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In hard times, Hillsborough schools have $338 million in reserve fund

TAMPA — Fewer bus stops for children, and less transportation for magnet programs. Less money to pay retired teachers who want to keep working. Less time for art classes.

In the Hillsborough County schools, as in most districts, these are hard times. But even as the declining economy has forced hard choices, the school system has been salting away money for an even rainier day.

By last summer, the district's reserve fund stood at $338 million or 22.6 percent of its $1.5 billion general fund, up from less than 5 percent in 2005. By comparison, Pinellas and Pasco counties managed to set aside 7.2 percent, with just 3.7 percent in Hernando.

Hillsborough officials say their true contingency fund is $92 million or around 5 percent of revenues, with other reserves backing retiree benefits or keeping programs afloat after grant money runs out.

But officials acknowledged that much of the reserve fund has been rolled over from year to year, and most of the $338 million can be used for any purpose.

And if tomorrow brings a fiscal catastrophe, superintendent MaryEllen Elia said the district is ready.

"We can weather a storm," she said, whether it's a direct hit from a hurricane or prolonged recession. "Either one of those or both could occur."

But with staff furloughs still on the table when contract talks resume Monday with the Hillsborough Classroom Teachers Association union, healthy reserves may complicate efforts to ask employees to sacrifice.

"At the very least, it takes off the table any need for a discussion about salary reductions," said union president Jean Clements. "We are not on the verge of disaster, so we don't have to take drastic measures to reduce salaries or jobs."

Reserve funds have always been a hot topic in Florida, with teachers unions often pressing to spend and districts pushing to save.

The Florida Association of District School Superintendents recommends a reserve of 3 to 5 percent, and districts get a scolding from state auditors — as well as lower bond ratings and higher interest rates — if they go below 2.5 percent.

Last winter, with tax revenues plunging, the Florida Legislature raised the bar, requiring districts to submit an action plan if they fell below 3 percent.

That guidance was too late for the Jefferson County schools, which this spring declared a financial emergency after draining its reserves.

William Montford, CEO of the superintendents association, said the state has only recently come to the conclusion that reserve funds are a necessity.

A few years ago, he said, the Legislature and Department of Education argued against building up large reserves, saying state funding should be spent on teaching students.

"Now the state has turned the complete opposite and said you need a healthy reserve," Montford said.

No one needed to tell that to Hillsborough, which has more than doubled the size of its fund in the years since Elia took the helm in 2005.

Finance director Gretchen Saunders said some of the current $338 million has been used to pay for things the state or federal government has stopped funding, like school nurses and occupational therapists for special-needs students.

The contingency fund of $92 million is there if the district needs to meet payroll and pay vendors during a catastrophe, she said.

Pinellas County schools set aside a 2.52 percent or $23.7 million contingency fund within its larger $63.4 million reserves last year.

"Which was good, because the previous year we were at 1.33 percent," said Fred Matz, assistant superintendent for finance.

He said the district learned the value of a healthy reserve last winter when the state held back promised money.

"When we lost over $14 million this year, we were able to take it from our contingency and not impact anything else," Matz said.

Those cutbacks were magnified in the 190,000-student Hillsborough schools, which had cut around $82 million over two years from the budget when contract talks with the union were put on hold last spring, as negotiators awaited the state budget.

Hillsborough cut art classes to 30 minutes, once a week, and put retired teachers on notice that they'd have to accept far less than their old salaries if they hoped to keep on working. (Around 130 retired teachers have since been rehired at $39,800, the salary of a fifth-year teacher.)

One cost-cutting measure that had been proposed by the district — two or three days of furlough for teachers, administrators and most staff — may still become necessary if enrollment or revenues fall too far, Elia said.

Union officials say they're pleased that the district has managed its money carefully, even awarding a 2 percent raise last year after voters rejected two property tax amendments to the state Constitution that could have cost millions in lost revenue.

"If the economy continues to sour, then obviously we'll have to make tough decisions later," said Clements, the union president.

Elia said she, too, will have one eye on the economic horizon, and the possibility the recession will outlast two years of federal stimulus money.

"Hillsborough, at the end of two years, at least has funds and won't go over a cliff," she said.

In hard times, Hillsborough schools have $338 million in reserve fund 06/05/09 [Last modified: Monday, June 8, 2009 2:43pm]
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