Alexandria’s School Board members received an unexpected piece of news late last week when Superintendent Morton Sherman informed them by memo that the schools would have a surplus of approximately $16.2 million dollars projected at the end of the current 2013 fiscal year on June 30.
Our research has shown that the total fund balance has grown every year since 2007 when it was a mere $4.9 million. Accumulating surplus funds may or may not be a good thing in public administration.
The budget that is adopted in the winter and refined in the late spring for the next fiscal year (July 1 through June 30) is a blueprint for spending. There are uncertainties in any enterprise, public or private, which often require more funds to be spent or, in some cases, actually save money. Rising enrollment is an example of the more funds kind. Vacant positions are an example of the less.
For most public bodies that do not have taxing authority, funds which are not spent by the end of the fiscal year must be turned back to the body that funds them. Alexandria operated on that system until the 21st century with the unspent school funds reverting to City Hall.
The problem with turning money back is that there is great pressure to spend what is left before the end of the fiscal year and there is no guarantee that it will be spent wisely. Given the uncertainties of end of year expenditures, cutting it too close can result in a deficit which, of course, is not permitted under the law.
When the School Board was given carry over authority, a conservative approach was mandated. Funds carried over from one fiscal year cannot be spent in the next but must be spent the fiscal year after that. This was done to insure accuracy as the budget for the next fiscal year is frequently put together before the audit for the past fiscal year is complete.
The results of this approach are now quite clear. Two pots of carry over money are created and together they are a sizeable amount. $16 million is close to a one-time savings of 5 cents on the real estate tax rate. After this year’s 4 cent increase tax payers, most of whom do not have children in the public schools, are going to wonder what is happening.
There is also the waste of having the funds sit around idly. There is no safe way to earn interest of any reasonable amount on this money in today’s environment. If the funds could be invested to return 5% that would be one thing but short term rates are now 1% or less.
Systems always have unanticipated consequences. Good public administration requires that the situations be dealt with once they are recognized. The process of dealing with school carry over authority must be analyzed and refined.
This is not just a School or a City issue. A successful solution will require both entities to cooperate. The schools should be allowed to carry a reasonable amount of unspent funds forward and should not be put in a position where they might have insufficient funds to cover expenses.
The City and its taxpayers should not be put in a position where they are paying a large amount of additional taxes to fund a large pool of unused and unproductive dollars.
We trust that City Council and the School Board will have the City Manager and Superintendent develop a more efficient yet equally safe system that protects the taxpayers as well as the City and the students. That is the fair course of action to take.