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District 200 Grant "Was Originally Earmarked for Construction" not Reserves

District 200 first said its $14.46 million school construction grant was "originally earmarked" for construction projects like Jefferson Preschool. It does not need to hold the money in reserve.

Last year, District 200 issued a press release stating that the $14.46 million school construction grant it received “was originally earmarked for construction” and could be used for Jefferson Preschool.  But District 200 has changed its tune, and now says it won’t use one dime of the grant to rebuild Jefferson, because “multiple school renovations in the 90s were partially funded by cash reserves.”  It says the school construction grant has instead “reimbursed District reserves.” 

In other words, the District 200 School Board has decided that increasing its checkbook balance is a higher priority than rebuilding Jefferson Preschool.

But this is the wrong answer for three reasons.

  • District 200 already rebuilt its reserves, and then some – only to draw down over $40 million in reserves, not in the 1990s, but in the last decade to fund deficit spending.
  • The reserves are already enough – even without the grant money, they have doubled in the last decade (far outpacing budget growth), and the District’s bond rating was reaffirmed based on the reserve level that existed before the grant money arrived.
  • The District’s own financial advisors say that the reserves will grow on their own, more than the amount of the grant money, if the Board sticks to its own financial plan.

First, voters should remember that the District has already “reimbursed” itself – with over $74.1 million of new money going into its Working Cash Fund reserves in just the last decade, long after “the 90s” ended.  Where did that money come from – and why does the District want still more?

In 2002, the District had $10.3 million in the Working Cash Fund.  Since then, it has borrowed money by issuing bonds for Working Cash purposes:  $11 million in 2002; $19.5 million in 2004; and another $20 million in 2009.  All of those bonds were issued without a referendum, and they add to the property tax burden because they are not subject to the tax cap.  As if that weren’t enough, the District also collected an additional $8.1 million for the Working Cash Fund from its regular property tax levies, and earned about $3.9 million in total interest (interest rates on savings used to be higher).  Throw in the $11.6 million “reimbursed” from the construction grant, and District 200 should have $74.1 million in reserves.

District 200 actually has only $33.5 million left.  The rest of the money – over $40 million – has gone to subsidize the Board’s deficit spending.

Second, when District 200’s bond rating was reaffirmed last year, the Standard & Poor’s analysts said the rating reflected the District’s “strong reserves level in its working cash fund” – in April, before the grant money was added.  In other words:  District 200 already had strong reserves before adding the grant money.  There was no need to divert it as an additional “reserve.”  In 2002, the District had $10.3 million in reserves for a $131.1 million budget (excluding debt service).  In 2012, reserves (without the grant) were $21.9 million for a $146.5 million budget.

And third, District 200’s own financial projections show that reserves will continue to grow – provided, of course, the Board maintains fiscal discipline.  Fiscal discipline is easier when there isn’t a big pot of extra money available to spend in the meanwhile.  According to the District’s five year financial plan (available here - page 16 of the presentation), by 2017 the District’s reserves will grow by more than $17 million, exceeding the total amount of the school construction grant.

Bottom line, there’s no good reason to vote for a tax increase April 9 when District 200 has adequate reserves PLUS the money needed to rebuild Jefferson sitting in the bank.

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Kevin Fitzpatrick February 18, 2013 at 09:04 PM
Mark, this is informative to the extent that it does track the dollars coming into the district and to the reserve account. You have a link to describe the $40M in deficit spending which I did click over to. I'm not nearly as informed on School funding as I am municipal funding. Municipalities try to keep 25-30% of their total operating budget in a reserve fund. This is a key indicator to the bonding agencies of fiscal health and management. They do everything possible not to go into the reserves unless of dire emergencies. Those dips into the fund do become curious to the bond agencies and are potentially indicators of potential downgrades. I do know school funding from state sources is aggravatingly intermittent and even frustratingly sporadic. Labor is their monster line item. In looking at a number of SDs, it's not uncommon to see frequent dips into the reserves and repayment. My only interest in all of this is seeing the Special Ed population wind up with an appropriate teaching and learning environment. Every district is coping with this more and more as the identification of at-risk students is more precise and earlier (Thank God!) You are very well informed on public spending (You are aware of how much I admire that) It still baffles me how a very old reimbursement for a capital grant can somehow not need to be replenished in a budget somewhere. The HS buildings were built and the money was spent. Capital money usually isn't that hard to track, it's hard evidence.
Kevin Fitzpatrick February 18, 2013 at 09:13 PM
Cont'd. There are buildings that exist to show where the money went. If that were borrowed from reserves, it would make some sense that it go back. Over 10 years I'm sure the money has bounced back and forth to make up for delayed payments from the state. To your credit, you always provide the numbers. Saying the board deficit spent to the extent of $40M is more general than what you would normally provide. If you're implying waste and mismanagement, please show it. If it's borrowing to augment payroll or pay into the pension fund until the state reimbursement or funding comes, that's different. I agree with you about accountability, but the case has to be made in an understandable way. Numbers can become very confusing to the point of frustrating even the most informed voters. They deserve the most concise and understandable information possible on this. As I stated before, the people hanging in the balance of this debate is the Special Ed population in a compassionate and wonderful community. They need to be spared any victimizing by this disagreement. Thank you for the thoughtful and informative essay. We're not coming to the same conclusion, but I respect your work.
Brian Wells February 22, 2013 at 03:55 AM
Thanks, Mark. Kevin, the job has to be done. I think most of us agree about that. This referendum is not actually about Jefferson. I say that because I honestly don't think the Jefferson project will fail to take place, even if (when?) voters say "Enough!" on April and veto the proposal on the ballot. So if the project is going to happen *regardless*, then the money essentially comes out of their current funds. The referendum merely decides whether we beef up that balance or whether we let it drop to the tune of the final project cost. That makes the question an entirely different one: now we're trying to figure out not "do we care about these special needs kids" (because we do, and the building *will* get renovated) but rather about "do I want to load up District 200 with more money." (And I don't.)
JanS March 06, 2013 at 10:31 PM
Preschool question, read this blog

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