Kansas should tap school districts’ cash reserves beyond a set amount to help pay for future education spending, efficiency consultants for the state recommend.
Alvarez & Marsal, a consulting firm hired by the Legislature to review the state’s budget, recommended that the state cap the amount of money school districts can build up beyond their operating expenses.
The firm, which released a 292-page final report to lawmakers on Tuesday, said the state should require districts to have a minimum cash balance of 10 percent of their operating budget and a maximum of 15 percent. Any dollars beyond the maximum would be deducted from future funding under the firm’s recommendation.
The firm, which had a $2.6 million contract to conduct the study, estimates that this policy would save $193 million over five years and would save $40 million if implemented for the next fiscal year, which begins in July.
The idea has been considered before but has met with backlash from school officials, who say the cash reserves are needed to ensure schools can continue to operate in the face of a crisis.
Rep. Ron Ryckman, an Olathe Republican and House Appropriations Committee chairman, said the recommendation — unlike previous proposals to tap reserves — offers districts “a sweet zone” to aim for when building up reserves.
“I think that’s something that our school districts would appreciate, that if we were to adopt something like that, they would have a target,” Ryckman said. “I think we’ve been all over the place. In years past, we’ve said you need to build reserves and then we’ve said, hold on, you have too many reserves. If nothing else, this would provide stability.”
Mark Tallman, a lobbyist for the Kansas Association of School Boards, said school districts have concerns about the plan.
“School board members by and large tend to be fiscally conservative people. They really do,” he said. “And I think their tendency is if we’re in kind of a risky environment, that natural tendency of let’s save to be prepared because we don’t know what’s going to happen.”
If the state wants districts to lower balances, then many districts would look to spend that money, Tallman said, adding that he doubted it would help the state’s overall cash balance.
A spokeswoman for the the Shawnee Mission school district said it has about $27.8 million in unencumbered cash balances, which is about 11.1 percent of operational expenses.
The Wichita school district had about $127 million in unencumbered cash balances as of July, which a district spokeswoman said was 17 percent of operating expenses, slightly above the efficiency study’s target.
One reason the district’s reserves go over the 15 percent mark is to ensure funding for its insurance plan, the spokeswoman said, noting that total reserves had fallen by $24 million since the previous year.
Alvarez & Marsal have also recommended consolidating school districts’ health plans into one statewide plan, which would save an estimated $360 million over five years. Individual school districts currently have their own benefit plans.
The firm has made more than 100 recommendations to the Legislature that it says could collectively save the state $2 billion over five years. Some 87 percent of the savings come from 21 recommendations, which Ryckman said lawmakers would prioritize.
Among the top recommendations: Hire 54 more collection officers at the Department of Revenue and fill 14 vacant auditor positions. Together, those recommendations are estimated to bring in $321.8 million in tax revenue over five years.
Ryckman said that some of the recommendations can be in place by next fiscal year and that House members will begin working on crafting legislation.