School leaders hope rolling reserves mean better budgets

Published 12:04 am Wednesday, March 16, 2011

Local school officials aren’t sure what the exact impact the new rolling reserve signed into law Friday by Gov. Robert Bentley will have, but they agreed it could provide a better budgeting practice than the one currently in place.

The bill, officially called the Responsible Budgeting and Spending Act, was the first to pass both houses of the legislature this year. It is designed to make the Education Trust Fund more resistant to proration.

At present, lawmakers formulate budgets based on revenue projections for the coming year. When those projections are overly optimistic, the governor is forced to declare proration to balance the budget. In turn, schools must cut services or dip into reserve funds for operating expenses.

Bentley said with the new bill, which goes into effect for the passage of the 2013 budget, will make proration “a thing of the past.”

“Proration is the little surprise that happens during the year that is the result of the lack of tax funds being received and the over budgeting,” Andalusia City Schools Superintendent Ted Watson said. “The rolling reserve would have concrete numbers and not going above and beyond.

“Proration is taken directly from the reserves the local board of education has saved in order to maintain the budget,” he said. “The new system would hopefully get rid of the need for proration.”

Under the new bill, the state would use a 15-year average of money available for the education budget to set a spending cap for education, and anything above the cap will be placed in the rainy day fund.

“If revenues are up, they’ll put the extra in the rainy day fund,” Watson said.

Watson said the new system would help local school systems.

“It appears to be a better system, because we will go into the year knowing how much money we have,” he said. “That means we’ll know how many teachers and support personnel we can hire without dipping into our reserves.”

Covington County Schools Chief Financial Officer Shauna Robertson agreed.

“From what I’m hearing, I can only guess it will be good to have it based on history, instead of a stab at projected growth,” she said. “I’m sure it’s not fool-proof, but I’m sure it’s definitely a better system than the one we have.”

Locally, school systems have fared better than the majority of school systems in the state.

ACS has the one month required, Opp City Schools has 2.9 months and Covington County Schools has 7.7 months in reserves.

Additionally, the law created a planned system of savings through a budget stabilization fund in which the funds can only be used when revenues fall below those expected and would be used for maintaining the previous year’s spending level or to prevent proration. And will provide a fund for school construction and maintenance, purchase of equipment and technology resources and debt service to fund these resources.

According to the governor’s office, the new law also specifically will:

• Service the debt owed to the Constitutional Rainy Day Fund as a first priority when revenues exceed the spending cap.

• Create a planned system of savings through the Budget Stabilization Fund. These reserves can only be used when actual revenues fall below expectations and can only be used for purposes of maintaining spending at a level no less than the previous year or to prevent proration.

• Provide for a Capital Fund for education spending. This fund will be used for school construction and maintenance, purchase of equipment and technology resources, or service debt incurred to fund these purposes.

Critics of the new law say that it will keep education funding at or below 2007 levels for another five years. Based on the 2011 fiscal year, the Legislative Fiscal Office estimates there would be 3.38 percent growth for the 2013 education budget, the first year the new law would be in effect.