School districts have operating cash reserves in many different funds, which function like a personal checkbook; the balances only increase if more money is deposited each year than is actually spent.  Every entity needs some degree of reserves but most school districts have dramatically increased their cash reserves over the last ten year.  Operating cash reserves (excluding federal funds and money set aside for capital projects and debt service) totaled $468 million at the end of the 2005 school year but grew to $911 million at the end of the 2016 school year; that $443 million increase is state and local aid given to districts that wasn’t spent.

school cash reserves

Some school districts say they set extra money aside because the state was late making payments during the recession but the majority of the increase occurred long before payments were delayed, and during a time when funding was significantly increasing.  There is no legislative record of school districts saying they had insufficient reserves prior to 2009.

Upon learning that some operating reserve balances were in restricted funds, the Legislature changed the law in 2012 to allow school districts to use up to $250 per student annually in several previously restricted funds, including At Risk, Bilingual, Driver Training, Parent Education, Professional Development, Summer School, Textbook and Student Materials, Vocational Education, Pre-School At Risk, Special Education and Virtual Education.  There is no limit on the use of funds from Contingency and other unrestricted operating funds.

The Department of Education publishes fund balances by district, which have been compiled into comparative multi-year reports here, here and hereThis report shows districts’ annual Carryover Ratio, which is the percentage of operating cash on hand at the beginning of the year expressed as a percentage of that year’s actual operating expenditures.

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