School district handles finances to maintain even keel in storm

Guest column by Kevin Leung
Posted 11/15/19

No matter where you get your news, chances are you have heard about a possible recession in the near future. A search for the word “recession” on Google recently increased five-fold. What does …

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School district handles finances to maintain even keel in storm

Posted

No matter where you get your news, chances are you have heard about a possible recession in the near future. A search for the word “recession” on Google recently increased five-fold. What does this mean for the Douglas County School District?

The Great Recession, which began in December 2007 and ended in June 2009, greatly impacted DCSD.

While we can never completely predict how future recessions will impact our school district, thanks to careful financial planning, DCSD is well-positioned to “weather the storm” should another recession occur in the near future.

DCSD has adopted “fund balance neutral” budgets. In other words, this year’s revenue is paying for this year’s expenditures, which means we are not drawing down our reserves or “deficit spending.” DCSD has healthy reserves in place equal to roughly 15% of annual operating spending. Also, DCSD does not budget money until it is secured — meaning we did not budget to spend the funds associated with the 2018 mill levy override or bond until the measures passed. DCSD is only reliant on sources we know are available. With the passage of the 2018 bond, funds are now available to meet our most urgent capital needs without having to rely on the general fund.

DCSD schools can carry over unspent funds from year-to-year, meaning they are not held to a “use it or lose it” mentality. This promotes responsible spending at the school level. At the department level, zero-based budgeting is used to reassess needs on an annual basis. Department budgets do not roll over year-over-year without regard to cost-saving opportunities.

Our financial team is consistently using five-year financial forecasting with input-driven financial models for future, multi-year planning. Our revenue is based on our enrollment. To that end, we engage a professional demographer to project each school by grade for the next five years.

Did you know that DCSD has the strongest credit rating of any school district in Colorado (Aa1)? Our credit rating, combined with the prevailing interest rate environment, enabled DCSD to sell the bonds approved by voters in 2018 for an additional $40 million. In other words, DCSD was able to secure an additional $40 million of bond funds, while still honoring the “no new taxes” pledge given to our voters and taxpayers.

Over the past 10 years, existing bond issuances were refinanced, resulting in $21.7 million in savings to taxpayers. Just this last year, DCSD has saved more than $1.3 million through competitive bidding processes and negotiations. Finally, our financial team has begun actively investing operating cash when it is not needed for payroll and accounts payable, in compliance with state laws and DCSD Board of Education policy. This resulted in investment earnings more than double from prior years.

The Colorado School Finance Act leaves us financially dependent on state funding. While DCSD has carefully planned and instituted strong fiscal policies to be prepared for a possible recession, the State of Colorado has already cut nearly $600 million from DCSD since 2009. We believe that while smart fiscal planning is prudent, the urgency and need for the State of Colorado to adequately and equitably fund public education in Colorado is critically important.

Kevin Leung is a member of the Douglas County School District Board of Education and serves as the director of District E.

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