Wilton Bd. of Education Considers Creating Reserve Funds Account
At last night’s (Dec. 20) Board of Education meeting, the Board discussed the merits of creating an Unexpended Funds Account, a reserve account that would be under BOE control and could be used for unexpected expenses.
As of now, any unexpected costs the district encounters outside of what the current budget allocates for are either covered by shifting funds away from something else in the budget, or asking the Board of Finance for money from the town’s General Fund.
Establishing a BOE reserve fund is something that the CT state legislature decided school districts could do in 2010, enacting Public Act 10-108, a law that would allow education boards to reserve a small, fixed percentage of any amount left over if the district comes in under budget at the end of a fiscal year. That account would be non-lapsing–meaning funds could accumulate over time–and remain under an education board’s control, to be used in subsequent fiscal years.
The statue caps the amount which could be reserved by education boards at no more than 1.0% of the total education budget for that fiscal year.
As of now, if Wilton Schools come in under budget, any excess funds are deposited into the town’s general fund account at the end of a fiscal year.
A BOE-controlled reserve account could be used for any unexpected expenses, for example any unexpected capital improvements or special education expenses that arise that weren’t planned for.
While the account would be under control of the BOE, any expenditures would have to be reported annually to the Board of Finance.
The idea of an unexpended funds account was first introduced by superintendent Dr. Kevin Smith and Anne Kelly-Lenz, finance director for both the town and the schools. The idea was brought up and considered earlier Thursday by the BOE’s Business Operations Subcommittee, which includes BOE members Glenn Hemmerle and Deborah Low as well as two members of the Board of Finance, Peter Balderston and John Kalamarides.
Hemmerle explained the rationale for a reserve fund.
“It prevents us from getting caught in a bind. Today as we upgrade, if we have unexpected costs, we have to find ways of moving funds around, balancing not spending here to cover that expense there. The state recognized that BOEs needed to have that ability.”
Hemmerle said the Business Ops committee surveyed what other school districts have such reserve accounts and said “about half” had established funds. In addition, he said that Kelly-Lenz is looking at Wilton’s education budgets of the past five years to determine how much such an account would have amounted to now, if Wilton had had such a fund in place, “to get a sense of the scope.”
“I doubt the dollars will be significant but we’ll find that out–what it might have been–because our budgets have been very, very tight over the last few years. There has not been a lot of at the end of the year that has gone to the general fund,” Hemmerle said.
BOE chair Christine Finkelstein noted possible opposition to creating such an account.
“I think we have to be careful about the perception that has been raised in other towns that this is like a slush fund type thing.”
Hemmerle countered that suggestion.
“It isn’t. We currently face these expenses on a regular basis. For a variety of reasons we may have a capital need that arises that wasn’t planned or budgeted for. In our current operating environment, we’d need to find those funds in the current operating budget. It means we’d have to choose between Peter and Paul what we’d do. If it’s a legitimate need, a safety issue, now we’ve got to find the funds in our existing budget, find how we’re going to pay for it. This would address those issues. It would mean that we don’t curtail buying textbooks or curtail other things we budgeted for. It’s not a slush fund at all, it’s a prudent, smart operating procedure,” he said, adding, “”It makes all the sense in the world to do that.”
He reiterated that having a reserve account would mean money would not have to come out of the General Fund. “If we had a need and had funds in this account we could use them as opposed to funds in the general account, which would have to be reimbursed by the taxpayers at a future date because the General Fund has to be maintained at a certain level.”
Kelly-Lenz explained why: “The town’s General Fund is typically [maintained] at $12 million. Keeping that balance is important for our Triple-A rating. Our rating starts to decrease when we dip below, and then it costs us more to borrow money when we do capital projects,” she said, adding, “This gives us the ability to manage it without having to go back to the town.”
Both Hemmerle and Kelly-Lenz noted that there hasn’t been any need in the past few years for the Board of Education to ask for disbursement from the General Fund, except possibly once. “Maybe 2010, we had a healthcare fund, and there was no reserve for significant claims. That was the only time in recent memory they’ve had to dip into the General Fund.”
Low noted that the Business Ops committee came away that they need to do some more research, and then bring it back to the BOE as a formal proposal before presenting it to the BOF for its approval.
The article was amended to clarify that the BOE would need to report annually to the BOF if any funds were used from the BOE reserve account; an earlier version misstated that the BOE would need to seek permission from the BOF, but that is not the case.