How the School Department Turned Temporary Stimulus into a Permanent Surplus
Being busy in spring 2011, I didn’t pay much attention when the Tiverton schools’ business administrator explained that the state was requiring the district to “restate” $740,000 in state aid. He meant that the state had been giving the money as “restricted” aid but, going forward, would call it regular aid. It was supposed to be just a matter of accounting. Numbers on paper.
Now that I’m on the Budget Committee, looking at a big tax increase to cover a major bond for school repairs, I’ve taken a closer look at the town’s audits, and I find the schools’ presentation of this “restatement” to be misleading. Indeed, the shuffling of numbers back then was behind the annual surpluses the district has enjoyed ever since, leaving it sitting on a $3.5 million reserve.
The first fact one must know to understand what happened is that the town — local taxpayers — is responsible for the total “appropriation” for the schools in each budget. If for any reason state aid comes in lower than estimated, we have to make up the difference — except for “restricted” aid.
With the recession hitting Rhode Island hard in the 2009 fiscal year (starting July 2008), the state General Assembly reduced its promised aid by $870,000, making most of that up with federal money. Because of the way the money came into Tiverton, however, it wasn’t technically part of the state aid estimate, so the school district wound up with nearly $200,000 more than budgeted. (See chart below.)
The next year — fiscal 2010 — the government changed its game. The General Assembly again reduced its aid to Tiverton schools, but this time, the new stimulus funds were counted as “restricted” accounts, filled with $1.4 million in federal stimulus money intended to be temporary.
For the fiscal 2011 budget, taxpayers endured two weeks of financial town meetings because of chaos in the room. In the end, the School Department managed another $790,000 in local funds on a vote of 564 to 541 — a difference of just 23 — with over 200 people in the room for some reason choosing not to vote according to the count. The advertised docket for that year had promised a local increase for the schools of only $1, but the School Committee proposed the massive increase on the spot, nearly covering a $844,000 reduction in “restricted” aid from the prior year.
The next year, state aid returned nearly to its 2009 level; the district also realized an increase of over a million dollars in local funding. Almost all of that ($985,000) turned into a surplus, giving the district its first end-of-year balance over $550,000 since at least 1990 and probably forever. In the years since, those reserves have grown to $3.5 million, even as the district has spent another $1.5 million on capital expenses off its budget.
In summary, when the state money shifted from regular aid to “restricted,” the school department built the excess into its budget. But when the funds shifted back, the increase was buried in this “restatement,” so local taxpayers would remain forever responsible for the supposedly temporary increase. As a matter of fact, the “restricted” aid didn’t actually decrease much; the accounts just changed.
Thus, the Tiverton schools maintained healthy budget growth even as the Great Recession wore on and housing values plummeted. In the years since, the financial town referendum (FTR) has empowered Tiverton taxpayers to keep the budgets down, but school surpluses continue, proving that tax increases can easily remain small or flat.