School Board grapples with Capital Reserve Fund

The School Board deserves credit for a meaningful discussion regarding the Capital Reserve Fund.  Two very diverse viewpoints emerged during debate over a new board policy for the $20 million Capital Reserve Fund

Two long-term board members seek limited controls on Capital Reserve Fund.  McTear wants the Capital Reserve Fund to be the “Slush Fund”.

Three new board members and veteran member Ralph Tang seek a specific plan/budget to guide use of the Capital Reserve Fund.

Background:

April 7, 2008 -- School Board’s Capital Reserve Fund Discussion

At this month’s School Board meeting, the Board had a lengthy discussion and public comment period regarding the use of and the budgeting for the Capital Reserve Fund.  This discussion was in response to questions and concerns from the public regarding this Fund.  The School Board deserves credit for having this discussion as they are now attempting to resolve the issues raised by the public. (You can view this month's discussion on GVTV).

However, it was obvious from the discussions at the meeting that some of the long-time members of the Board are resisting the changes necessary to improve the fiscal responsibility of the Board.  We are grateful for the positive approach to the problem by Ralph Tang, Jack McDowell, Scott Oswald, and Gene Kozik.  These members clearly understand the need to make changes to improve the transparency and the fiscal responsibility of the Board. 

The Issues:

The Stakeholders have raised the following issues regarding the Capital Reserve Fund to the Board in the past few months:

• In the past 7 years the School District has had budget surpluses totaling over $20 million, yet they continued to increase the budget and raise our taxes each year.
• Each year, the surplus was placed in the Capital Reserve, which now totals over $21 million.
• When presenting their proposed operating budgets each year, the District did not disclose that these surpluses existed, nor was it explained that they were placed in the Capital Reserve.
• The District had a budget for spending the Capital Reserve money, however, they overspent that budget by $7 million in the past 7 years.

This means that the District took millions of dollars that were originally budgeted for operational expenses, placed them in the Capital Reserve, and then spent millions on unbudgeted expenses beyond the oversight of the public.  This raises serious questions regarding the fiscal responsibility and the transparency of our School Board.

The Discussion:

We appreciate the open discussion and the time for public comment regarding this important topic.

Long time Board members Carr and McTear made comments which indicated they did not want any significant change to the way funds are deposited in the Capital Reserve Fund and how they are spent.  In fact, Mr. McTear stated that he preferred to keep the fund like a “Slush Fund” and did not want to “shackle the Capital Reserve Fund” by having a budget for spending the money.

Contrary to that unacceptable viewpoint, Board members Tang, McDowell, Oswald, and Kozik were all in favor of more controls on the budgeting and spending of the Capital Reserve Fund.  They wanted to ensure that the process would be transparent so the public would see what was planned and how the money was spent.  They called for an effective budgeting process to accomplish these goals. 

No significant decisions were made at this meeting, except to agree to vote at the next meeting regarding a policy concerning how to handle surplus funds at the end of the fiscal year.

Our Recommendations: 

Make Capital Reserve a Line Item in General Operating Budget

The Stakeholders made the following recommendations to the Board:

• Based on the needs of the Strategic Plan and Strategic Objectives, establish a 5- year budget for the Capital Reserve:
  • Determine how much of the current money in the Fund is actually needed for capital expenses for the next 5 years
  • Budget for all capital expenses anticipated for each of the 5 years
  • Establish a line item in the District’s operational budget to place money in the Capital Reserve each year to fund those needs.  This amount would vary from zero to whatever is needed to maintain the funding to cover those planned expenses in that 5 year period.
  • Review and update this Capital Reserve 5 year budget plan each year

• There is no need for a “Policy” which states that some of the budget surplus will go into the Capital Reserve, because the Capital Reserve funding would come from the operational budget and the amount would therefore be established each year.

• This simple budget process will provide more transparency to the process for the taxpayers and will provide more accountability for the District to follow an actual budget plan.

• If, after having put the budgeted amount in the Capital Reserve at the end of the year, you experience a budget surplus, you can then designate the surplus for the Budget Fund Balance and/or reducing next year’s expenses. 

These simple budgeting procedures will improve the fiscal responsibility of the Board and will improve the transparency of the budget process. 

The District has not shown any desire to adopt this approach, so the Board must exert its authority over the District to make these changes.

Public needs to voice its opinion:

Contact the School Board now and request that these suggestions be adopted.

Link to school board email