The truth about the $10.6M unassigned general fund balance

You may have seen some things going around from groups that opposed the referendum regarding the district’s $10.6 million unassigned general fund balance – and how this should mean that no painful budget cuts are required.

Like most of the information from these groups, there’s a kernel of truth here surrounded by bushels of misinformation. Let’s dig in, shall we?

First, let’s start with the kernel of truth – the district did in fact have a $10.6 million unassigned general fund balance as of June 30, 2019, which was the end of the school’s 2018-19 fiscal year. However, this doesn’t mean that we can just use up this balance and not have to worry about budget cuts or referendums to raise additional operating funds. Why?

You may recall that in October (before the referendum), there was a fair amount of hyperventilation from the anti-referendum groups about Finance Director Dee Dee Kahring’s presentation to the Victoria City Council, where she noted that the district was spending more in 2018-19 and 2019-20 than their projected revenues. The anti-referendum groups at that time said that such behavior was irresponsible.

Lost in the hubbub was how the district was closing that gap – by spending down fund balances – the very same mechanism these groups are calling for today! The district’s 2019-20 budget calls for spending about $2.8 million out of the unassigned general fund balance, and an additional $1.5 million out restricted-use funds. That’s in addition to $2 million of spending down of fund balances in 2018-19.

As a result of these decisions, the unassigned fund balance will be under $8 million by the end of the year, facing a need for $5 million in cuts in 2020-21. Still OK, right? Well, no.

District policy (Policy 714) requires maintaining an unassigned general fund balance greater than 5% of general fund expenditures. (Incidentally, this policy represents a low figure compared to peer districts – the Minnesota School Board Association recommends a policy of a 10% reserve, while Eden Prairie and Shakopee maintain 8% reserve policies and Minnetonka is at 6%).

By the end of this school year, our reserves will be down to about 6% of general fund expenditures. This means that most of our headroom and ability to use reserves to cover spending needs will be gone – at most, we could perhaps squeeze out another $1 million, but as our district grows that reserve will need to grow with it. With a total of $10 million in cuts projected between now and 2023, it’s clear that there are going to have to be serious cuts in spending, and there’s almost no way to avoid classroom impacts from that level of cuts.

The anti-referendum groups continue to throw smoke in the air to try and hide the fact that the “no” vote on Q1 last November is going to have real and serious effects on students. We can and should work to find ways to minimize these impacts, but fudging the numbers ain’t acceptable.

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