School districts across Pennsylvania stashed away enough money in their reserve accounts in 2014-15 to operate all 26 state prisons for two full years and still have money left over.
Combined, they had just shy of $4.3 billion sitting in their fund balances. That is about 5 percent - or $190.5 million - increase from the prior year when they had $4 billion, according to data recently released by the state Department of Education.
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That money set aside in district's committed, assigned and unassigned fund balances represents, on average, 15.6 percent of the $27.4 billion the 500 school districts spent in 2014-15, although that percentage adjusts for the negative fund balances that 18 financially struggling school districts had.
More than 300 of the 747 districts, charter schools and career and technical centers included in the department's data had fund balances topping 20 percent of their total expenditures, which is where state Auditor General Eugene DePasquale said he believes the line should be drawn.
This graphic depicts the growth in school districts' committed, assigned and unassigned fund balances over the past 10 years, according to data from the state Department of Education.
"It is a judgment call as to what is too high," DePasquale said. "Certainly anything that is above 20 percent, clearly that's where you start to question it."
Looking at the dollar amounts districts were holding reserves in 2014-15, Pittsburgh School District had the highest with $199 million, representing about a third of its total expenditures that year. Another Allegheny County district, Penn Hills, had the lowest with a negative $19.6 million, which along with other fiscal mismanagement problems in that district prompted DePasquale to call for a criminal investigation into the matter.
The 179 charter schools listed in the education department's data, meanwhile, amassed $273 million in their fund balances in 2014-15. They ranged from a high of $36.5 million at the state's largest charter school, Pennsylvania Cyber Charter School, to a low of Chester County-based Pennsylvania Leadership Charter School's negative $1.7 million fund balance.
Added all together, districts, charter schools, and career and technical centers had stashed away more than $4.6 billion at the end of 2014-15, the data shows.
While some may consider those school entities with big-dollar fund balances to be hoarding public funds, the Pennsylvania Association of School Business Officials executive director Jay Himes said he only has to point to this past year's late state budget passage to make his argument about the importance of districts having reserves.
"This year is a poster year for why people hang on to fund balances," Himes said. "It is the buffer of unanticipated and I would say unbelievable situation that you may find yourself in in the course of a fiscal year."
But James Paul, senior policy analyst of the conservative-leaning Commonwealth Foundation in Harrisburg, offers a different take on the matter.
"The fact that districts managed to sock away $200 million in reserve funds while pension costs skyrocketed by $500 million should be an eye-opener for those who believe we aren't spending enough on public schools," Paul said.
His analysis of the education department data for 2014-15 finds 155 school districts and charter schools with reserves of more than 30 percent of their total spending that year; 35 of them with reserves topping 50 percent of total spending.
"These are really high numbers," Paul said. "At the same time so many school districts and school boards are complaining about being underfunded, many are amassing large totals in their reserves. So before school boards look at raising property taxes, they should make sure to take a close look at their fund balance."
However, he admits not all districts are in such a position where they have a choice.
Stuck in a hole
While 285 school districts were able to add to their reserves in 2014-15, 18 found themselves with a negative fund balance.
Six of those 18 - East Allegheny, Penn Hills, Wilkinsburg, Aliquippa, Mid-Valley and Scranton - found themselves stuck in a deeper financial hole that year than they were in the year before.
Several of those districts with large negative fund balances that show little to no improvement from one year to the next "are literally on the edge" of going bankrupt and should be a cause for concern for state officials, Himes said.
Steelton-Highspire School District is one of those districts teetering on the edge. Although it had a nearly $1.3 million negative fund balance at the end of 2014-15, it did manage to improve its situation from the negative $2 million from the year before.
Operating a school district without any kind of fund balance to serve as a safety net is difficult, said the district's interim Superintendent Travis Waters.
"You can do a budget based on your best estimate but there's always going to be things that come up and when you don't have a fund balance you can't address those things," he said.
For example, last year as well as this past year, Waters said the district had a sewage pipe collapse. They didn't see that coming but knew it had to be fixed.
Given the fiscal challenges his district faces, when he hears broad brush criticisms about districts being over-funded or sitting on too big of piles of taxpayer dollars, he dismisses it as coming from people who are ill informed or "don't understand the true dynamics of school funding."
Balancing act
This past year's delayed state budget passage that held up funding for districts - and the ensuing cash flow problems it created - did little to persuade districts to be less conservative in the amount they are holding in reserve.
So does Act 1, which holds school boards to raising school property tax rates no higher than a state-set inflationary index unless they go to a voter referendum.
Some school officials say this law that was intended to control tax increases has actually caused tax rates to rise.
School boards tend to raise their rates to the Act 1 limit, whether their next year's budget requires that amount of extra money or not out of fear that they may need some extra in a future year and don't want to take the risk of having to go to referendum to try to get it.
"Look around [at district's tax increases]. That's what you'd find," said Northern Lebanon School District Superintendent Don Bell.
The uncertainty surrounding state funding, along with growing pension and health care costs, unanticipated enrollment growth, and unforeseen charter school expenses are also reasons district officials offered for why they keep a healthy fund balance.
But they recognize the danger in using reserves to pay for ongoing expenses like that.
"Once you start sticking them in the operating budget, you begin a downward spiral that can lead you to a place no one wants to be," Himes said.
But many districts do it anyway.
Middletown Area School District in Dauphin County is tapping its fund balance next year to help avoid a property tax increase. Pequea Valley School District in Lancaster County is looking to raise its property tax rate by 3.71 mills but after not raising tax rates last year, is forced to dip into its reserves to bring its 2016-17 budget into balance.
Carlisle Area School District in Cumberland County has been using reserves, along with raising property tax rates to the Act 1 maximum, for a number of years, said district director of finance Shawn Farr. Next year's proposed budget is no different.
Fortunately, he said, the district had built up some healthy reserves to help cover the rising pension and health insurance costs. So dipping into its fund balance, along with contracting out a number of services, has enabled Carlisle to avoid making any kind of dramatic instructional programmatic cuts that impact students unlike other districts.
"We've been kind of pacing ourselves," Farr said. "This isn't something we can do forever but we've been able to smooth out the impact of all the changes especially with the increase in pension costs but it's hard to say long-term what this will look like."
Like Carlisle, Cumberland Valley School District in Cumberland County built up its fund balance but it was done intentionally, said Superintendent Fred Withum. In 2014,15, the district was sitting on nearly $26 million, or nearly 24 percent of its total expenditures that year.
This past year, he said the district began drawing down that fund balance to lessen the amount it had to borrow to pay for the construction of an elementary school and a middle school to accommodate its burgeoning enrollment growth. It also used reserves to pay the entire $7 million tab to renovate two elementary schools, making those buildings usable for another 20 years, Withum said.
"What Cumberland Valley is doing is purposely drawing down the reserves we have in order to finance one-time things that are related to an increased enrollment," he said. He anticipates the district will see its fund balance decline to about 8 percent of its operating budget over the next couple years.
Himes said another consideration that district officials keep in mind when it comes to fund balances is how bond rating agencies view them. Have too low of a reserve and that winds up costing districts more when they want to borrow money for a construction or renovation project, if they can afford to borrow at all.
Commonwealth Foundation's Paul said he understands the need for districts to keep "reasonable" reserves, but he hesitated to offer what percentage of a district's total budget he would consider that to be.
"I would say instead of putting a number on what it should be, I'd say over 30 percent seems excessive and over 50 percent is beyond excessive, especially if there are discussions of property tax increases," Paul said. "Those two things should not go hand in hand."