School reserves unwise target for balancing budget
Legislative leaders are taking a prudentcourse in delaying a decision on whether to force local schooldistricts to use reserve funds in the event of a state fundingshortfall, but the possibility of such an action has many statesuperintendents already working on a line of defense.
If state revenues fall short, Gov. Phil Bryant has proposed the 152school districts cash in $73 million from their rainy day funds tomeet budgetary needs. The exact size of the state school districts’collective reserve pot is hard to pinpoint as state educationleaders say the total had shrunk to around $450 million on Dec. 31after being at $615 million on June 30, the end of the state’sfiscal year.
Regardless of the statewide total, school districts – and theirsupporting local taxpayers – are impacted individually when itcomes to state funding reductions.
All school districts are not created equal. Some are blessed withstrong property tax bases or good leadership that allows them tobuild up sizeable reserve funds. On the other hand, other districtsface the challenge of financing educational needs in communitiesthat simply can’t afford much.
Balancing out this disparity was the purpose behind the MississippiAdequate Education Program (MAEP), which was designed to providesufficient funding to allow all school districts to meet mid-leveleducational goals.
However, more often than not, the Legislature has failed to fullyfund MAEP over the years. And to provide what funds they have foreducation and the myriad other government obligations in recentyears, lawmakers have turned to various one-time money sources.
Now the next source could be school districts’ reserve funds.
Lt. Gov. Tate Reeves, the leader of the Senate, is taking await-and-see approach to the school reserve funding use idea. As inyears past, lawmakers in a few weeks are hoping to have a betteridea upon which to base state revenue expectations.
Using reserve funds is problematic for all school districts andpotentially punitive for those who have endeavored to be goodstewards of funds as expected.
Many school districts dip into reserves throughout the year tocover expenses when property taxes and other revenues are slow inarriving. For some, this cash flow flexibility is a critical toolin day-to-day operations.
School districts also maintain a healthy reserve in order to pursueconstruction projects when needed without having to go to taxpayersto ask for funding help through a bond issue. Having a strongreserve can be a necessity in the event of a catastrophe wheninsurance is insufficient to fully cover a major loss.
Furthermore, the fairness factor cannot be ignored.
Why should the Lincoln County School District, with a reserve fundof more than $7 million, or the Brookhaven School District, with areserve in the neighborhood of $3.7 million, be asked locally tofulfill what is a state obligation? And what kind of local burdenwould be placed on those school districts elsewhere that haveminimal to nonexistent reserve funds?
Lincoln County Superintendent Terry Brister, who is serving assecretary of the Mississippi Association of School Superintendents,raises a good point when talking about lawmakers’ inability to tapreserve funding only once. He fears if school districts are askedto dip into reserves this year, they could be made to again nextyear and the next, etc.
One only need look at the state’s Health Care Trust Fund to see thevalidity of Brister’s point.
The supposedly “inviolate” fund created from the state’s 1999 $4.1billion tobacco litigation settlement has been raided repeatedlyover the years to make budget ends meet. And all of the remaining$97.4 million fund balance is now being eyed to meet budget demandsthis year and avoid more cuts.
The bottom line is that lawmakers have used one-time money to kickthe can down the road year after year. Asking local districts toutilize reserve funding punts a state obligation and threatens thesolid financial foundations that school leaders like those inBrookhaven and Lincoln County have taken years to build.