Report: Area school district reserves often too low

By Mark Guydish - [email protected]
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A new report argues that school districts statewide may appear to have healthy fund balances, but that a closer look shows most — including eight of 11 in Luzerne County — have reserves below what most experts recommend as a minimum level.

Released by the Center on Regional Politics at Temple University, the report used state data to distinguish between district reserves that are restricted and those that are “unassigned.” While some district may have healthy-looking reserves, much of the money is often set aside for things like construction costs.

The analysis, done by David Davare of the Pennsylvania Economy League noted, that during the nine-month budget battle in Harrisburg from July of last year into March of this year, critics contended Pennsylvania’s 500 school districts were collectively sitting on about $4.7 billion in reserves even as many insisted they would have to close without state money.

But Davare notes the total fund balance is not representative of money immediately available to a district. For starters, the state Department of Education requires the balance sheet include money “to be received in 60 days after the closing of the fiscal year.”

Other parts of a total fund balance may be restricted by state law, by debt covenants, or by school board policy, leaving far less actually available for general purposes.

For example, according to state data Wilkes-Barre Area had a $6.5 million fund balance in 2014-15, yet $5.6 million was “committed,” which Davare defined as money “limited by board policy or board action,” such as planned construction or a reserve for anticipated pension payment increases. On the advice of the state, Wilkes-Barre Area has been trying to build a buffer for pension payment hikes.

That means the district had only $917, 283 in unassigned reserves, according to state data. While the total fund balance is nearly 5.9 percent of total spending, the unassigned reserve is a scant 0.82 percent.

The report notes experts generally recommend a reserve ranging from at least five percent to as high as 15 percent. The report also notes state law “limits the amount of unassigned fund balance to 8 percent for a district whose expenditures exceed $20 million if it is going to raise taxes.”

In Luzerne County, only Northwest Area spends less than $20 million, and the 2014-15 unassigned fund balance there was about 4.1 percent of $18 million in spending.

Because critics leveled their allegations at a time when districts were trying to survive without state subsidies during the budget impasse, Davare also looked at unassigned reserves as a percentage of total state subsidy.

By that measure locally, Crestwood could theoretically last the longest without state money because its unassigned reserve was about 21.5 percent of the total received from the state. Greater Nanticoke Area had reserves of about 13.2 percent state subsidies, while Lake-Lehman had reserves amounting to about 12.9 percent of state subsidies.

The state data lists Hanover Area as running a negative fund balance of -$2.15 million. District Business Manager Tom Cipriano could not be reached Friday afternoon, but he has noted discrepancies in state financial data in the past.

The district has depleted its fund balance in recent years, with the 2016-17 final budget showing an unassigned reserve of $325,000 in a budget with total spending nearing $27.7 million.

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By Mark Guydish

[email protected]

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish.

Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish.