The Changing Position on Fund Balance

So...is it OK to use fund balance--often called the "rainy day" account to help lower property taxes for a given year? The following quotes typically have school board members saying "No! Don't use fund balance!". But then, when cornered, it suddenly is acceptable--and even a good idea--to use fund balance to pay for things like the cost of issuing construction bonds.

What's unsettling is how the board and administration argue from both sides, depending on which approach best serves their...dare we say? ... "ulterior motives". When citizens recommend using fund balance reserves, they quickly jump to the defense, threatening dire consequences. But when THEY want to use fund balance, it's suddenly the perfect thing to do and doesn't adversely affect them in any way. It's this inconsistency that's maddening.

Nobody is saying that we should take money out of fund balance EVERY year. We are suggesting that in this unprecedented recession, that if the board is not going to reduce spending, then perhaps the "rainy day" that is always alluded to is already here in the present.


$183,060 from fund balance brought into question
Frei told The Star on Tuesday that the $183,060 taken from the fund balance is to cover the closing costs attached to the bonds.

"Typically those closing costs are included in our debt payment schedule, which is a 20-year cycle," Frei said. "But for the Qualified School Construction Bonds, which is that federal money that we got with no interest or very low interest, they didn't allow us that option. We either had to take it out of the money that we were going to borrow, in this case $22.9 million, or we could take it out of our general fund balance."

The board held a special meeting on Sept. 3 and approved the resolution awarding the sale of $22,965,000 general obligation Qualified School Construction Bonds to J.P. Morgan Securities.

At that meeting, the board voted unanimously to pay issuance costs of $183,060 from fund balance. Board member Jim McCourt was absent from that meeting.

"What the school board decided and I fully support this is this is a one-time payment. We have a fund balance that we've built up over the last few years, it made sense to them to take it out of there versus the other option of taking it out of our construction money," Frei said. "We're not over budget by any stretch, but we are close to the budget and we still have about a year to go on construction for the 8-9 and another six months for the high school, and there are still some unknowns out there."

Frei said it was a good approach to use the fund balance because the money is there, rather than come to the end of the construction and not be able to pay for work on Marshview Road, furniture for the new building, and other construction needs.

Frei added that he is not worried about a negative impact on the district's bond rating.

"Long term, if you continually dip into your fund balance, yes that definitely affects your credit rating. To take a one time payment out of fund balance, I would say has very little or no affect on bond rating," Frei said. "What they look for is the trend, so if you continually dip into it your fund balance, and we have done the opposite-we've continually built our fund balance. I'm not worried about that, and neither is our financial advisor, R.W. Baird."
--Sun Prairie STAR 10/1/09

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Stackhouse 9/17/09

"The more money we take out of the fund balance, that affects our credit rating and standing," Stackhouse said.
-- Sun Prairie STAR 9-17-09

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Slane 8/20/09

At the end of the 2008-09 school year, the district had a projected surplus of $800,000, which has been placed in the fund balance. The administration is planning to use $200,000 of that surplus to pay a one-time property tax charge-back to the city of Sun Prairie during 2009-10.

School board member Al Slane, present at Thursday's meeting, said that some people in the community have talked about using more of the fund balance for a one-time payment to lower the mill rate.

"I think that's a very bad idea, especially when we have more bonds," Slane said. "I think we should be going the other direction long term. We should be building the balance, not spending it. One of the reasons is because of the bonds. The other reason is because spending that money, it's a one time deal. It's not like if you spend it you're going to reduce the mill rate forever by $2. It's a one-time payment. You don't get it back. I think it's better to save that for a real rainy day."

However, Mealy, who has suggested using portions of the fund balance at past Finance Committee meetings to lower the mill rate, said, "It don't get much rainier than it is now."

-- Sun Prairie STAR 8-20-09

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Frei 7/30/09
Frei said the projected end of year surplus for the 2008-09 school year is $800,000, or 1.2 percent of the budget. The surplus will go into the district's fund balance.

"We're still one of the lower fund balances in the state, according to the Wisconsin Taxpayer Alliance," Frei said.

-- Sun Prairie STAR 7-30-09

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Food Service Fund Balance, Slotten-Bauchamp and Frei 6/25/09

Slotten-Bauchamp said the district anticipates breaking even at the end of the school year, and maintaining the nutrition fund balance of just over $500,000 for the next year.

From that fund, $100,000 will be allocated to purchasing new kitchen equipment in the district and to the remodeling of the current high school, soon to be the 8-9 upper middle school.

"That money is just sitting there," Slotten-Bauchamp said. She added that Royal Oaks Elementary School is in need of new equipment.

"We can augment referendum dollars with district dollars," said Phil Frei, deputy district administrator of business operations.
[SP-EYE note: "augment referendum dollars"? Is that another case of quietly exceeding the $96M referendum limit? ]

At the current time, Slotten-Bauchamp said she is not adding on any more staff.
--Sun Prairie STAR 6-25-09