Comments on: Vault Percentages Vary

By: Frank Morgan

Frank Morgan — Mon, 08 Jun 2009 14:52:59 +0000

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

By: FITSNews

FITSNews — Mon, 08 Jun 2009 13:30:32 +0000

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

Frank Morgan — Mon, 08 Jun 2009 13:19:00 +0000

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: Yeah Right

Yeah Right — Mon, 08 Jun 2009 12:56:08 +0000

Thanks Daniel. Not sure why Will keeps ignoring the fact that bond requirements typically require large reserves.

By: lou

lou — Mon, 08 Jun 2009 10:46:29 +0000

I don’t believe anyone about anything anymore

By: Sammy

Sammy — Mon, 08 Jun 2009 00:47:20 +0000

I don’t believe a word the education establishment utters.

By: Steve

Steve — Mon, 08 Jun 2009 00:44:25 +0000

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: For real

For real — Sun, 07 Jun 2009 23:05:09 +0000

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: Daniel Layfield

Daniel Layfield — Sun, 07 Jun 2009 22:47:14 +0000

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.