Thursday, July 13, 2017

Additional Flexibility is a Legislative Victory

On June 30, 2016 the district carried $265,529.97 in six different reserve fund categories. We are still in the process of closing out our books on fiscal year 2017, but I anticipate those reserve funds will grow as they have the last several years. Luckily this should be the last year we will have to deal with such large reserve funds, since HF 564 and 565 have been signed into law. A categorical fund is a dedicated fund that can only be used for a very specific purpose. In most cases, the rules for expending these funds are very narrowly defined. Revenue flows into these funds through our foundation formula and is typically pupil based. The point the legislature was trying to make in setting up and appropriating these funds was that they wanted to ensure that they were being expended on the intended purpose. I think we can all agree this is a noble and justifiable goal.

The question of course became, once the need is met, what happens to the remainder of the funds? Well, in Hudson and most other school districts it becomes part of a reserve fund balance like those mentioned above. Since it can only be used for a specified purpose, it has to sit until such a time the district can figure out how to use it for that specified purpose. Often times this can, and has been to the detriment of other needs in the district. It is entirely conceivable that some investments are delayed or scrapped in school districts because there isn't any money available--at the same time the district is sitting on a $265,529.97 reserve fund balance.

Furthermore, in my opinion it would be a complete waste of tax dollars if we were to spend down these reserves on the specified purposes outlined in the Code if they weren't really needed. That is why for the past several years, our school board has advocated for greater flexibility when it comes to utilizing these categorical funds. You may recall over this last school year we had to work incredibly hard to secure permission to use existing funding to start our preschool program. We had to jump through some pretty significant hoops and get permission to invest resources that we already had--all because of the constraints within our categorical funds.

Our request and advocacy really focused on two areas when it came to flexibility. One: we wanted to expand the menu of items that could be fit into each categorical fund. As one example, when it comes to At-Risk and Dropout prevention programs, I argued that guidance counselors should be an allowable expenditure for these funds. Interestingly enough, some school districts were allowed to do this while others may have perhaps only been able to fund fractional FTE through this fund. It didn't make sense and appeared to be inconsistent around the state. Two: we believed that if a school district had satisfied and could demonstrate that a need had been met, any remaining funds should be able to be captured and redirected to other needs in the school district.

Representative Walt Rogers, who chairs the House Education Committee provided valuable leadership during this past session, shepherding these bills through the legislative process. Because of his work, and his colleagues on both sides of the aisle,  these bills gained traction and were signed into law with the passage of HF 564 and HF 565. Interestingly enough, both bills passes on a 98-0 vote in the House and a 49-0 vote in the Senate. Since we had been advocating for several years on this issue, I wonder why they finally passed with such ease this year? Truthfully it shouldn't have been all that surprising. In the past, every legislator I talked to thought these were reasonable ideas and supported them. The final vote clearly shows these laws had broad bi-partisan support. Heck, how many  times do we EVER get a law changed [basically] unanimously? Hopefully all our legislators can hang their hats on that and agree to work in a bi-partisan manner come January. 

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