School District Fund Balances

This comment on fund balances was posted under the thread, From Timmy's association. 

Anonymous said...
Legally speaking I don't believe the district has the ability to indefinitely carry these balances year after year. They should have been assigned every year by the end of the next fiscal year. But clearly that hasn't happened.
Perhaps this is another reason we need a new auditor.
August 5, 2013 at 10:07 AM

I thought that was an excellent point made. The short answer is, "Yes, they can." Not wanting to be accused of pulling a Posti, I base this answer on the following Pennsylvania School Board Association information.
PSBA FAQ: School District Fund Balances

There are different kinds of fund balances and advantages to maintaining a fund balance.

Q.  What is the benefit of maintaining a Fund Balance? A. In addition to the ability to generate interest income, a fund balance benefit occurs when a bond issue is required. Credit ratings of school districts and other public entities can be affected directly by the level of their fund balances; those with little or no money in reserve are considered to be higher risks and their ratings - along with their cost of borrowing, suffer accordingly.

About raising taxes and fund balances:

Q.  Are there formal guidelines or standards for a Fund Balance? A. Guidelines that exist offer three different methods. One relies on a formula where a predetermined number of months (usually one to three months) of operating expenditures are used. The other is used by the three major bond rating agencies - Moody's, Standard & Poor's, and Fitch. The rating agencies recommend between 5% and 10% of current period operating expenditures (budget). Section 688 of the school code says that when the fund balance exceeds between 8 and 12% of expenditures, depending on the size of the budget, the district must consume any fund balance in excess of 8% prior to increasing taxes. 

Where do we stand as far as percentages?

About policies concerning fund balances:

Q.  Should there be a formal policy concerning fund balance? A. Yes. The board should adopt the standard that best suits the district.

 The School Board has such a policy. Use of Surplus Funds, Policy DFAA

1. The Unreserved Fund Balance will be set at six percent of budgeted expenditures;

2. Upon the completion of the annual fiscal audit, all funds in excess of this amount will be
transferred to the Capital Projects Fund and/or the Post Employment Benefits Trust Fund, unless such funds exceed 8% of budgeted expenditures. If such funds exceed 8%, those funds in excess of 8% will be allocated at the Board’s discretion;

I had asked about investing funds. There is a policy for that too. Investment of School District Funds, Policy DFA According to Timmy's August 2012 introduction to the 2012-13 budget posted on the School District website,

The School Board is working diligently to reduce the impact of the additional cost of that second bond issue on the tax rate on the community by discussing different bond payment schedules and setting money aside in the Capital Projects Fund to offset the need to borrow money for this project.

If what Timmy writes is true, and why would it not be, why isn't the board using the money being set aside in the Capital Projects Fund to offset the need to borrow money for this project?

I am still waiting to see the 2013-14 budget and the other options for financing the final amount needed to fund the high school renovation. It is August 6, 2013 and nothing has been posted on the district website.