As explained in this video below, the general fund is like a checking account. (See this write-up for even more.) The district has an annual budget cycle where its cash balance peaks in January when property taxes come in. The balance falls through the year, bottoming in the fall, and it rises back up again in January.
Looking at the lowest balance during the year, indicates the long-term savings in the account. As mentioned last year, when the district had to borrow $4 million to meet payroll in October and Novemeber, there was no savings in the account, because the minimum balance for the year would have actually been negative in the fall.
Having to borrow to meet payroll or having no savings in your account is a sign of a weak financial position. Why? If the organization happened to be hit with an unexpected expense in the fall (when its minimum balance occurs), it would have had to borrow even more money to pay that new expense. Paying interest gets you no new teachers, textbooks or even one pencil.
Throughout the year, it is ideal to have some saving in your account so you can meet such an unexpected expense with cash on hand. Having long-term savings will also put the district in a better position to withstand funding cuts from the state (mainly to maintain staff levels), if the economy happens to weaken again.
As a result, the district/ the board has been taking steps the past couple of years to sure-up the long-term health of the general fund account.
Steps Taken:
In the 2010-11 budget the board proposed spending $1 million less than anticipated revenues to bolster savings. The board cut $2.75 million in spending for the 2011-12 budget. The district has rejected two requests for new TIFs and I don't think it will approve a request for a renewal of the Central TIF. Hopefully, the district/ board will allow TIFs with Clemson and Liberty to expire. This will stop the diversion of school district revenue to these towns and bring those school tax revenues back to the district. The district is also selling surplus buildings in order to increase its revenue and cut its future building maintenance costs. Additionally, the district is no longer receiving federal stimulus funds that are usually paid late, so that will improve the district's cash flow.
New Development:
The audit has just been completed and the balance on the general fund as of June 30 was $2.2 million higher than the year before. This was a surprise to me, who thought the fund would be up $300,000 to $500,000. While I was wrong, no one else had it right either. Even the finance director's estimate was about $1 million off. It was a blow out figure on the upside.
Likely, the district will not have to borrow to meet payroll this fall. That is, the general fund will not go negative. Likely, there will be savings in that account, but we won't know how much until we examine the minimum balance for the year. Like I said, that normally occurs in October or November.
If the board actually can save a good chunk of this money, it is highly likely there will not be lay-offs next year and the 3 year streak of position eliminations will end.
Without seeing the audit it is difficult to know exactly what contributed to the $2.2 million increase in the account. I suspect it has been belt-tightening by the district/ the board as well of additional revenue. We'll know when we see the audit in October.
Efforts To Spend The $2.2 Million:
At the September 26th meeting, the district administration proposed spending $1.6 million on things like a 1% bonus for all employees, buying new ID badges, hiring 3 teachers, buying new radios, and adding a new activity bus.
Jim Shelton amended the motion (seconded by Herb Cooper) to change the bonus to a 2.1% pay raise, so his plan was going to cost $2.5 million.
An item that was on down the agenda, was the another request by the district administration to spend $484,000 to do renovations to the old Career Center. Adding that in, under the district’s plan $2.1 million in new spending was on tap for the meeting. Under Mr. Shelton’s plan, new spending on the night would have been $3 million.
When it was my turn to speak, I asked, wouldn't the district's or Mr. Shelton's proposal require 3 readings on 3 separate days? The answer is, “Yes”. If the board would have approved either of those plans as presented -- just one reading, the vote would have violated the law. I then the law that was passed in 2007, in the aftermath of the Greenville Plan vote.
The Law: Pickens County School Board of Trustees; Budgets
SECTION 1. Any measure by the Pickens County School Board of Trustees providing for the annual operating budget, a supplemental budget or appropriation that exceeds one-half of one percent of the annual operating bud get, or results in the district incurring debt, must receive three readings on separate days.
Given the annual budget was $94,772,000 million, if the board spent more than 0.5% or $473,000 at the meeting, the new spending would have to have 3 readings on 3 separate days. The district needed certain items on their list passed that night, so it couldn’t go the 3 readings route.
Mr. Shelton then withdrew his motion. The administration's proposal was cut down to $454,500 and the board was able to approve the most vital items in one reading.
Included in the $454,500 of new spending was $150,000 for 3 new teachers, $228,000 for radios that burned up in the fire, $17,500 for a Counselor at Simpson, $20,000 for Band Supplies, $15,000 for Art, PE and Music at Chastain Road, $4,000 for ID Badges, and $20,000 in classroom supplies. The 1% bonus at $1 million or the 2.1% pay raise at $1.9 million wasn't passe given its size and the three reading requirement.
Despite the tough economic times, the Pickens County School District has added 6.5 teaching positions versus last year, and it was done without raising tax rates, without borrowing money and without raising or instituting new instruction fees.
Conclusion:
The conversation never got to the point of the pros and cons of spending all this money, but I surely would not have voted to spend $2.1 million or $3 million for various reasons. When it comes to spending, I'm conservative, especially in this economic environment.
I was OK with new spending of $454,500 and putting most of the new money in the bank, so I voted for the proposal. I suspect they'll be more attempts to spend this $2.2 million in the future -- get the money, spend the money is the way some operate, but I'm not sure if it will pass.