Friday, February 24, 2012

The Reserves at Potsdam Central School

It has been suggested that I am misleading the public with the references I have made recently to the reserves at Potsdam Central.  What appears to be fact is that, on the audit report accepted by the Board of Education on October 11, 2011, there is a combined fund balance for the general fund of over $5.5 million dollars.  It is fact that this money is in several different reserve accounts with various restrictions. One is an account to pay for the costs associated when an employee leaves the district, such as pay for personal days, sick days and retirement incentives (this is the EBALR).  This is the reserve that the New York State Comptroller publicized last year for all school districts in the state.  Another is an account to save money to help pay the local share of a capital project (this is the Capital reserve). Two accounts are not "restricted".  These are the fund balances with which most people are familiar.  One is the amount of money that has been allocated to the current year's budget and expected to be spent.  The second is the unallocated or undesignated fund balance.  It is this reserve which is not allowed to be more than 4% of the next year's spending plan.  They are all very worthy savings accounts.  Why do these accounts exist?  They exist because, for quite a few years, the school district found that there were significant amounts of undesignated fund balance, exceeding the legal limits, left at the end of the fiscal year. When this happens, the money can be returned to the taxpayers by allocating the money to the spending plan, thus lowering the tax levy, or moved into reserve accounts.  The decision of the various Boards of Education was do a little of both.  I was on the school board when several of these reserve accounts were created and the number one concern by the school board members was if these funds could be tapped if the district found itself in financial difficulty.  The response by each of our financial advisors was YES.  Therefore I do not believe that I am misleading the public.  The Potsdam School District is in financial difficulty.  These reserve accounts are a wonderful financial asset in times of plenty, but we may need some of the money now.  Let's hope that our advisors were telling the Board of Education the truth when it was stated that these funds could be tapped if absolutely necessary. 

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