This story originally published May 7, 2010
Editor’s Note: This story appears today as part of the PA Independent’s Year in Review series. This week, we will re-post several of our top stories from 2010. The article below was originally published on May 7, 2010.
Despite a potential shortfall from the state government, Pennsylvania’s 500 school districts are sitting on a financial gold mine of about $1.6 billion in undesignated reserve funds.
According to the state Senate Appropriations Committee, these reserve funds are “just contingency funds that aren’t allocated to an area within their budget. There’s a manual of accounting with the Department of Education (DoE) and school districts are supposed to report based on the manual of accounting.”
While some school districts actually owe money to their undesignated reserve funds, the school districts with the ten largest funds range from nearly $13 million to over $38 million. The undesignated funds are not committed to any planned project whereas the designated funds and any other funds, such as capital reserves, are already allocated to a specific project. The school districts have about $872 million, combined, in the designated reserve funds.
All told, the school districts have more than $2.5 billion in reserve funding.
Given the school district superintendents recently received a letter from the state General Assembly on April 27 warning there is no guarantee of school funding from the state, the reserve funds would be an alternative to cost cutting or tax increases, already limited by Act 1 passed in 2006.
The letter from the state legislature was sent by state Sens. Joseph Scarnati (R – Cameron), Dominic Pileggi (R – Chester), Jake Corman (R – Centre), and Jeffrey Piccola (R – Dauphin. The senators are, respectively, Senate President Pro Tempore, Senator Majority Leader, Senate Appropriations Committee Chairman, and Senate Education Committee Chairman.
“For the most part they’re funds that can be used for any purpose. For the most part that money comes without strings,” said Tim Allwein , deputy executive director for Pennsylvania School Board Association (PSBA). “The only thing they can do if they don’t use their reserve fund is start cutting programs and we’re seeing a lot of school districts do that. Districts aren’t filling positions when people leave, letting the staff be reduced through attrition. If you’re not going to spend, you have to cut.”
But while the school districts received a similar letter last year, the Senate Appropriations Committee indicated they received “significant increases” through supplemental money for special education, stimulus money, and $350 million in basic education subsidies. In Gov. Ed Rendell’s current proposed budget, already passed by the House, there is a proposed $354 million increase in funding for state schools.
“It’s been two tight years in a row and this is the kind of economic situation that reserve funds are created to help weather,” said Erik Arneson, spokesperson for the state Senate Republicans. “Last year there were some districts that had zero balance and some that had millions and millions of dollars in reserve funds. There is no so-called typical school district in that case.”
The potential shortage of funding from the state to school districts also comes at a time when government schools are calling for decreased funding to cyber and cyber charter schools, and the PSBA has specifically called for action on the spending and oversight of charter schools. (link)
According to the most recent information available from the Department of Education on school districts’ reserve funds (for the 2008-2009 fiscal year), the lowest reserve fund with a balance totaled about $16 thousand.
The DoE was unable to provide comment on this issue.
