Manatee schools feel the pinch of spending their reserves
Facing big budget shortfalls, the Manatee school district over the past few years has resorted to some tough choices -- pay cuts and layoffs among them. Its decision to dip into reserves to cover costs could have more long-term effects.
Fitch Rating has downgraded some of Manatee's debt, a move that often is followed by increased interest rates. A key culprit, according to Fitch, is Manatee's shrinking reserve accounts, which already had been viewed as too low just a few years ago.
"DOWNGRADE DUE TO DECLINING RESERVES: The downgrade of the implied ULTGOs and COPs reflects the decline in the district's already minimal reserve levels to below its adopted policy of 3% of spending. The district's financial flexibility is further diminished by the severity of expenditure reductions made to date. The new rating incorporates Fitch's expectations that operating margins will continue to remain slim."
The district's low fund balances are a further driver. Fitch held out some hope that the Florida Legislature's move to increase education funding will help Manatee, even though district officials have said they think the funds will simply cover rising costs and revenue lost from other sources.
Teachers in Manatee and all over Florida have gone without raises for years. Some have encouraged their school boards to use reserve accounts to help employees make ends meet. Given that low reserves generally have negative financial implications in the ratings agency world, is this still a path districts should consider?
If not, where should districts find money for added salaries? In Hernando, employees last year got a half-step, but now the district is looking at taking away two paid holidays. Other tradeoffs sound good?