Balancing act: How big should reserve funds be? |
Spring 2010 • Volume 8 • Issue 2
In every budget season, school board members must do more than balance expenses with revenue. They must determine if the district is saving enough. It is never easy.
Indisputably, maintaining reserve funds is part of sound financial management, but school districts find criticism no matter how they handle them. To starve them is to gamble, to fund them modestly can violate accounting standards and risk lower bond ratings, and to fund them to the accounting profession's specifications would break state law and bring accusations of hoarding from politicians and special interest groups.
With a wounded economy and taxpayer unrest seeping though communities like lighter fluid ready to ignite, tapping reserve funds can seem like an appealing option. Gov. David Patterson has criticized school districts for not dipping into so-called "rainy day" funds, claiming those that refrain are holding back on taxpayers. And the state comptroller has criticized many districts for overfunding certain reserve accounts. "Schools stockpile taxpayer's cash" was a headline in April 29, 2010 issue of The Wall Street Journal. The story said school districts in New York State have $3.3 billion in "obscure reserve funds."
