CSBA calls reserve limit unworkable
(Calif.) Legislation limiting how much money schools can retain in reserves includes too many facets of a district’s ending budget balance and skews the amount actually being reported, according to a study released Monday by the California School Boards Association.
Money tied to bonds and self-insurance, for instance, are two funds opponents say shouldn’t be included in the new reserve formula and will create a false representation of how much money the district has.
“Virtually every district in the state is going to be over on the ending balance caps just to operate a facilities program or to self-insure,” said Rob Manwaring, CSBA consultant and former K-12 education director at the Legislative Analyst’s Office. “So it’s almost nonsensical to place a restriction on how much a district can hold to build facilities as somehow a cap on reserves.”
According to Manwaring, money that can’t simply be spent, such as proceeds from local bonds, money to pay interest and capital expenses from those bonds and developer fees, are all included in the statute even though they can’t be used or thought of as reserve money.
State officials said the reserve cap, a last-minute addition to the 2014-15 budget agreement demanded by the governor, is to ensure that school districts are not holding back dollars that should be spent on educationally disadvantaged students.
Districts will be required to have reserves that do not exceed 6 percent of their revenue, which opponents of the cap say isn’t representative of the diversity in school size across the state. While large districts may not need to hold nearly as much money in reserve, small districts’ wallets are hit harder when making standard purchases on items such as school buses.
CSBA officials said that local school boards know what is best for their districts, especially where spending is concerned, and that well maintained reserves have proven beneficial, if not necessary, in recent years.
“The idea of a safety net for schools at the state level is a facade, and it ignores recent history with regard to how schools used budget reserves during the great recession to avoid even greater cuts,” Josephine Lucey, CSBA president, said at the press conference.
“The cap on school district reserves is an affront not only to local control but to sensibility. It’s fiscally irresponsible, inconsistent with the principal of subsidiarity and must be repealed to protect our school’s financial security and the student’s we serve,” she said.
Districts often tap into reserve funds when purchasing textbooks, upgrading technology and spending on maintenance projects, but reserves have also been used to pay everyday costs.
According to Vernon Billy, CEO and executive director of the CSBA, the new cap would only maintain about three week’s worth of operational funding, which wouldn’t be nearly enough in the face of another recession.
Billy delivered his speech at the conference in front of an empty vault, which he said symbolized what school budget reserve funds will look like under the new law.
“We remain adamantly opposed to this statute and don’t believe we can now or ever take a chance that districts will be forced to empty their reserve funds,” he said.