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Archive for Sunday, August 18, 2013

School district explains large cushion in capital outlay budget

August 18, 2013

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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.

Additional plans

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.”

Comments

anotherview 1 year, 4 months ago

With this balance and the money the school district spent on building two sports complexes they could have remodeled the schools without the need for a $92 million dollar bond issue.

I predict the school district will spend some of this extra cash to put down new turf on the football fields because the old turf is unsafe and visting teams will no longer come to Lawrence because of the unsafe conditions. Isn't that how the story goes.

Sue McDaniel 1 year, 4 months ago

So they had to see if they could dupe the public and pass a school bond before they spent it on what they really had the money to do in the first place is my take????

Everyone is flush except there are no jobs.......hmmmmm......

Suzanne Jacobsen 1 year, 4 months ago

Meanwhile, the cost to families just to enroll kids in school, is so far out of line, that those who don't fall into the "free/reduced lunch" qualifications (required, in order to have reduced tuition/book fees), are struggling just to buy their kids the never-ending supplies that are required by their teachers. $467.00 to enroll a high school and middle school student. Granted, that does include the $50.00 fee per extra curricular activity... but seriously!
Now I see where some of my money is going. How many students are in the district? Multiply our fees by that number. Ridiculous!

Suzanne Jacobsen 1 year, 4 months ago

Hmm... Funny. I don't remember the last time we went out to eat, or had any extras.

thinkagain 1 year, 4 months ago

I read the headline as the school district was going to explain the purchase of a "large cushion".

William Ed 1 year, 4 months ago

The truth is whatever the beholder wants to remember and forget. If the district spent all the funds it a had and left no reserve, there would NOT be an emergency if a boiler broke or a roof failed. All the district would do is go to a local bank and take out a loan to cover the costs. I guess that fact is overlooked. If no one else remembers I would remind them that when the district needed an additional $9.5 million for the football complexes and there weren't funds available, that is exactly what they did. They are still paying off that loan at an interest rate of around $4.5%. See every mouth has at least two sides.

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