Are local school districts hording money or saving too little? A new analysis suggests most districts have reserves within a recommended range but below a state maximum, though a few are clearly operating without a net.
The Temple University Center on Regional Politics looked at the fund balances, or reserves, of public school districts, charter schools and career and technical centers from 2016-17. The study focused on the “unassigned” fund balance, money available for immediate use without restrictions, as opposed to reserves restricted by outside forces such as debt terms or assigned for special purposes by the district such as construction projects.
The policy brief also compared 2016-17 balances state-wide to funds in 2012-13, and to operating expenditures. Comparison to expenditures is a common yardstick. The brief notes that “the financial industry suggests an unassigned fund balance between 5 percent and 10 percent of total operating expenditures,” and that state law limits school districts unassigned fund balances to no more than 8 percent of total operating expenditures.
The state law is different for districts with expenditures of $19 million or less, increasing the maximum for every $1 million below that threshold.
Local data from the report shows that Luzerne County’s public schools average a relatively small 3.6 percent of total expenditures held in unassigned reserves, but the average is skewed dramatically by Hanover Area School District.
Hanover Area recently replaced both the superintendent and business manager. Board members and the new superintendent have claimed discovery of widespread budgetary discrepancies they are trying to fix, and the data in the report adds credence to the claim.
The report lists the district’s total spending at $31.6 million with an unassigned fund balance in the red, -$6.8 million, or -21.7 percent of total spending.
No other district has a negative fund balance. West Side CTC and Wilkes-Barre Area CTC both had little to no fund balance, but they operate differently from school districts. CTCs do not levy taxes, instead relying primarily on a per pupil payment from member districts.
Seven of the county’s 11 school districts had unassigned reserves within the industry-recommended 5 to 10 percent of spending. Greater Nanticoke Area hit the state limit of 8 percent. Northwest Area had 8.9 percent of total spending, but it falls below the $19 million spending threshold and thus can legally exceed the limit by a small amount.
Excluding Hanover Area, three districts were below the 5 percent threshold: Hazleton Area at 4.5 percent of spending, Wyoming Valley West and Wilkes-Barre Area both at 2.5 percent. Those are the county’s three largest districts by enrollment and by total spending.
Statewide, the analysis found that total reserves among all public schools rose from $4.3 billion to $4.9 billion, but that the unassigned balance, or “flexible reserves” of most districts were within or below the minimum standards recommended by bond raters.
Reach Mark Guydish at 570-991-6112 or on Twitter @TLMarkGuydish