A decline in the amount that the Joplin School District keeps in its reserve fund was expected as a result of rebuilding following the 2011 tornado, Superintendent C.J. Huff told the Board of Education earlier this week.
The district has come under fire recently from several candidates seeking election to the board in April, who have said they are concerned about the district’s financial stability and future.
Huff said there is no required amount that must be held in reserve, but most districts aim to keep an amount equal to 25 percent of their budgets, or about 3 months’ worth of operating expenses, in their reserves.
Joplin ended the 2013 academic year with about 14 percent in its reserve fund, Huff said. The fund is expected to further dip to between 8 percent and 10 percent by 2015, which administrators predicted would happen after the tornado, he said.
Paul Barr, chief financial officer, said 14 percent of the district’s normal $65 million operating budget translates into about $9.4 million. A reserve fund at 25 percent would be $16.2 million; a fund as low as 8 percent would hold $5.2 million.
The primary reason for the decline is rebuilding efforts following the tornado, Huff said. The leasing of temporary schools and the construction of new schools have caused the district to tap into its reserves to pay those costs, while reimbursement from the Federal Emergency Management Agency — which will be up to 85 percent for many costs — won’t come until the projects have been completed, he said.
“They don’t pay you on the front end; you have to pay upfront, and they pay you later,” he said.
Some of the seven candidates seeking a board seat April 8 have expressed concern over the district’s funding levels and have focused their platforms, in part, on fiscal responsibility.
Debbie Fort, a retired principal, said the lower reserve level was one of the reasons she filed for candidacy. She previously told the Globe that a projected 8 percent reserve amount is alarming.
“That’s one of my concerns: Where are we right now financially, and what is our plan to get us back up to where we need to be?” she said.
In response to the district’s position, she said she still viewed finances as a concern. She said she also questioned the district’s fiscal plan in relation to the number of upper-level positions that exist, the construction of a new early childhood education center when the Memorial campus will be vacated next year, and whether administrators will eventually relocate from their current headquarters in a former state Department of Transportation building.
Jeff Koch, another candidate who is business development manager for Umicore Optical Materials USA, previously told the Globe that spending, while not unexpected after the tornado, should be carefully monitored to ensure the fiscal health of the district.
“Out of necessity, we have spent more in the past three years than we have in the past 15, but is it sustainable?” he said. “Is it going to subside when the facilities are complete? There may be a new normal, and we have to make sure that is in line with what we, as a community, can afford to spend.”
Randy Steele, who has served on the board since 2008, previously said that although the fund had been expected to decrease because of the tornado, the board needs to work to bring it up to a more comfortable level.
“We’ve got to have that budget because if you don’t have the finances where they’re at, you can’t accomplish the things you want to do,” he said. “You’ve got to have that balance fund. You’ve got to improve your funding in order to get everything else done.”
School districts keep cash reserves to use in case of an emergency, or perhaps if state or local funding sources don’t produce the projected revenue amounts, Huff said.
“It could be that a school bus catches on fire and you have to purchase a new bus, or (there is) an economic disaster where we have to dip into fund balances to pay our bills,” he said. “Some people refer to it as a rainy-day fund, but it’s where we hold money back to cover short-term needs, if the need arises.”
Huff said the anticipated cost reimbursements from FEMA will help the district’s reserve fund recover, but he acknowledged they alone won’t return it to a 25 percent level.
“To get it back to 25 percent will take some diligence on our part,” he said.
Barr said the board has committed, through its recently adopted strategic plan, to start saving some of its surplus money on an annual basis to slowly grow its reserves to the 25 percent level.
“With intelligent budgeting and saving, we can grow that back up over time,” he said.
Board members noted last week that one-time capital expenditures, not ongoing operating expenses, led to the decline in reserves. They also noted that the decline showed the district was working to rebuild instead of holding back funds that could have been used for reconstruction.
“We only had one chance to do this right, and I feel like we did,” board member Michael D. Landis said.
Missouri law identifies a school district as experiencing “financial stress” if its reserves dip below 3 percent.