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You Paid For It: School districts challenged with managing excess funds

School districts challenged with managing excess funds (CNYCentral File Photo)

Each year, school districts across the state are tasked with calculating the revenues and costs the district will face in the upcoming school year.

When districts over-estimate how much they need, the money can be put into the unrestricted fund balance. This is a reserve account that acts like a savings account for the district. However, according to state law, districts are only allowed to hold onto a balance of 4 percent of the following school year's appropriations in their unrestricted fund balance.

The state comptroller's office says the reason is to keep districts from over-taxing.

"We understand that schools are trying to maintain a cushion," Deputy Comptroller Gabriel Deyo said.

The difficulty for school districts is to maintain a cushion within the statutory limit, and not padding their reserves unnecessarily.

"If they retain that money then that's not really going to help the school, it's just kind of sitting there and it could be a cause for taxes being higher than they need to be," Deyo said.

The comptroller's office has audited every school district in the state — 289 districts were found to have gone over the 4 percent threshold totaling $818 million in excess funds. Sixteen of those districts are in central New York and are responsible for about $35 million in excess funds.

"If you have excess money at the end of the year, it's okay to fund it with reserves, but have a plan on how to spend those reserves, you can also use the money to pay off one-time expenditures, and to reduce debt."

Dr. Rick Timbs is the Executive director of the New York State School Finance Consortium and he works with school leaders who are constantly worried about having enough money to operate.

"Let's just say this year the 4 percent is enough, but will you have enough the year after that, and the year after that?" Dr. Timbs asked.

It's especially difficult because districts can't always accurately predict how much they'll receive in state aid each year.

"I don't know about you, but I've got money in a savings account, I hope most people do, and I have actually no plan for it, but I know if I need it, it'll be there," Dr. Timbs said.

Dr. Timbs points out that other municipalities and institutions aren't held to the same strict standards as school districts when it comes to managing excess funds.

"It would behoove the legislature I think to re-examine this 4 percent limit. I think in the 21st century this limit has outlived its usefulness," Dr. Timbs said.

Financial stability is a top priority for any district, but for taxpayers how much is too much to pay - just in case?

"There's a lot that can go wrong in a school district and the last thing you want to go wrong is a money issue; Therefore, you have to plan for the worst and hope for the best," Dr. Timbs said.

"We sometimes hear that districts are budgeting conservatively and given the recession over the past decade we can understand where they're coming from on that, but we're trying to look out for taxpayers just to make sure that the money they're putting aside for school is being used in the best possible way," Deputy Comptroller Deyo said.

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