Roanoke School Board members have accelerated plans to create a spending policy for the district’s reserves after learning the current balance barely exceeds the amount needed to cover cash flow shortfalls.
Until recently, discussions about the school district’s rainy-day fund have been primarily philosophical — what types of projects to use the reserves for and how much of the reserves to spend. A third consideration, the degree to which the reserves function as a line of credit, emerged earlier this year.
Tuesday, the board learned that in the last two years, the reserves have covered up to $20 million during times when the district was short on cash while waiting on reimbursements.
That’s about the amount in the reserves currently, meaning that if the balance drops much lower, the district won’t be able to rely on the reserves to cover future cash shortfalls.
Board members said they were surprised by the information and thought they had more time. They’re scheduled to approve a categorical budget next month that relies on using $7 million from the reserves.
“I don’t see how we can pass a categorical budget that has us spending down the fund balance so that we can’t cover our cash flow,” said Laura Rottenborn.
The reserves grew to a high of almost $36 million in 2011-12 with money from a meals tax. Since then, the reserves have paid for one-time and recurring programs like the district’s summer enrichment program and a laptop program.
While lauding the programs funded by the reserves as beneficial and much-needed, some board members and city council members have pushed the district to try and reduce its use of the reserves as the balance has dwindled.
Earlier this year, the board agreed to implement a policy that would guide how the remaining balance could be spent. An early draft prepared by the district’s attorney required a portion to be set aside unless five of the seven board members approved the expense.
Before adopting a policy, the board wanted more information about how often the reserves function as an internal line of credit.
The district had an external line of credit up until a few years ago but dropped it when the bank’s fees were going to increase from around $5,000 a year to $60,000.
Superintendent Rita Bishop told the board Tuesday that she’s talked with city leaders about the school district seeking a line of credit with the city, a partnership that could keep the district’s costs lower. Board members said they thought that strategy was prudent and asked for cost estimates by the next meeting.
Board member Dick Willis said he’d like to see the board adopt a policy on reserve spending “as soon as possible.”
“This would be urgent,” he said.