Question 5 for the 2021 Legislature: School district cash balances, how much and why

Question 5 for the 2021 Legislature: School district cash balances, how much and why

Between now and Jan. 11, legislators are preparing for what will undoubtedly be an historic session because of the impact of the COVID-19 pandemic.

Once in session, legislators will debate issues concerning how schools should be operating, budget problems and numerous other issues that will directly or indirectly affect public schools. Now is a crucial time for education leaders to develop or solidify relations with legislators, including those who are returning to office and the many new ones, so that our concerns, challenges and suggestions are considered.

Here are the questions that legislators are likely to be asking, some statewide perspectives from KASB, and suggestions on local responses school leaders may want to prepare.

Question 5: What are school district cash balances or reserve levels, and why?

School districts, like most organizations, maintain ending or cash balances for three major reasons:

Cash flow. School districts revenues often do not line up with spending, so at different points of the year, districts have balances to pay for upcoming expenses. July 1 balances include cash for tax levies collected during one year for bond payments the next year; for special education because state aid payments are not made until October; and food service because revenues do not begin until students arrive and begin paying fees. In fact, monthly (not annual) unrestricted school district operating fund balances vary as much as $400 million over the course of the school year, because expenditures and revenues do not match up.

In addition, July 1 cash balances to do not reflect annual delays in final state aid payments, which are used to allow the state to manage its own cash flow.

Savings for major projects. Cash balances are also used to save for major purchases without going into debt and paying interest. These projects include savings for building construction and repairs (such as roofs), technology purchases in multi-year cycles, school buses and student materials.

Contingencies. Districts keep balances to cover unexpected expenses or revenue shortfalls – exactly the kinds of unforeseen circumstances as the COVID pandemic. Cash balances can only be spent once; they cannot be used for on-going expenses.

Total July 1 cash balances statewide were over 30 percent of total school district expenditures, but most of those funds were restricted to bond payments, capital outlay costs and insurance reserves. Unrestricted funds equal about 10 percent of expenditures.

Some legislators and organizations question why balances are at those levels. There is also a great deal of variation among school districts.

Local Issues: How do your district’s reserves compare to expenditures and why? How do you determine appropriate cash balance levels for various funds?

For more details on school districts cash balances, see this post.

Monday: How are districts working to improve learning and what impact will COVID have on student learning and health?

Tuesday: How has COVID affected your school district operations?

Wednesday: Do fewer students and remote operations save money?

Thursday: School funding and the Gannon agreement