EXAMINING INDIVIDUAL
SCHOOL DISTRICTS
SURPLUS/DEFICIT AND
UNRESERVED FUND BALANCE
School districts operate in an
environment where a variety of economic pressures, some in conflict with others,
are operating simultaneously.
·
School districts, supported by public funds, are
expected to operate efficiently and collect only the local tax revenue they
really need.
·
They are expected to anticipate the future and
establish reserve funds to protect against hard times.
·
They are expected to expend the necessary funds to
maintain an educational program that meets academic standards.
·
They are expected to expend the necessary amounts
to maintain a multi-million dollar investment in buildings and grounds.
·
They are expected to accomplish all this despite
uncertain economic conditions, changes in the student population and higher
standards.
Under any circumstances,
determining the overall fiscal health of a school district is a complex task. At
this time no single, generally accepted financial indicator exists. Indeed,
examining financial information alone is probably an inadequate approach.
Factors such as changing property values, student demographics, plans for major
capital expenditures and other non-fiscal circumstances may affect a district's
financial health. However, an analysis can begin with an examination of trends
over time.
This section contains
calculated data over a five-year period for two items: Operating Surplus or
Deficit and Unreserved Fund Balance. The baseline data for these items can be
found in the Masterfiles for 2001-02 through 2005-06. These items were selected
as a reasonable start to the examination of fiscal trends over time and because
there is a relationship which exists between these items. Information is
provided for each of the major districts as they existed in the 2005-06 school
year. These two items are only two of the many factors which need to be
considered when assessing a school district's financial condition.
OPERATING
SURPLUS OR DEFICIT AS A PERCENTAGE OF TOTAL EXPENDITURE
Calculation: (Total Revenue -
Total Expenditures) / Total Expenditures
This represents the balance
between revenues and expenditures for the year. A positive percentage indicates
that a district had an operating surplus in that school year (i.e., revenues
exceeded expenditures). Conversely, a negative percentage indicates that a
district had an operating deficit. In general it is considered preferable for
revenues to slightly exceed expenditures. There
may be circumstances in which a district will plan to run an operating deficit
(deliberately have expenditures exceed revenues), such as to reduce an overly
large unreserved fund balance. If operating deficits accumulate for several
consecutive years, a structural deficit may be indicated. This situation would
likely have a negative impact on the unreserved fund balance.
UNRESERVED
FUND BALANCE
Calculation: Item AT091 on the
ST-3 / Total Expenditures
The unreserved fund balance
represents monies that a district accumulates to protect against unexpected
expenses or revenue shortfalls that could cause an operating deficit. It is
generally considered desirable for the unreserved fund balance to be a few
percent of total expenditures. Large balances may be considered excessive.
Negative balances may indicate serious financial difficulties, particularly when
negative balances continue for multiple years. Note that the dependent status of
the New York City, Buffalo, Rochester, Syracuse and Yonkers school districts
results in zeros for this item. School districts may also set up dedicated
reserves for a variety of purposes, such as insurance claims, tax judgements or
building repairs. Dedicated reserves are not included in this item, thus the
total reserves of a district may be understated.