In public meetings and letters to the editor concerning the West Windsor-Plainsboro School District’s proposed 2011-’12 budget, a number of statements have been made about the district’s fund balance and whether it should be used for tax relief in the upcoming budget. As members of the Board of Education Finance Committee, we are writing to address this issue.
The June 30, 2010, general fund balance was slightly less than $20 million. Encumbrances make up about $1 million of that amount. This is money the district has already spent but, because of billing and payment cycles, had not paid as of June 30, 2010. It is exactly like paying your June credit card expenses in July.
The next major category is the district’s reserve funds, which total about $8 million. This is money the district has set aside for specific purposes, as allowed by state regulations, particularly capital expenses, maintenance, and emergencies. We will say more about the reserve funds below.
The remaining $11 million is the surplus. The unrestricted portion of it is, in effect, the working capital for the district — money available to pay day-to-day bills and smooth over any short-term timing problems between income and expenses. By law, a school district cannot retain more than about 2 percent of its annual budget in this category. For WW-P, with an annual budget of over $150 million, it is approximately $3 million, or about one week’s worth expenses.
That leaves approximately $8 million of the 2009-2010 year-end surplus. This is the money that is available for tax relief and that is where it goes — every penny of it. Almost $6 million of the June 30, 2010, fund balance was used for tax relief in the current year (2010-2011). The remaining $2 million will be used to offset a portion of the tax levy in the upcoming year.
The district’s reserves contain funds that are set aside for either emergency or long-term use. The largest portion is the Capital Reserve Account –– money for equipment, construction, and other items that have a multi-year life. This reserve allows the district to accumulate funds for major expenses that would otherwise have to be funded in a single year’s budget or through a separate debt issue. This is much like a homeowner putting aside money each year knowing that a roof replacement is in the near future.
There are no requirements by the state to set aside money for reserves, although the state does impose caps on the total amounts. Instead, it is left to the judgment of the local boards of education. Currently the WW-P school district owns about $200 million worth of buildings and equipment and has approximately $6.3 million in capital reserves. In the budget being presented to the voters on April 27, $4.1 million of that amount will be used to support funding of designated capital projects.
Another concern that has been raised recently is that the district deliberately over budgets in order to build up the year-end surplus. First, one must understand that, once established in the spring, the amount of money a school district can raise in the following year is essentially fixed. If expenses in any line item run higher than budgeted, the difference must be made up by cutting somewhere else. An unusually cold winter or spike in energy prices could mean cancellation of some spring student activities. A review of the district’s financial performance in recent years will show that expenses have consistently run 3-5 percent below budget, with the surpluses being returned to taxpayers in subsequent years.
Using accumulated surplus or reserves to offset a single year’s tax levy is a one-time gimmick that will affect the district’s financial condition for years. We believe that the Board of Education’s budgeting of fund balances is prudent and in the long-term interests of the residents and taxpayers of Plainsboro and West Windsor. We urge you to vote YES for the budget on Wednesday, April 27.
Randall Tucker, chair
John Farrell
Anthony Fleres
WW-P Board of Education
Finance Committee.
(Note that any opinions expressed here are those of the signers of this letter and may or may not represent those of other board members.)
