"Saving for future projects, acquisitions, and other allowable purposes is an important planning consideration for local governments and school districts. Reserve funds provide a mechanism for legally saving money to finance all or part of future infrastructure, equipment, and other requirements. Reserve funds can also provide a degree of financial stability by reducing reliance on indebtedness to finance capital projects and acquisitions. In uncertain economic times, reserve funds can also provide officials with a welcomed budgetary option that can help mitigate the need to cut services or to raise taxes. In good times, money not needed for current purposes can often be set aside in reserves for future use.
In addition to reserve funds, maintaining a reasonable amount of undesignated fund balance within operating funds is another important financial consideration for local governments and school districts. A reasonable level of unreserved, unappropriated fund balance provides a cushion for unforeseen expenditures or revenue shortfalls and helps to ensure that adequate cash flow is available to meet the cost of operations. Combining a reasonable level of undesignated fund balance with specific legally established reserve funds provides resources for both unanticipated events and other identified or planned needs. Although this guide is primarily focused on planning for specific needs through legal reserve funds, our companion guides Financial Condition Analysis and Understanding the Budgeting Process contain additional information on maintaining and utilizing unreserved fund balances."
Warwick has been diligent in respecting the rules set by the State. We have also been fiscally prudent in past years so that we still have most of our fund balance in tact. We would only use it as a last resort to forestall financial insolvency, which some schools in NY are approaching. Those school systems in the most dire straits have already used their fund balance and face the prospect of not being able to meet their contractional and financial obligations. Warwick is years away from this, but if the State continues to fail to meet their constitutional obligations to fund all schools fairly it is very conceivable that we would face insolvency. Under the current system of school financing, as one Superintendent has said, "We are all on the same train heading to the end of a cliff. When we go over the cliff depends on how far back from the engine we are located."
If you would like to learn more about reserve funds click on the following link: Local Government Management Guide- Reserve Funds or catch up on recent school news by reading the following article about school reserve funds: School officials say reserve funds will dry up sooner than later
I hope this is helpful. A key point to remember with public funding is that nothing is simple or black and white, which is why we rely on our Assistant Superintendent for Business, Tim Holmes, for his valuable expertise.
Submitted by Dave Eaton
