CUSD board member forces look at cash reserves

Jun. 29—Private citizen Kurt Rohrs has expressed concerns about how much cash the Chandler Unified School District keeps in reserve for while Governing Board member Kurt Rohrs is in a position to do something about it.

Rohrs alternated between both hats during the board meeting June 14 as he stepped away from the dais to address the board as a citizen to complain about the amount of money the district holds in reserves rather than return some to the state.

Now, his complaint will come front and center before the board at its Wednesday, June 28, meeting as it tries to determine exactly how many extra dollars CUSD has in reserves and possibly putting limits on that.

Rohrs placed an item on the agenda that he says would limit the district's reserves to 25% of its annual operating costs.

"That's substantial," Rohrs said.

How much CUSD has in reserves is a complicated question.

"Districts don't have a particular fund called a 'contingency fund,'" CUSD Chief Financial Officer Lana Berry said. "Like the state has a rainy day fund and, I believe, cities also have rainy day funds, school districts are not allowed to have that fund."

More than a year ago, before he won election to the board, Rohrs was quoted by a newspaper saying he believed the district had about $300 million in reserve.

He said that number was based on figures the Maricopa County Treasurer's Office provided him.

That's not close to the answer Berry gave Rohrs to his question on the topic during the budget presentation last July.

Berry told Rohrs then that ideally, the district would like to have at least 15% of all aggregate accounts as a reserve. Based on the district's current total budget of about $470 million, that would be $70.5 million. She said at the time, they did not have that much in unrestrictive reserves.

The district's operating budget for this fiscal year is $365.8 million. If Rohrs' suggestion of 25% of the operations budget passes, that would limit the district's reserves to about $91.5 million.

Rohrs said before he was elected that the district has too much money in reserve and should give some of it back to the state.

Before the board's June 14 meeting, Rohrs posted on his personal Facebook page, "Chandler Unified is concealing how much money they have in their contingency reserve fund. It appears to be well over $100 million."

He went on to say that he had requested an agenda item to discuss this in mid-May, but at that point no action had been taken.

District officials told him in private correspondence that before any item from a board member can be placed on the agenda, it must first be studied by staff and then reviewed by the district's legal counsel.

That was the reason for his item being delayed until June 28.

When he addressed his board colleagues as a private citizen June 14, Rohrs called on them to follow the state's sunshine laws and ensure greater transparency.

"My guess is that Lana, who is an excellent CFO, knows the number off the top of her head," Rohrs said. "What we're given to understand is that the official policy of district administration, or the previous administration, was not to reveal that number to the public."

So why is it so hard to know exactly how much the district has in reserve?

Berry says CUSD has 70 different funds, nearly all of them come with their own restrictions on how the money can be spent.

For example, Proposition 301 money can only be used for teacher salaries. The money for capital improvement raised during bond sales can only go toward the projects that voters approved.

Because the law does not allow the district to have a contingency fund, Berry says sound financial practice is to spend less than what might be available and keep reserves in each account, carrying them over to the next fiscal year.

Healthy reserves are a key factor in determining bond ratings, Berry said.

CUSD has a Triple-A bond rating with two of the three top rating agencies. That means it pays the lowest interest rates on the money it borrows.

Berry said the district is audited every year by an outside agency and publishes detailed financial reports that are available to download online.

She also pointed out that the reason the district wants healthy reserves is not just for the superior bond rating. There are times when that money is needed.

For example, at the start of the pandemic, the district spent $18 million from its reserves to help students learn from home and rapidly expanded the Chandler Online Academy.

The district did that without any guarantee at the time that the federal government would reimburse the costs — which it eventually did.

Berry said if there was another crisis, she does have the ability to move some money around to make sure bills get paid.

There are reasons to be concerned about how many dollars the district will have available in the future, she added.

First, CUSD's enrollment is in decline and that trend is expected to continue. Fewer students means less funding from the state.

Second the Aggregate Expenditure Limit has become an annual source of angst for school districts as they wait for the Legislature to waive it.

While lawmakers have already waived the limit for the 2023-24 school year, Berry said there is always a chance that a future legislature will refuse to waive it. That would force CUSD and most other school districts to immediately cut spending by as much as 20%.

Berry said CUSD could use its reserves to get through the short-term and finish the school year should that ever come to pass.

Another looming financial threat is the rapidly expanding voucher system that enables parents to send their kids to private schools.

here's also a new threat to district funding.

The Arizona's Department of Education reported at the end of May that the state's Empowerment Scholarship Accounts would cost taxpayers $900 million in 2024 because of the unexpected increase in the number of children being enrolled in private schools.

That may impact in the long run how much money the state allocates public school districts.

Berry said she is open to ideas on how best to handle the district's reserves, pointing out the Governing Board approved a change in January that restricts the district from spending more than 10% of its unrestricted reserves in a year without board approval.

"It's a good measure to have," she said. "We put it in place, just making sure that we're being good fiscal agents for the district."

Rohrs voted for that measure at the time, but said he was only doing so if staff put together a more substantial policy for handling reserve funds.

Six months later, Rohrs is no longer willing to wait on staff and is offering his own proposal.

The agenda for the meeting won't be published until June 26. However, Rohrs provided a copy of what he said is in his proposal.

He calls for the district to formulate a total contingency reserve fund balance, and to report that number to the board quarterly. In addition to limiting the total reserves to 25% of the operating budget he would continue the current policy of limiting withdrawals in any year to 10%.

However, he varies from current policy in the board's ability to exceed that 10% limit if it needed to.

Current policy states a majority vote is needed. Rohrs' proposal calls for unanimous support to exceed that 10% threshold.