means and Senate Finance committees aren’t exactly models of sound financial management. Seeing the data should help in an analysis.
By Sammy June 7, 2009 at 8:47 pm
I don’t believe a word the education establishment utters.
By lou June 8, 2009 at 6:46 am
I don’t believe anyone about anything anymore
By Yeah Right June 8, 2009 at 8:56 am
Thanks Daniel. Not sure why Will keeps ignoring the fact that bond requirements typically require large reserves.
By Frank Morgan June 8, 2009 at 9:19 am
I thought it might be useful for your readers to get a “real world” perspective on this issue. At the beginning of FY 2008-09, the Kershaw County School District had a reserve of $3.9 million, or about 5.4% of our General Fund budget. These funds are used as cash flow for payroll until state and local revenues start to flow in November. In the absence of these funds, we would need to borrow funds to make payroll during this period and include the interest on this loan in our budget.
This year, our district cut about $4.3 million during the school year in response to state revenue shortfalls. Cuts included salary reductions, furloughs, position eliminations, and as many operational decreases as could be feasibly made. We also used about $2 million of our fund balance to cover both the state and also a local revenue shortfall. We took the approach we did to protect classroom teaching and direct services to students to the greatest degree possible. Our fund balance is now about $1.9 million, or about 2.9% of the budget we will adopt in a couple of weeks. Because of this, we will need to borrow money to make payroll during the first several months of the fiscal year. I suspect that if you look at most districts in the state, you will see similar situation.
As I said in a previous post several months ago, I’m not sure how constructive it is to simply add up all the fund balances across the state because as much as I might like to have access to the funds in more affluent districts, I don’t.
I hope this information is helpful to your readers.
With best regards,
Dr. Frank E. Morgan
Superintendent
Kershaw County School District
By FITSNews June 8, 2009 at 9:30 am
Dr. Morgan,
Thank you for your thoughtful reply. Your district’s fund balance has consistently been among the lowest we’ve studied, and contrary to the conduct of leaders in certain other districts it certainly seems as though you are making wise decisions with that money.
Having said that, in regards to your statements regarding the $4.3 million cut your district absorbed this year, could you please give our readers some context on that figure?
Specifically, could you tell us the amounts by which your budget increased over the previous five years?
-FITS
By Frank Morgan June 8, 2009 at 10:52 am
Good question! I’ve only been here two years, so I had to do a little digging. We started 2004-05 at $55.2 million. We’ll finish 2008-09 at about $66 million. In looking at the budget documents, most of the increase over the five years was tied to increasing teacher salaries, which I understand was a statewide focus. FM