Big school districts increasingly turning to their rainy-day funds

A survey of 32 school districts finds a net reduction of $45.7 million in their rainy-day funds this year.

By NORMAN DRAPER, Star Tribune

Last update: September 17, 2009 - 11:48 PM

Big Twin Cities school districts are spending millions of dollars from their rainy-day reserve funds to make ends meet in these tough economic times.

The findings come from a survey released Thursday by the Association of Metropolitan School Districts (AMSD), a consortium that represents the legislative interests of 31 Twin Cities school districts, including many of the largest, and St. Cloud schools.

The survey found the 32 districts tapping $45.7 million from their reserves this year. That amount includes $8.2 million in Minneapolis, $8 million in St. Paul, $7.7 million in Rosemount-Apple Valley-Eagan, $5.9 million in Eden Prairie, and $5.7 million in Anoka-Hennepin.

It's not uncommon for districts to dip into their reserves when budgets are tight. But AMSD executive director Scott Croonquist said the practice has been more common this year. "It's far greater this year, and it's very widespread," he said.

That's because of a convergence of financial challenges. For one thing, state school funding was frozen this year and next. In addition, in a balance-budgeting maneuver, the state is delaying payment of more than a quarter of this year's school funding until next year. Finally, many metro districts are seeing school enrollment declines, which result in less per-pupil funding from the state.

Time to tap the funds?

Some district officials say rough times such as these are exactly what those reserve funds are for.

"I would say, 'yes,' it's acceptable in times when the funding is not sufficient," said Jeff Solomon, director of finance and operations with Rosemount-Apple Valley-Eagan schools. "What it does is provide districts with a time to respond without having to make dramatic and immediate budget cuts as a result of a funding change."

Solomon said spending down $7.7 million from the district's cash balance will leave it at about $31 million. That's still more than double the minimum set by the school board as a safe amount.

What's left in the reserves of the state's largest district -- Anoka-Hennepin -- is not so safe. Michelle Vargas, district chief financial officer, said the district's decision to spend down $5.7 million will leave the reserve at $7 million. Vargas said that would cover less than one week of the district's operating expenses. "It's not where we want to be," she said.

Unlike Rosemount-Apple Valley-Eagan, which dipped into its reserve for the first time in several years this year, Anoka-Hennepin has been turning to its fund since the 2005-06 school year, Vargas said. "That's partially because our enrollment has been declining since 2004," she said.

Even as the district has tapped its rainy-day fund, it still has to make deep cuts in its budget. This district trimmed almost $16 million this year and is projecting $18 million in budget cuts next year.

Although AMSD reported a big reduction in Minneapolis' reserve fund, the district's chief financial officer, Peggy Ingison, said it will actually be able to replenish the reserve with savings from other areas. Ingison put the district's reserve at $59 million, a healthy 13 percent of basic operating fund expenditures.

"It's roughly a couple of months' worth of cash," she said.

Croonquist said the picture next year is unlikely to improve.

"The reality is next year the situation looks even bleaker," he said. "By that time, we'll be into the second year of frozen funding from the state ..."

Norman Draper • 612-673-4547

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