Wake schools may keep more rainy-day money

Wake wants to keep more in rainy-day fund

khui@newsobserver.comJanuary 16, 2013 

— The eternal battle over school funding in Wake County could heat up again over the system’s latest effort to keep unspent money in its rainy-day fund, rather than return the dollars to county commissioners.

School finance staff want school board policy changed to allow the state’s largest school district to nearly double the amount of money it holds back to cover emergencies. Staff warned school board members Tuesday that they risk large numbers of layoffs this year unless the district can keep the money and use it toward balancing the budget for the 2013-14 school year.

“If we don’t receive a significant increase in funding or use our fund balance, we could have a significant reduction in force,” said David Neter, the system’s chief business officer.

School board member John Tedesco, a Republican, warned that the change could raise red flags and cause divisions with county commissioners at a time when the two boards are trying to develop a school construction bond referendum. The boards will hold a joint meeting Thursday with the eventual goal of putting a bond on this fall’s ballot.

Tedesco said members need to consider the political climate.

“Shouldn’t the political climate be wise business operating procedure?” responded board member Jim Martin, a Democrat.

“And there should be rainbows and unicorns,” Tedesco replied. “That’s the reality around us. We have to negotiate with the county commissioners.”

Commissioner Tony Gurley, a Republican, charged in an interview that the policy change would be a “dishonest action by the school board.”

“They’re being very dishonest with the taxpayers,” Gurley said. “It’s fraudulent advertising as far as I’m concerned.”

The school district’s fund balance has long been a source of contention between the school board and the commissioners, who determine the amount the schools get from county tax coffers.

The system doesn’t have taxing authority so, like many of its peers, it keeps funds in reserve. Money is accumulated during the year from savings, such as not filling vacant positions and other cost-cutting measures.

On Tuesday, Neter proposed a change that would let the district keep 3 percent of its annual operating budget. With combined federal, state and local revenues at $1.25 billion, the change would allow Wake to hold over about $37 million annually.

Some commissioners have argued that the district should rely on the county to cover any emergencies.

Since 2007, school board policy has allowed the district to keep in reserve as much as 6 percent of the amount it receives from the county, with any excess returned to the county’s fund balance. Neter said Wake now has $32 million in the reserve fund. Under the policy, Wake could keep about $20 million of the $319 million it gets from the county annually.

In the past few years, the school board has voted to waive policy to keep more than the amount allowed. Last year, the board kept the excess money so that it could take $28 million out of the emergency fund to balance the budget and avoid layoffs.

Neter told the board that Wake faces the cycle of keeping and use most of the fund balance to forestall large numbers of layoffs.

“We’re going to have to do something to fill the hole,” interim Superintendent Stephen Gainey said.

The school board’s policy committee agreed to refer the policy change to the full board.

Hui: 919-829-4534

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