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Cash Reserve does not create additional spending authority in the General Fund. Cash Reserve is a way of increasing the checkbook balance to come closer to the credit card limit as was illustrated earlier in our discussion. In past years, the State Legislature has had state aid reductions which has reduced the amount of state aid that was paid to the local school district. This did not reduce the spending authority (or credit card limit) but reduced the amount of cash to fund that spending authority during that specific year. A Cash Reserve levy allows property tax to replace those dollars that were not received from the state. Cash Reserve may also be used for cash flow between times when revenue is not received on a regular basis, such as during the summer months. Again, it is important to remind you that levying a cash reserve without authorization from the School Budget Review Committee to increase spending authority does not allow an increase in the maximum budget for the school district.
The School Budget Review Committee has established a cash reserve limit standard as to when it is considered unreasonably high in the eyes of the School Budget Review Committee for a district to levy cash reserve. Therefore, they created the following rule: A cash reserve cannot exceed 25% of the year prior to the base year expenditures, minus the cash balance for the same year. The base year is usually the previous school year, which is represented by your last Certified Annual Report (CAR). |
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