Daniel T. Connor
Superintendent

227 Main Street
Goshen, NY 10924
(845) 615-6720

Budget News

District favors conservative approach in using financial reserves to balance budget

February 28, 2011 - Governor Andrew Cuomo has stated that school districts should use their fund balances in order to cover losses in state aid for the 2011-12 school year. Under his budget proposal, Goshen is slated to lose approximately $1.47 million in state aid – as well as an additional reduction of approximately $600,000 in aid for summer special education.

However, school districts see great value in maintaining adequate financial reserves in case of future emergencies or unexpected costs. Although district officials agree that using a portion of Goshen’s fund balance is one way to help supplement shortfalls in state revenue, they strongly favor a conservative approach to dipping into these funds.

For example, the district typically uses approximately $800,434 of its fund balance to help balance the budget each year. Last year, in the wake of a 12.6 percent loss in state aid, the Board of Education decided that an additional $180,000 of the fund balance be applied to the current year’s budget, for a total of $980,434, in order to hold down the tax levy increase.

“Depleting our undesignated reserve funds to alleviate revenue shortfalls places the district in a precarious financial position,” said Assistant Superintendent for Business Robert Miller. “We cannot predict future financial challenges, especially under current economic conditions, and must maintain a long term view.”

You may be wondering:

What is a reserve fund?

The district’s fund balance is a “rainy day fund” set aside to pay for emergencies or unexpected costs that could restrict daily operations. New York State law allows each district to have an undesignated fund balance of no more than four percent of its current budget. There are no restrictions on how the fund balance may be used.

Are there other kinds of reserve funds?

Yes. Under state law, school districts can create and maintain up to 15 different types of reserves beyond the undesignated unreserved fund balance. Voters must approve the creation of certain reserve accounts, but not all. Districts must follow strict laws to establish, fund and expend money placed in these designated reserves.

Currently, Goshen has reserves for encumbrances (a way to carry over different budget items from one year to the next), unemployment insurance, health insurance, tax certioraris, and employee benefit accrued liability.

Did you know?

The Government Finance Officers Association recommends that municipalities maintain an unreserved fun d balance of 5-15 percent of general fund revenues, or up to two month’s expenses. They have no limit as to what they can put aside – but school districts are only permitted by law to maintain a maximum balance of four percent of their operating budget.

Therefore, the HIGHEST percentage of money that a district is allowed to have on hand in case of emergencies would be considered an inadequate amount for a municipality.