Kenosha Reporter

School finance involves understanding several key concepts, one of which is the fund balance. This financial buffer helps school districts manage expenses and avoid borrowing. Contrary to common belief, a fund balance is not just a rainy-day fund.

A fund balance represents the difference between a district’s assets, like cash and investments, and liabilities, such as outstanding expenses. In Wisconsin, school districts receive property tax and state aid payments at various times during the year, leading to significant fluctuations in cash flow. Without an adequate fund balance, districts might need short-term loans to cover bills and payrolls—a costly option given current high interest rates.

These reserves are crucial for covering unexpected costs and stabilizing cash flow since funding is not consistently received throughout the year. The Wisconsin Association for School Business Officials provides examples illustrating how revenues and expenses fluctuate over the fiscal year.

One-time funds from the reserve should not be used for ongoing operational expenses that create long-term budget obligations because rebuilding these reserves can be challenging once depleted.

Some key facts about fund balances include: A healthy fund balance typically ranges between 20% to 25% of a district’s annual expenditures or two to three months of general fund expenses; Fund balances vary by district but aim to avoid short-term borrowing; These balances change daily but are officially reported on June 30 each year; KUSD's unassigned fund balance as of June 30, 2024 was 23.7%; While cash is an asset, a fund balance encompasses other financial elements.

Fund balances play an important role in avoiding short-term borrowing and associated interest costs while maintaining financial stability. They can also generate revenue through investments during periods of high interest rates and protect academic programs during uncertain times.