The school district’s 2015 financial audit is complete and the district’s budget ended the year in surplus of $3.8 million. Unfortunately, $3.3 million of that surplus was spent on building maintenance and equipment. Staggering building costs continue to eat up the budget.
Savings increased $550,000. The district has built about $4 to $5 million in savings. This is a far contrast to 2010 when the district was facing a $2.75 million deficit and had negative savings, having to borrow money to meet payroll late that year.
This improvement is due primarily to these reasons: Unlike surrounding school districts, our school board bit the bullet and made permanent reductions in spending in 2010 and 2011. As a result the budget deficit that year and for years to come was wiped out.
The economy rebounded and as new revenue started to flow-in in 2012, 2013 and 2014, the board limited annual spending growth, and surpluses and savings began to build. A by-product of this fiscal austerity was it altered the culture by making employees more cost conscious. Looking at the details of the audit, actual spending for hundreds of items were below budgeted expenditures. The district leadership and employees have done a good job of keeping actual spending under budgeted spending the past few years.
Combing through the audit, total debt is $303.1 million.
The district’s retirement benefits liability is $142.7 million. By the way, 31% of the state’s pension assets are now invested in the stock market. Another 31% are invested in even riskier assets like hedge funds, private equity and debt, as well as commodities. It is assuming a 7.5% annual return.
The financial condition of the district has improved significantly. Longer-term, total debt is staggering, over $300 million. The pension liability is probably $250 million given market returns are likely to fall short of 7.5%. The audit doesn’t mention the district’s long-term medical liability is, but it is probably north of $200 million and going higher because ObamaCare continues to ratchet up medical costs.
Many state and local governments look the same way, better in the short-run, but buried in debt and having made too many promises they’ll never be able to afford in the long-run.
Pickens County School Board Trustee