Kudos to one of our freshman School Board members for going through the 2011-12 spending plan to find a potential way out of the difficult budget situation the district finds itself in. I have been saying for several years that the spending plan's bottom line has been excessive and that there is a "slush" fund that is too large. It is very difficult for Board of Education members to get a handle on this concept and even more difficult to get an answer from administrators about how much extra money is in any budget. I believe that administration thinks having a large percentage of excess funds in a spending plan is good management.
What do I mean by a "slush" fund? Every spending plan needs to have some extra funds set aside for unexpected expenses. For example, if there is an expensive, unanticipated mechanical failure that might cost thousands of dollars, there needs to be money in the spending plan to cover that expense. Another common situation is when a family moves to the district which has one or more children with special educational needs. The district is legally required to provide services and will get reimbursed, but not until the following year's spending plan. Therefore, they need to have up-front funds for the services. Finally, another common need for extra funds is when a district is in negotiations with its unions and one or more years have gone by without a settlement. In anticipation of a settlement, there should be money "hidden" in the spending plan to settle up when the contracts are approved. I say "hidden" because the administration doesn't know what the final settlement will be and wouldn't want to broadcast how much they are anticipating for that amount.
How much should the "slush" fund have in it? It depends on the school district and circumstances. Are they a district which has old infrastructure and might have more mechanical failures? Are they a district, like Potsdam, which has a good reputation for providing special educational services in district, rather than the child being bused to another district? Do they have expiring labor contracts? Probably a fair amount would be 2-3% of the spending plan. For Potsdam's $25 million dollar budget, it would seem that $500,000 - $750,000 would be sufficient.
How much is in Potsdam's "slush" fund and how do I know? I believe that this year (and last year), that amount is around $1.5 million dollars. It could have been more last year because contract settlements were anticipated. There are two places I look to find out how much excess money is in the spending plan. The business manager provides the Board of Education's members with monthly budget reports which show revenues and expenses to date. The expense documents show what has been expended and what is encumbered (that is, funds that are committed but the check hasn't been written yet). What is left over is the "slush" fund. Monthly budget reports were presented at the March 13th Board of Education meeting with an unspent and unencumbered amount of $1,515,054. There are just three months left in the fiscal year, so there can't be many more unanticipated expenses. Anticipated expenses should be encumbered.
The second place I have learned to look is fund balance designated toward the tax levy. For the past many years, this money has not been spent. It is a way to move money out of the undesignated fund balance account (which has a limit) and remove excess monies in reserve accounts (remember the EBALR account that was overfunded) but not reduce the tax levy. For 2011-12, that amount is $1,548,500. Amazingly close to the unspent funds in the budget, isn't it?
What does it all mean? Well, to me, it means that there is at least $500,000 in the spending plan that is not needed and could be used to fund positions which are being cut. Remember that this money has been rolled over into the proposed 2012-13 spending plan but not encumbered for any particular expense. So, again, I say kudos to all of the Board members who are trying to "right size" the spending plan. They are not winning points with the administration and may find themselves outside of the majority circle, but I certainly appreciate their efforts. Those efforts are in the best interests of our students.