Budget battle feared over District 833 reserves
South Washington County Schools officials say they are worried that state lawmakers will penalize District 833 for being financially prudent as they look to balance the state budget.
School Board members and district officials told legislators representing south Washington County that the district's "healthy" reserve fund of $17 million is the product of fiscal responsibility. They fear the Legislature will reduce funding to districts like 833 that have built up rainy-day funds, and say that could result in more local spending cuts that affect classrooms.
Local legislators said they will defend the district's budget practices, but made no guarantee the district will not be targeted in St. Paul, where the Legislature's main job this year is to set a new two-year state budget and erase a projected $6.2 billion deficit. Some lawmakers in past years have questioned why local governments, including school districts, maintain large fund balances during difficult budget times.
There is no formal proposal yet to tap local schools' fund balances to shore up the deficit, but that will be considered, said Sen. Katie Sieben, DFL-Cottage Grove. Sieben serves on the Senate Education Committee and said the committee's Republican chairwoman already has inquired about District 833's fund balance.
"It's something that will come up in discussion," Sieben said of proposals to use school district reserves to erase the state budget. She and other lawmakers met with school officials Jan. 20.
Sieben encouraged district officials to spend down the reserves to avoid losing funding at the hands of cash-strapped state government.
Debate over reserves
Superintendent Mark Porter said the district has done a good job managing its funding and that has provided stability, including in teacher staffing ratios. Reserve funds have been used to avoid classroom spending cuts.
The reserve fund is stable, Porter said, but that could change if lawmakers somehow reduce state funding to District 833.
"We could very quickly find ourselves in a difficult financial circumstance that would impact the classroom," Porter said.
School Board Chairwoman Leslee Boyd said the district's ability to maintain a healthy fund balance actually has saved the district money. Its financial situation has resulted in good bond ratings, thereby lowering borrowing costs.
Board member Jim Gelbmann said the district should spend down more of its reserves because they are given to the district by taxpayers to be used for students. The district's policy calls for maintaining reserves equal to 5 percent to 9 percent of this year's roughly $156 million operating budget. The current reserves exceed that range.
Gelbmann said the district in past years has underestimated the revenue it received. That padded the reserves, and there were "missed opportunities" in the past when the funds could have been spent, he said.
"I think it makes it hard for us to go to the Legislature hat in hand when we do have such a large fund balance," he said.
'Doesn't make sense'
State aid comprises 79 percent of the district's operating budget. Local property tax dollars and other funds make up the rest.
The concept of reducing aid to districts sitting on big reserves is not new, Sieben said. Former Gov. Tim Pawlenty had proposed that as a state budget-balancing move, but the Legislature did not embrace it.
Sen. Ted Lillie, whose district includes Woodbury, said that based on what he has heard from the school district, the state would be penalizing the schools for being fiscally responsible.
"That doesn't seem to make sense," said Lillie, R-Lake Elmo.
Rep. Denny McNamara, who represents a portion of south Washington County, said the school district has been "prudent."
"For (the Legislature) to go after that, I would think there's going to be a lot of us fighting real hard to say no," said McNamara, R-Hastings.