Last week I shared information about the operating funds of the Worth County R-III school district – the General or Incidental Fund and the Special Revenue or Teachers’ Fund. These two funds support the everyday operating costs of the school district, including employee salaries and benefits. Two other funds are set up to support the major equipment purchases and the facility needs of the school district.

The Debt Service Fund is used to account for the resources accumulated for and the payment of long-term debt. Amounts in the Debt Service Fund are generated from the Debt Service Fund tax levy and are used solely to retire bonded debt. You may also hear this fund referred to as Fund 3. When the voters approve a bond levy they are actually approving the school district to sell bonds on the bond market for a specific amount, which gives the district immediate funds to complete a large project. Then the patrons will pay a bond levy tax, so the school district can pay the bonds and the interest off over a period 10-20 years.

The last fund, the Capital Projects Fund, is used to account for all facility acquisition, construction, lease purchase principal and interest payments and other capital outlay expenditures. Expenditures for ordinary repairs to school property will not be made from the Capital Projects Fund. Capital expenditures are defined as expenses paid or incurred for the acquisition or repair of assets that will remain useful for more than one year. Examples of these expenditures would be the cost of acquisition, construction, or erection of buildings, remodeling or reconstruction of buildings and the furnishing thereof, and similar property having a useful life substantially beyond the current fiscal year. Examples of expenditures not allowed to be paid from the Capital Projects Fund are the costs of mending leaks, painting, plastering, custodian salaries, maintenance supplies and employee benefits.

How are the Debt Service Fund and the Capital Project Fund financed? The Debt Service Fund must have a voter approved bond tax levy to obtain funding. While the Capital Project Fund can also use a tax levy to generate money, the school district is allowed to transfer money from the General fund to the Capital Project Fund once a year. Basically, this would be like a family household watching their budget and putting extra money in a savings fund to go toward a larger purchase for the household.

So how does Worth County R-III school district generate the money to support these four funds? Currently, we have an operating levy of $3.3703 and a debt service levy of $0.25 for a total levy of $3.6203 per $100 of assessed valuation. If we compare our school district levy to the school districts that surround ours, we find that we are the lowest. The other districts range from $4.11 to $6.4618 per $100 of assessed valuation.

When reflecting on that Senior Center conversation that I had two weeks ago, I hope there is a greater understanding on Public School Funding. We do have projects that are needed to maintain our school and facilities. With the public’s input on our facilities committee, along with the Board of Education, we will continue to work on a plan in which we demonstrate good stewardship of the public’s money. At the same time, our goal will be to maintain the property in a manner in which the community can take pride.

Recently, I had lunch at the Senior Citizens’ Center in Grant City. The conversation around the table eventually turned to how the school district was doing. I told them things were going well. Then one of them asked me about the parking lot and road between the school and the football field. We agreed that it is a bit bumpy at times back there. I explained that it takes money to fix problems like the road and the parking area. The fact of the matter is that it does take money to keep the facilities of the school district safe and functional – just like a home.

Our district, while small, serves the children of the school district well by providing them with a safe learning environment and quality teachers. The citizens of our district provide about half of the operating funds that the district uses each year. The other half of the money comes from the state foundation formula and the federal government. These monies are put into two funds for operating the school: the general or incidental fund and the special revenue or teacher fund. Because the public school is a governmental agency we have certain requirements on how we can spend the money.

The General (Incidental) Fund is used to account for all financial resources except those required to be accounted for in another fund. This fund is where we put local taxes; Foundation Program payments such as Basic Formula, Transportation, Early Childhood Special Education, Career Ladder, Educational Screening Entitlement/PAT and Vocational/At-Risk; along with various other transactions associated with federal projects. We use this fund to pay for the operational expenses of the school system, which includes any expenses that are not teacher related or capital improvement related. We transfer money in this fund to the Special Revenue/Teachers Fund in order to pay the certificated faculty. The Special Revenue (Teachers) Fund is used to account for revenue sources legally restricted to expenditures for the purpose of teachers’ salaries and benefits and tuition payments to other school districts.

These two funds together make up the Operating funds. Our goal ,at the end of the fiscal year in June, is to have the balances in these accounts equal to 25-30% of the next fiscal year’s operating budget. Why you may ask? We keep this amount in reserve in order to avoid having to borrow money to operate the school before property tax money arrives in January. This past year we were able to keep the reserves at 31% as of June 30, 2014. By the end of December our balances for Fund 1 (General/Incidental) was $588,190 and for Fund 2 (Special Revenue/Teachers) was $197,469.

Our operational budget is on track for this year. This money, however, does not allow for facility improvements or upgrades. Next week, I will update where we are on our capital improvements and debt service funds.