Bill Aims to Penalize School Districts That ‘Hoard’ State Funding

April 7, 2010

A bill to withhold state funding from school districts with fund balances exceeding 15 percent of their operating budget would penalize those districts that are "hoarding" state funding, said its sponsor, state Rep. Tim Melton, D-Auburn Hills.

Livingston County districts would be spared because none have fund balances of that size.

But one local superintendent said the idea — outlined in state House Bill 5963 — would essentially punish districts for being fiscally responsible in uncertain times.

The bill would amend the state School Aid Act to withhold state funding to public and intermediate school districts with general fund balances exceeding 15 percent of operating expenditures as of June 30 of this year.

The funding would be deducted from what is known as "22b" funding, which is a pot of discretionary funding within a district’s foundation grant allo wance.

The Howell Public Schools district is lucky to have a fund balance that is 10 percent of its operating expenditures, said Lynn Parrish, the interim superintendent.

Parrish said she doesn’t agree with the concept, however.

"It’s not realistic for us to get to 15 percent in Livingston County, but if we were there, I would oppose being punished for what amounts to good management of funds," Parrish said.

The bill was introduced in March and referred to the House Committee on Education, which Melton chairs.

He said the Michigan Education Association teachers’ union was the main proponent of the idea, which he expects will die in committee for lack of support.

"There would be a lot of details that would have to be fleshed out to make this bill palatable," he said.

Melton contended that some districts "horde" per-pupil funding rather than spending it as intended for the year it’s allocated to schools.

Melton said some school officials have suggested he increase the limit to 33 percent of operating expenses, so that districts can avoid having to borrow money to maintain cash flow.

He said the MEA is advocating that the limit on fund balances should be 5 percent, which would require cuts to many more districts across the state.

The proposal is one of many attempting to address the state’s expected $1.7 billion budget shortfall for next fiscal year. which starts Oct. 1. So far, the budget is expected to maintain the current level of funding, which was cut $165-per-pupil from the high po int of $7,316 last year.

State Rep. Cindy Denby, R-Handy Township, co-chaired a bipartisan caucus of first-term state representatives that recently presented several school funding reform ideas.

Denby said she shared Parrish’s concern about fiscal responsibility at the school board table.

She also said the bill will look much different if it sees the light of day.

"I think it’s going to be met with many concerns over how we address taking funds away from one district that has tried to be conservative and spend their money wisely," she said.

State Rep. Bill Rogers, R-Genoa Township, said he wasn’t familiar with Melton’s bill, but that criticism of districts with large fund balances isn’t new.

Rogers said it would be difficult to tell the difference between those districts that are stashing funds and those that are building up fund balances as responsible planners.

Melton admitted it would be difficult to determine how much a school district actually has in its fund balance, because fund balances often include money designated for a specific purpose, but not yet actually spent.