On the school district's fund balance
Much of the community discussion about the Fairbanks North Star Borough School District fiscal 2019 recommended budget has centered on the district’s fund balance. There are serious misunderstandings circulating about how much money is available and how the district is using it.
An editorial published in the April 12 Daily News-Miner perpetuated inaccurate information and challenged the district to do a better job of communicating with our community about the reserves. I accept the challenge to clarify some key points about our fund balance.
First, the school district does not have unlimited access to $30 million in the operating fund. The fund balance does not operate like a standard savings account. Yes, we have saved modest amounts of our annual budget over several years to build a small cushion against emergencies and fiscally challenging times. That amount has always remained below the state legislated cap of 10 percent of our previous year’s expenses. At the start of the current school year, the true available fund balance was about $20 million, or 9.91 percent of the state cap, per the June 30, 2017, independent FNSB School District audit.
Other revenues deposited into the fund throughout the year, such as annual federal impact aid, are reflected elsewhere in the budget for next year. We use federal impact aid dollars in the school year they are designated for. Second, the school district has not been just “sitting” on the money in the fund balance.
We have been using it. Of the $20 million in the fund on June 30, 2017, we used $7.5 million in the school board’s approved budget for the 2017-18 school year. We used 37 percent of our total savings, which equated to not cutting an additional 69 teachers. The school district has $12.7 million of unreserved savings remaining.
The school board’s recommended budget includes plans to use another $2.8 million from our remaining savings. Without this withdrawal, we would be looking at a cut of another 26 teachers beyond the reductions already proposed. The state’s budget challenges have not been solved. The district’s drawdown plan of our fund balance allows us to spread our total remaining savings over the next three to four years of fiscal uncertainty for public education in Alaska.
Remember, the school district has no way to generate revenue. We are dependent on three levels of government (federal, state, local) for the financial resources to fulfill our statutory responsibility of providing an educational program for the children of our borough. We have no ability to control the level of funding that comes our way. We do control our fund balance and have tried to use it as a stabilizing factor to provide a safe landing in economically turbulent times.
Finally, in our current fiscal climate, the school district’s available fund balance will not protect our system from cuts. Our annual operating budget is nearly $200 million. The school district’s fund balance for fiscal year ending 2018 is $12.7 million, just 6 percent of our operating budget. To make the same comparison the News-Miner made in their April 12 editorial, the borough’s projected unassigned fund balance for the same point in time is $25.2 million, or 19 percent of their operating budget.
We face increasing costs every year to deliver our services, and education funding is not increasing to keep pace. We have had to trim back year after year. We will continue to have to reduce services until a predictable, sustainable fiscal plan for our state and our borough is in place. The local contribution the school district is requesting from the borough is more than $1 million less than this year’s contribution.
By portioning out what is left of our savings over the next few years, our intent is to make it feel like we are walking down a hill rather than falling off a cliff. But make no mistake, we are still marching downhill and if the borough chooses anything less than meeting the district’s funding request, they are ensuring there is a cliff at the bottom.
This Community Perspective by Board of Education President Heidi Haas was printed in the Fairbanks Daily News-Miner on April 19.