Lawrence school officials offered a more detailed explanation this week of how they plan to spend nearly $17 million they've budgeted for big-ticket purchases and expenses next year, and why the budget documents they published may give a misleading picture of that fund.
The Lawrence school board formally approved its budget for the 2013-14 school year Monday night. The $17 million is included in what's called the “capital outlay” fund – money that state law allows districts to use for a long list of purposes such as building construction and maintenance and furniture or new computers and equipment.
That budget figure raised eyebrows among observers because it is more than twice the amount that the Lawrence school district typically spends for capital outlay in a given year.
Last year, the district spent just $5.4 million from that fund, but the average over the last five years has been about $8.3 million, according to district spokeswoman Julie Boyle.
Kansas statutes allow districts to levy up to 8 mills of property tax for their capital outlay funds, and the Lawrence district budget calls for using that full authority.
Going into this year, however, the district reported having $9.1 million of unencumbered cash in that account. A mill is $1 in tax for every $1,000 of a property's assessed valuation, and the 8 mills of property tax levied by the district will bring in an estimated $8.1 million in new revenue this year. Combined with other adjustments outlined in the district's full budget document, that left the district with $16.98 million in spending authority in that fund for the upcoming year.
That would appear to be roughly $8 million to $12 million more than the district ever actually spends from that fund.
First explanation: budget cushion
The Journal-World asked for a fuller explanation of how the district planned to use that money after Kathy Johnson, the district's finance director, gave a presentation to the school board Monday night and indicated that the extra money was simply a large cushion to protect against unforeseen circumstances.
“If we were to set that budget at $7 million, and you had a boiler break or you had something happen where you needed to spend, and it exceeded that six, seven, eight million that you would have set at too low an amount, you now have a statutory budget violation if you have to exceed that,” Johnson told the school board.
If the district overspent its budget authority, she said, that would constitute a “budget violation” that would send up a red flag to Moody's, the district's credit rating agency.
“Or you have to wait until you do have the budget authority, and that could be six months, eight months, and that's not necessarily a good thing if it's in the winter when it's cold,” Johnson said.
Second explanation: unusual year
On Wednesday, the Journal-World asked for a more complete explanation of how the district planned to spend the money, given that both the beginning cash balance in that fund and the new money to come in through the 8-mill levy were nearly equal to or greater than the amount the district typically spends in a year.
First, Boyle said, spending from the fund last year was unusually low, and the cash carryover was unusually high, because the school board did not approve a capital improvements plan last year until after the April 2 election.
“In fiscal year 2012-13, we spent ($5.4) million because we were waiting to see if the bond issue would pass and take care of some of the larger capital improvement needs,” Boyle said in an email. “The board didn't approve the capital improvement plan until after the bond issue election in April, so as a result, many of those bids and projects extended beyond the end of the fiscal year.”
According to figures provided by Johnson, the finance director, $2.9 million worth of projects that were approved last year were begun after the new fiscal year started July 1, which meant that spending authority had to be included in the 2013-14 budget.
Johnson also outlined $7.6 million of routine capital outlay expenses planned for the coming year – lease purchase payments, new instructional equipment and furniture, and the regular replacement of old equipment.
She also noted that about $2 million of anticipated revenue this year is only “possible revenue” that may or may not actually materialize.
In the end, Johnson said, the district can only count on $14.9 million in available resources, and it has planned or committed to $10.5 million in spending, leaving a balance of about $4.5 million.
“Additionally,” Boyle said, “with the passage of the bond, the board may consider using Capital Outlay dollars in combination with bond funds to provide additional classroom space for anticipated enrollment growth and to make some of the building safety and security improvements board members have been discussing.”