The fund balance was high, so why did we need the 2012 bond issue?

Post date: Jul 28, 2012 9:52:57 PM

The school bond funding pays for construction costs and supplements operational capital costs so that the fund balance can serve its intended purposes:

keep the district from going into default through the year as it waits for ad valorem tax receipts to arrive
allow it to temporarily endure deficit budgeting to preserve class sizes and program quality
have a cushion against repeated "gotcha" state funding cuts and other unexpected funding losses or cost increases

As shown in the charts at right, by 2011-2012 the State Aid Formula funding for the local school district had dropped 12% or over $2.23 million from the level in 2008-2009. This resulted in repeated program cuts and teacher and staff layoffs in 2009-2010 and in 2010-2011, including the painful and controversial decision to close Oak Park Elementary in May 2011. The district gained well over $600,000 in annual operational savings from shifting about 180 Oak Park neighborhood students to Wilson Elementary, and happily Wilson posted high test scores in 2011-2012 with its new student make-up. The closure allowed the board to take the risk of a budget for 2011-2012 which had a projected $1,000,000 loss.

In early 2012 the state unexpectedly opted to provide supplemental funding, which included fully funding mandated employee health benefits, which for years had been a partially funded mandate draining district resources. That and local revenue improvements happily turned the projected $1,000,000 loss for the year into a break-even. The closure of Oak Park and the large fund balance near the legal limit of 14% were instrumental in preserving class sizes across the district despite huge uncertainties and continuing state funding shortfalls, and have allowed the district to again risk a large projected net loss for 2012-2013 to preserve class sizes, keep its already low salaries from falling further behind the peer group, and meet high-priority instructional needs to reduce class size "hot spots" and provide more support for lower-performing subject areas.

A large fund balance is what allows the district to temporarily budget at a projected net loss without risking default. This means more staff can be retained and district salaries, which are already far below the peer average, can be kept from falling further behind. Thus class sizes are maintained, quality staff can be retained, and the end result has been high student achievement despite ever-increasing local poverty levels and shrinking state funding.

The fund balance also insulates the district from the repeated funding shortfalls imposed by the state or, most important to a district which defaulted in 1995, unforeseen accounting errors. The most recent example is an unanticipated cut of over $192,000 in July 2012 when the State Department of Education opted to hold back far more funds than usual, excusing it as setting aside money that might be needed for charter and virtual schools.

Bartlesville's annual funding through the State Aid Formula has declined by 12%, over $2,230,000, from what it was in 2008-2009

State Aid Funding Formula Money

for the Bartlesville Public Schools

Click the bar chart to enlarge it

So how does the "fund balance" work?

All school districts receive state aid formula funding through the year, but local ad valorem revenues (property taxes), which are 25%-30% of the revenue base, arrive from late December through February. The district must rely upon its fund balance to pay monthly bills during the fall months of each year. By December the district funds dip to levels below the cost of one month's payroll, until the local ad valorem revenue begins to arrive. The fund balance prevents the district from going into default.

Notably back in 1995 accounting errors by past administrators and an inadequate fund balance led the district to default on its payroll. Eventually a court-ordered tax judgement on district property owners was needed to get employees paid for the work they had done. Subsequent administrations and school board members have understandably been determined that a default must never happen again, which requires a larger fund balance to be maintained even in an environment of repeated and often unexpected cuts in state funding and other revenue sources.