This is intended to answer some questions about Los Alamos Public School (LAPS) reserve funds. It represents my opinion as a member of the LAPS Board and does not represent an official position of the Board or the Administration.
First, some basics. LAPS receives operational funding from four major sources. The State of New Mexico formula-based funding–normally referred to as School Equalization Guarantee or SEG funding–is about $26.3M for the upcoming school year. We receive $8 million a year from the DOE and about $3 million in grant funding for the coming year. Grant funds vary from year to year and normally have restrictions–Title I, Title II and Title VII are examples of these types of funds.
We also earn about $1.8 million net after expenses from leasing school facilities.
This does not include capital funding that comes from local school bond elections and, potentially, the State. State funds in this category are typically referred to as Public School Facilities Authority (PSFA) matching funds. Based on New Mexico law, money from school bonds can only be spent on capital items, e.g., equipment, major renovations, buildings, not on school operations, e.g. salaries, consumables.
Over time, LAPS painfully built up about $7.8M dollars in reserves by sequestering a portion of lease revenues. Our reserves are greater than the state requirements—which are about $2 million–and were created over the past 8-10 years by LAPS Boards to be used for unexpected non-recurring expenditures.
In the past, reserves have been expended to avoid LAPS layoffs and the loss of many school programs due to the statewide downturn in education funding in 2009-2010 and, recently, county-assisted upgrades to one leased facility. There have been no significant additions to the fund since 2008-2009 other than to rebuild our balance after the 2010-2012 expenditures.
Reasonable and often-asked questions are, “When and how these funds should be used?” and “How much should we hold in reserves?” Currently, there is no formal policy that answers those questions. Past Boards have indicated that possible uses would be to ease the pain of DOE funding cuts or reductions in lease income. The current Board has discussed using reserve funds to upgrade leased facilities and even adding to leased facilities, thereby adding to ongoing operational income.
The current Board has also discussed holding reserves for future capital projects (more on this in the next paragraph), as well as other one-time expenses. This year, in a controversial action, the Board voted to allocate $767,000 of reserves to salary increases. This allocation of non-recurring revenues to recurring expenses resulted in a divided vote on the budget.
One potential use of remaining reserve funds would be to fund new school construction. LAPS has been fortunate to have state funds to supplement our bond funds to rebuild major parts of our high school, our middle school, and Aspen elementary school. Our public has been generous. State contributions to these projects have been several million dollars.
For example, Aspen construction benefited from more than $5 million in State funds. Given current paucity of State funds, LAPS should not depend on continued state funding for capital improvements or construction.
Unfortunately, Los Alamos County’s property tax base is not sufficient to rebuild an elementary school with our own bonding capacity. Since three of our four remaining elementary schools are on the State’s “bottom 100” list and maintenance costs are high and increasing, LAPS has begun planning for a 2017 bond election to rebuild another elementary school.
If successful, the bond proceeds, coupled with most of our reserves at the current level, will be sufficient to build an elementary school even if State finances do not permit a State contribution. If State funds become available to supplement LAPS bond funds (the highly desired outcome), LAPS may be able to maintain its reserves.
Another significant issue that may be addressed with these funds is our aging leased facilities. Maintaining the leased facility income stream will require significant capital investment over the coming years, and these requirements will need to be funded from our reserves.
The Board recognizes the importance of prudent management of public funds as well as challenges with uncertainty in building, maintaining, and using reserve funds. Partly for this reason, the Board asked the administration to develop a charter for a standing budget/financial committee to assist the Board in developing formal policies with respect to district financial operations and budgeting. The committee will include members from within the district and community members. Check the school website in a month or so for a Budget/Finance Committee Charter and list of members