Rainy Day Fund

Why Shelby County Schools has $84 million sitting in a savings account

Say your home air conditioner dies, and it’s August in Memphis. You don’t have enough in your checking account to cover the cost of a new one, but you have just enough in savings. The problem: After you’ve cleaned out savings, what if your car breaks down too?

That’s part of the rationale behind Shelby County Schools’ $84 million “rainy day” fund.

“I look at it as, ‘What (amount) do you feel comfortable with, not only for the short-term risk but the long-term risk?’” Finance Chief Lin Johnson told school board members last month in explaining the rationale behind the district’s fund.

Still, the stockpiled cash has raised eyebrows in a district serving a large number of impoverished students — as its leaders complain of being woefully underfunded by the state. (The district’s funding lawsuit against the state continues to wind through the courts.)

As the district’s fiscal year ended on June 30, the stash actually could have been more than $84 million. But in May, the school board asked Superintendent Dorsey Hopson to begin shifting more savings to address a backlog of needs — for instance, hiring more school personnel and repairing aging buildings. His administration responded with $33 million in reallocations.

Johnson warned that the board should tread lightly when raiding the fund. Here are some frequently asked questions:

Why does Shelby County Schools have a rainy day fund?

The district needs some padding to cover expenses throughout the school year as it waits for revenue from dozens of sources ranging from federal Title I funding to various government and philanthropic grants. While the money flows in at different times, the district still needs cash to operate without interrupting services. This fund keeps everything running smoothly and also is available for emergencies.

Do similar school districts keep this level of cash?

Between 4 and 12 percent of a district’s operating budget is standard practice, according to the Council of Great City Schools, a group of urban school districts that share data on best practices in academics and operations. Shelby County Schools reserves about 8 percent. Johnson, who is considered a conservative budgeter, would like to see a rainy day fund of between 10 and 15 percent.

PHOTO: Caroline Bauman
Lin Johnson, finance chief of Shelby County Schools

“I am not comfortable with 8 percent,” he told board members. “If we’re over 15, I think the administration needs to provide a plan to spend that down so we’re not having an excessive fund balance.”

Still other government organizations are even more conservative about having savings on hand. The Government Finance Officer Association recommends no less than two months of operating expenses, or 16.7 percent. If Shelby County Schools followed that standard, its savings would stand at $164 million. (The association notes that large cities, counties or school districts need less cash on hand because they’re better able to predict risks.)

But shouldn’t that money go to schools and kids?

In some ways, it already does. Part of the purpose behind reserves is to support services for students. But if it’s excessive, then it takes away from kids in the classroom. It’s the job of school board members like Kevin Woods to determine how much is enough.

“If there are great things we need to be accomplished right now… then we probably should try to get those things done and not keep that money in the bank,” Woods said.

At the same time, Woods cites concerns about proposed federal budget cuts that could trickle down to districts.

That’s the tension.

How does the district figure out how much cash to stash?

Shelby County Schools weighs risks, some specific to the district and some that apply to any school system. Memphis leaders are closely watching the possibility of private school vouchers being introduced in Shelby County under a proposal in the legislature. The growth of the city’s charter sector and municipal districts, as well as the possibility of more school takeovers by the state-run Achievement School District, also have the potential of siphoning off funding from Shelby County Schools. Then there are the usual challenges such as changes in state and federal funding and increases in the share of students with disabilities.

state of the state

Whitmer: Michigan needs ‘bold’ changes to fix schools — not just more money

Gov. Gretchen Whitmer delivers her first State of the State address on Tuesday, Feb. 12, 2019.

Michigan’s new governor called for “bold” changes to the way schools are funded — though she’s not saying what those changes could be.

Gov. Gretchen Whitmer, a Democrat who took office last month, devoted a large part of her first State of the State Address on Tuesday night decrying a “crisis” in education defined by alarming declines in childhood literacy.

Those declines can’t be blamed on students or schools, she said.

“Our students are not broken,” she said. “Our teachers are not broken. Our system has been broken … And greater investment alone won’t be enough.”

Whitmer offered no specifics about the reform she wants to see, but said she didn’t think incremental changes would be enough to fix Michigan schools.

“Phony fixes won’t solve the problems,” she said.

“A government that doesn’t work today can’t get the job done for tomorrow,” she said. “That ends now. As a state, we must make the bold choice so we can build a stronger Michigan.”

Whitmer is expected to propose her first state budget next month. She said that budget will “give our frontline educators the tools they need to address the literacy crisis.”

Her comments come amid a growing chorus from education and business leaders across the state who have called for funding schools differently, giving schools more money for students who cost more to educate, such as those who are learning English or living in poverty. That would be a departure from Michigan’s current system of giving schools largely the same amount per student, regardless of that student’s needs or background.

A report from Michigan State University last month found that Michigan had seen the largest education funding decline in the nation since 2002 and currently has one of the nation’s lowest funding levels for students with disabilities.

Changing school funding could pose a challenge to a Democrat working with a Republican-controlled legislature.

Whitmer’s hourlong speech was greeted warmly by Democrats who cheered her policy proposals but drew less support from people across the aisle.

At one point, she seemed concerned that only Democrats stood to applaud a line about “generations of leadership” failing Michigan children.

“I know Republicans love education, don’t you?” she asked.  

Whitmer invited Marla Williams, who teaches special education at Detroit’s Davison Elementary School, to the speech. She praised her for “tireless” advocacy that includes visiting children when they’re sick and doing their laundry.

“That’s because she — like so many Michigan educators — knows teaching is more than a career. It’s a calling,” Whitmer said. “I want to send a message to all the devoted educators across Michigan: You’re not failing us. We have been failing you.”

Detroit teacher Marla Williams waves during Michigan Gov. Gretchen Whitmer’s State of the State address.

The only specific education policy proposals Whitmer offered in her speech involved helping high school graduates attain career certificates or college degrees.

She proposed a scholarship program called MI Opportunity Scholarship that would guarantee two years of debt-free community college to qualified high school graduates.

Whitmer said this would make Michigan the first midwestern state to guarantee community college to all residents, but the impact would be minimal in the 15 cities — including Detroit, Flint, Grand Rapids, and Kalamazoo — that already offer free community college through Promise scholarships.

Whitmer’s proposed scholarship would also provide two years of tuition assistance to students seeking four-year degrees at nonprofit colleges and universities. She said the option would be available to all Michigan students who graduate with a B average.

The Detroit Promise scholarship pays the four-year tuition for students who earn a 3.0 grade point average and score above a 21 on the ACT, or a 1060 on the SAT.

Whitmer’s scholarship proposal bears some similarities to a popular Michigan scholarship called the Michigan Merit Award that gave scholarships to students who earned high scores on a state exam. That program was cut from the state budget over a decade ago.

First Person

Denver teachers are stepping up. It’s time for Colorado voters to do the same.

PHOTO: Kirsten Leah Bitzer

I’m a Denver social studies teacher, and I am striking today with my colleagues as we fight to make teaching in Denver schools a sustainable career.

Yes, it must be noted that Denver Public Schools is top-heavy, and more of the district’s funds should be directed toward professionals who have direct contact with students. But amid this pitched battle between district and union, it’s also important to realize that our current moment does not exist in a vacuum.

Twice in the last six years, we’ve watched ballot initiatives that would have significantly increased Colorado education funding fail. Amendment 73, which lost last fall, was projected to raise $1.6 billion a year. Much of this revenue would have gone to local districts, which could have boosted teacher salaries and added programming for students.

Colorado’s Taxpayer Bill of Rights played a significant role in creating this situation, through its draconian limits on our representatives’ ability to raise additional needed funds and its requirement that ballot measures effectively be presented to the public with the costs as a headline and the benefits as a footnote.

But there are other forces at work here, too. Last year, the state’s Chamber of Commerce and business-oriented lobbying groups celebrated the demise of Amendment 73, the latest attempt to bring Colorado’s education funding to an appropriate level — even as some business leaders have expressed concern over the lack of fully prepared graduates.

The result? Denver Public Schools’ and the teachers union’s proposals are currently separated by $5 to 8 million. While our state’s $345 billion economy booms, we are fighting for scraps.

It shouldn’t be this way. An investment in teachers is an investment in our students, and in our civic and economic future. This is challenging, essential work that requires us to contend with competing answers to a recurring question: What is the purpose of schooling? As teachers, we work to balance many answers, from teaching our subject matter to instilling work skills, modeling interpersonal skills, developing citizens, and cultivating creativity.

As a social studies teacher, I’m driven to help my students understand the world as it is while also giving them the tools to reimagine it. So as my colleagues and I strike, I hope my students and my neighbors will think about what education activist Margaret Haley said 115 years ago.

“A grave responsibility rests on the public school teachers and one which no fear of opposition or misunderstanding excuses them from meeting,” she said. “It is to organize for the purpose of securing conditions that will make it possible for the public school, as a democratic institution, to perform its proper function in the social organism, which is the preservation and development of the democratic ideal.”

This is why we are organizing, today and in the future. We deserve pay that is commensurate with the demands of our work and a level of education investment that reflects the vital importance of our schools.

When the district and the union reach an agreement, which I am confident will happen soon, we will be closer to that goal — but we will not be there yet. Whereas teachers in West Virginia and Arizona were able to pressure their legislators to raise pay statewide, Denver teachers are stuck negotiating with a district starved of funding from above. Our state cannot endure this neglect forever.

The next time education is on the ballot, I hope Coloradans will invest in our students and our future.

Peter Wright is a teacher at Denver’s Northfield High School, serving students from Stapleton, Park Hill, Montbello, Green Valley Ranch, and beyond.