Pennsylvania’s Public Schools Boost Reserves (PA)
September 20, 2010
Gov. Ed Rendell has made increasing investments in public schools his top priority. But much of that money has wound up in public schools’ rainy day funds.
Since Rendell came to Harrisburg, public schools have amassed $2.75 billion in reserve accounts. That figure has climbed 83 percent from Rendell’s 2003 inauguration to June 30, 2009, the most recent data available from the state Department of Education.
Public schools ought to be draining those accou nts before passing property tax increases on to homeowners, said Senate Appropriations Committee Chairman Jake Corman, R-Benner Township. “Clearly during this time, you shouldn’t be raising taxes and putting money in reserve,” said Corman. “I think that would be wrong if school districts are doing that.”
Rendell spokesman Gary Tuma said much of the additional money for schools was targeted to instructional programs and led to the academic gains that students have shown in recent years. “While fund balances might have grown somewhat, there has still undeniably been a substantial increase in the amount of money that has gone directly to bettering educational quality and classroom performance,” Tuma said.
Public school advocates defend the financial cushions that many districts and schools have built up.
They say there is nothing static for public schools: Students move in or out, local revenues can fall and state aid can be held up.
“There’s a lot of unpredictability,” said Michael Conte, finance director of the Philipsburg-Osceola Area School District.
But people expect their school to be open. “Each child has only one shot at kindergarten, fourth grade, eighth grade, etc. For that reason, schools must be able to budget for a consistent educational program regardless of outside forces,” said Tim Potts, a government reform advocate who is a former Carlisle school board member.
But Camp Hill school board member Peter Regan said he thinks districts forget whose money it is they are sitting on. “It doesn’t belong to the school district,” he said. “This is really a money grab so that they have money sitting around that they can spend on every little pet project that comes along.”
H e considers Camp Hill’s approximately $3 million fund balance to be much too high. He said the district, which has a $16.7 million budget, should have used it to lower this year’s 9.5 percent tax increase.
“If you look at what our needs are, that’s one heckuva rainy day. That’s a Noah’s Ark kind of flood,” Regan said.
With so many people out of work or facing pay cuts or freezes, public school advocates are out of touch with the public when they defend keeping large reserves, said Matthew Brouillette, president of the conservative-leaning Commonwealth Foundation of Harrisburg. “It’s raining on the taxpayer,” he said. “Instead of building (reserves) up during this time, we ought to be giving less money to the schools and they ought to be tapping these reserves. It doesn’t get any more rainy that what we’re experiencing now. I’m mad about this.”
While more recent data on public schools’ savings account will not be available for months, some suggest reserve accounts are likely growing. After all, Rendell and the General Assembly approved a combined $500 million increase in basic education funding to districts last year and this year.
But Jay Himes, executive director of the Pennsylvania Association of School Business Officials, said his group’s survey of districts suggests their reserves have declined. He said local revenues from income, property taxes and housing sales have dropped off in the sputtering economy. This has forced districts to dip into their savings to help balance their budgets to the tune of about $500 million last year and again this year.
“If circumstances stay the same, school districts will run out in some cases or run them down to what I consider warning levels,” Himes said.
Himes said the amount of sav ings a district has affects its credit rating — the better the credit rating, the lower its borrowing costs.
The savings also provide a cushion for districts when the state government delays passing a budget, said Bellefonte business manager Ken Bean.
In the 2002-03 school year, Bellefonte had $3.46 million in its reserve funds. That increased to $7.7 million in the 2008-09 school year, the most recent year for which statewide information was available.
Bean said $2.22 million of that is for planned capital projects and $200,000 was set aside for “the big spike coming up” — the expected increase contributions to the state employee retirement system,
Penns Valley Area School District has set aside money for that looming expense, as well as medical increases — about $795,000 at the end of the 2008-09 school year.
“It is imperative for school districts across (Pennsylvania) to maintain appropriate fund balance levels,” Penns Valley Area Superintendent Brian Griffith said in an e-mail, adding that savings provide a cushion against unforeseen expenses.
And while Penns Valley’s fund balance grew by 39.42 percent between 2002-03 and 2008-09, the ratio between fund balance and total budget didn’t change much. In 2002-03, Penns Valley’s fund balance equaled 12.91 percent of the total budget. In 2008-09, it equaled 14.07 percent of the total budget.
Of all the districts in Centre County, Philipsburg-Osceola increased its fund balance the least — by $389,679 or 10.39 percent.
That’s largely because the district had a budget crisis in 2006. A $3.4 million budget shortfall caused the district to lay off dozens of teachers and staff and close an elementary school.
For two years in a row, the district had a negative fund balance. It has since been able to build it back its reserves, so that it had $3.75 million in savings by the end of the 2009 fiscal year.
“We have quite a number of projects going on this year, where if we didn’t have the fund balance we couldn’t do” them, said Conte, referring to roofing upgrades and infrastructure work to improve Internet connections.