School Board ponders permanent budget reserve fund

SANDPOINT — The Lake Pend Oreille School Board will be asked Monday to adopt a policy establishing a general fund operating reserve equivalent to five percent of its combined general fund and maintenance and operation portions of levy budgets.

The recommendation comes after several years of fluctuations in the fund-balance of the district's general fund, from a high of more than $1.2 million in 1999 to a deficit of over $400,000 in 2002.

For the fiscal year that ended June 30, the district had a general fund undesignated fund-balance of approximately $973,232, or just under 5 percent of the district operating budget.

In Idaho, most districts have a considerably larger fund-balance. According to a summary prepared by the State Department of Education for the fiscal year that ended June 2003, the statewide average of fund-balances in school districts' General Funds that year was 11 percent.

Currently, LPOSD has no policy regarding a General Fund operating reserve.

"A savings account is a wise move for a family, and it's a wise move for the school district," said Superintendent Mark Berryhill. "A nice balance in your family's checking account looks good, but it doesn't tell the whole story about your family's financial obligations — the mortgage, car payment and credit card debt."

LPOSD now has a more than $1.6 million in lease-purchase debt obligations, up from $219,851 in 1999.

Business manager Lisa Hals said the operating reserve fund would be used to provide for unanticipated expenditures of a temporary nature "and to minimize the effects of economic fluctuations on revenue generation." Year-to-year budget volatility "offers neither long-term financial stability nor adequate planning mechanisms for the district," she added.

Hals recommends that a new operating reserve policy "explicitly prohibit the District from balancing a current budget at the expense of future budgets."

Her recommendation to the board calls for an initial contribution of $300,000 to the operating reserve for the current fiscal year, with future contributions of $100,000, at minimum, until the goal of a reserve fund equal to 5 percent of the budget is achieved.

The recommendation will follow the annual audit report to the board at its meeting Monday, Oct. 11 at Sandpoint High School. The independent audit of district finances for the year ending June 30, 2004, found no significant issues to be addressed.

Copies of the audit report, along with the agenda for Monday's board meeting and other materials, will be available at the district central office by late afternoon Friday.