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Curmudgeon's Corner

cur-mud-geon: anyone who hates hypocrisy and pretense and has the temerity to say so; anyone with the habit of pointing out unpleasant facts in an engaging and humorous manner

G'town School Funding Follow-Up

Education, Germantown, School Board, Taxes

The July 16th blog dealt with the dilemma that is faced by the Germantown School District as it works to make ends meet in the face of significant reductions in state contributions.  Ric Ericksen is the Business Manager of the District and has written the following in response to the blog (and possibly to one or more of the comments):
"Maintaining a fund balance is necessary to meet the district's cash flow needs until such time as state aid and taxes are received. It is NOT a rainy day fund and, in my experience, most districts try to maintain a reasonable balance for only cash flow management purposes. By having some reasonable amount it helps minimize the need for short-term borrowing.
There are some experts (municipal bond advisors, auditors, GASB officials, DPI accountants) who strongly encourage schools and other local government agencies to maintain about a 30% fund balance as measured against the total general fund expenditure budget. If Germantown hit that target, the figure would be about $12 million. That would be nice, but it is a lot of tax dollars.
Without the borrowing and including the roughly $4.5 million on hand at the end of the fiscal year (June 30) our greatest deficit each year is in early January. That cash flow deficit is about $6.5 million dollars. Therefore, to meet our cash flow needs in 2008/2009 the district borrowed $6.5 million. Proceeds are invested until needed.
As a veteran school business manager it will be my suggestion to the Superintendent and Board of Education to minimize the impact on local property taxes resulting from the large reduction in state general aid. One way it could be done is to use fund balance with the intent on paying it back over several years. A bit of a "crap-shoot" ... yes, I suppose. But these are the most extraordinary economic times that most of us will ever be confronted with in our life time. Inasmuch as interest rates on both the borrowing and investments are very low and have been for the last year the option seems reasonable. It also seems prudent to help the local taxpayer with some sort of effort, this being one option.
Due to revenue controls imposed for over a decade, Germantown schools (like most) have cut significantly through the years.
For what its worth I have sat on my state association's accounting committee for over the last four years. We provide leadership and advise the state in all areas of school finance, accounting methods, and budget development."
Thanks Ric for taking the time to write this piece.
The Curmudgeon Blog today is titled Time For A Deep Breath.

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