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Lawmaker to schools: Use rainy-day funds now

March 16, 2011 - According to an article in The Detroit News, Sen. Jack Brandenburg, R-Harrison Township, believes school districts should be required to spend down their fund balances just as the state has done. The Budget Stabilization Fund is down from $2.2 million from a high of $1.2 billion in 2000.

Brandenburg told The Detroit News the state could recapture $282 million by capping school district fund balances at 15 percent of annual operating costs.

Thirty-seven percent of states have tapped into rainy day reserves over the last three years, according to a review by the National Association of State Budget Officers.

John Fazer, superintendent of Goodrich Area Schools, would not support Brandenburg's plan.

"I am not in favor of the proposal to intentionally spend down our fund balances," said Fazer. "The truth of the matter is that most school districts will have to spend down the balance just to get through the next two years in addition to massive restructuring. Goodrich's fund balance is projected to be 14 percent ($2.5 million) as of June 2011, down from 23 percent in June 2007. We are projecting an initial deficit budget for next year of $2.8 million due to rising operational costs and state budget cuts. We will need every cent of our fund balance to make ends meet. I don't believe that Sen. Brandenburg truly understands school funding."

Brandon School District Superintendent Lorrie McMahon also questioned Brandenburg's proposal.

"The proposal from Senator Jack Brandenburg is very interesting. I can speak to it only from my local perspective," she said. "Districts in Michigan have been advised for years to maintain a fund balance of 15 percent of operating costs. Brandon was able to do that until the economic downturn of the last couple of years. Our fund balance has helped us maintain our quality educational programs during this tough financial time."

"Because we have had to spend fund balance dollars, the reserve is dwindling. At the end of this budget year we expect the balance to have dropped to about 7 percent. With the funding reductions projected by the State of Michigan, we may well be in deficit spending by June 2012. Sen. Brandenburg's proposal implies that school districts are sitting on money. That certainly is not the case in Brandon. We have taken our role as fiscal managers seriously, as well as our role of the defenders of quality education for all our students."

Michael Van Beek, director of education policy for the Mackinac Center for Public Policy said several issues need to be addressed.

"To some extent, this bill would punish districts that have been prudent over the years," said Van Beek. "Many of these fund balances are necessary for districts since they need to cover cash flow when they don't receive money from the state."

"The bill is very short-sighted—the fund equity is not a piggy-bank. Going after them as a stash of cash is just shortsighted. These fund balances are fiscally shortsighted."

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