Thursday, December 27, 2007

“It Lasted Four Years”

Our school leaders are fond of saying that the last operating levy, passed in 2004, has lasted one year longer than expected.

That one can slide right by unless you stop to think about it a minute.

The tendency is to interpret that statement as meaning that a fixed amount of money was raised by the levy, and that fixed amount was stretched out over four years instead of three. Kind of like giving your kid a $10 weekly allowance and having him tell you at the end of the third week that he had spent only $20 so far and with the other $10 still in his pocket, could go another week with getting any additional allowance. Like that is ever going to happen…

But it's not the same. That 9.5 mill permanent operating levy we passed in 2004 generates on the order of $20 million every year whether or not the Board asks for more money. Being able to wait one more year before asking for more money doesn't mean they stretched three year's worth of money over four years. Rather it means that the growth in spending has been less than forecasted. That's a good thing, but not the same thing as what is implied by saying "It lasted four years."

But they also raided the cookie jar. The Board passed a policy a few years ago that it would keep an amount equal to 10% of the annual expenditure budget in reserve as a 'rainy day fund.' With projected FY08 expenditures of $148 million, this reserve should be $14.8 million dollars. However if you look closely at the Treasurer's most recent Five Year Forecast, note that the ending reserve will be a little less than $11 million. That seems pretty close, but the real impact is in the following couple of years.

Without passing a levy, we would run out of money next year. But by deciding on a 9.5 mill levy this time around, instead of the 11.5 mills I believe it should be, the Board has also accepted letting the reserve balance further drop to $9 million in 2009 and $4 million in 2010, in violation of their own policy.

There is no rule saying that 10% is the right amount for this kind of reserve. In fact, one could argue that keeping what amounts to a little more than one month's expenses in reserve has little value. When the norm of the Board is to practice brinkmanship by waiting to put a levy on the ballot until it is almost too late, having an extra month's expenses in reserve isn't of much help.

We need to get out of this feast or famine mode by planning with a longer horizon – perhaps two or three levies into the future – and educating the community effectively about school funding so they understand the reasoning behind the plan.

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