Accelify Blog

House Proposal Would Free Up Some Funds for Schools (KS)

May 3, 2010

As schools work on cutting their budgets by roughly $170 million next school year, a Wichita legislator introduced a bill last week that he said would free up some money that schools could use to soften the cuts.

The proposal would allow districts to transfer cash left in restricted funds — such as funds set up for bond projects or paying for p re-kindergarten for low-income families — to its general fund.

Districts can spend general fund money however they choose. Money in restricted funds can only be spent on the designated purpose.

But education leaders said the proposal would have little effect on their shortfalls because the money is needed to pay bills and shouldn’t be treated as leftover dollars or savings.

The proposal, known as House Bill 2748, would allow school districts to transfer money left in special funds at the end of this fiscal year, June 30, to their general funds for next year, which starts July 1.

"It would be giving them a lot of flexibility," said Rep. Joe McLeland, R-Wichita, who introduced the bill Wednesday.

McLeland, chairman of the Education Budget Committee, said he will hold a hearing on the proposal on Monday.

Education law already gives districts flexibility in shifting money from the general fund to special funds — and back, said Dale Dennis, deputy commissioner of the Kansas State Department of Education.

The reason districts keep additional cash in funds for specific programs is to make sure they can pay bills for those programs throughout the year, he said.

Payments to the schools for the programs usually come once or twice a year, not monthly or when payments are due. Dennis said schools need to transfer enough cash into the funds at the end of the year to keep afloat until the next payment.

For example, state aid for special education is paid every Oct. 15, but school starts in August. Dennis said if they didn’t put the money aside, the district wouldn’t be able to pa y for special ed at the start of school.

"You can’t spend money unless you got it," Dennis said.

McLeland said schools have enough cash that districts could use money from another fund if one special fund is running low.

But Dennis said once the money is transferred and is mingled with the general fund, there’s no guarantee there will be enough money to pay bills when they come due.

The proposal would help a little with cash-flow but wouldn’t go far in filling in budget gaps, said Linda Jones, chief financial officer for Wichita schools.

Some special funds receive money from student fees specifically designated to that fund, such as fees paid for textbooks and school lunches. School leaders said using the fees for other purposes could violate the reason for collecting them and parents’ trust.

Plus, she said districts try to distribute as much general fund money as they can at the end of the fiscal year to special funds. Otherwise, any positive balance in the general fund would be deducted from next year’s state aid.

But Jones said a positive balance isn’t a problem because the general fund balance for Wichita schools has been negative on June 30 for six years.

School leaders said their biggest savings account is the contingency reserve fund, and this year that money has often been used to make payroll while waiting on state payments, which have been late several months this year.

Several districts needed emergency aid from the education department in order to pay their employees after the delayed December payment, Dennis said.

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McLeland said he’s trying to prevent that cash-flow holdup by adding an amendment to the House Appropriations bill that would require the state to pay schools on time.

Prompt school payments are already required by law.

"We’re trying to re-emphasize paying the bill up front," McLeland said.

He said there are funds state administrators could dip into to make school payments on time.

"They don’t want to pay," McLeland said.