School surplus: District savings can be good
February 19. 2013 4:57PM
Though local circumstances will vary, as a general rule it is a good idea to encourage school districts to set aside a bit of money at the end of the budget year. Doing so can make life a little easier on property taxpayers.
A state law passed last year allows school districts to save up to 2.5 percent of the town's net tax assessment. Use of the funds is tightly restricted and must be approved by voters. Now is the time of year when public officials have to decide whether to put forward warrant articles asking voters to approve such savings for the local school district.
Letting the school system stow away taxpayer money can be a politically charged issue. Shouldn't surplus cash be returned to taxpayers right away? Not always.
Without the ability to put money aside for future emergencies, school districts, like other government agencies, have little incentive to control expenses. If money must be spent or returned to taxpayers, the incentive generally is to spend it. If districts can save some money to use as a cushion in case of an unexpected expense or a sharp drop in revenue, administrators have a stronger incentive to budget more frugally.
A school district with a little bit of cash in the bank will, in theory anyway, be able to reduce yearly fluctuations in the tax rate, as the reserve can provide more budget stability.
Again, local circumstances might not warrant creating a savings account this year or next. But it is not necessarily anti-taxpayer to establish one.