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 2006-07 through 2010-11. 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 2010-11 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: For Years prior to 2010-11: Item AT091 / Total Expenditures
Subsequently: AT0994 / Total Expenditures
The unreserved fund balance (also known as unexpended surplus funds) 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.
Data Table (1.77 MB)