With schools facing numerous challenges related to this year’s budget development process, Gov. David Paterson has repeatedly suggested that school districts use their unrestricted reserves – known as fund balances – to cover any losses in state aid for the 2010-11 school year.
While Broadalbin-Perth district leaders agree that the Governor’s suggestion is one possible approach to dealing with reductions in revenue from the state, they also caution that using up the district’s fund balance poses additional risks.
What is a fund balance?
Just as families do their best to save money for a “rainy day,” school districts also see great value in maintaining adequate financial reserves in case of emergencies that could otherwise close a school building or restrict the district’s daily operations if not handled immediately.
For example, if a boiler at B-P Middle School stopped working, the district would use money from its fund balance to repair it right away and ensure a properly heated building for students. Or, if fuel prices suddenly spiked, Broadalbin-Perth could use its fund balance to supplement the amount that the district budgeted for fuel.
New York State law allows each public school district to carry a fund balance of no more than 4 percent of its current budget – and puts no restrictions on how the fund balance may be used. Broadalbin-Perth currently carries a fund balance of about $250,000, which is 0.9 percent of the district’s $27.9 million budget for the 2009-10 school year – well below the state maximum of 4 percent.
Broadalbin-Perth could use part or all of its fund balance to help close revenue gaps in the budget and stabilize the local school taxes. However, district leaders favor a conservative approach to using fund balance to make up for lost revenues from the state.
“Far from using up our fund balance, we need to focus on building it up,” said Superintendent Stephen Tomlinson. “Right now, it’s at a dangerously low level. It would be fiscally irresponsible of us to use up our reserves this year, especially considering the continued volatility of the economy.”
District reserve accounts
Besides Broadalbin-Perth’s unrestricted fund balance, other financial reserve accounts are often discussed during the budget planning process. B-P maintains a number of financial reserves that are each legally restricted to specific uses.
Under state law, a school district can create and maintain up to 13 different types of reserves. Besides its unrestricted fund balance, Broadalbin-Perth has one additional reserve for debt service.
District leaders encourage residents to learn more about Broadalbin-Perth’s reserves, revenue and other budget-related topics by visiting the Budget Central page on the district’s Web site. Residents can submit their budget-related questions to district officials by visiting Patriot Plain Talk