TRAVERSE CITY — Traverse Bay Area Intermediate School District Board of Education will hold a hearing on their fiscal year 2013-14 budget on Tuesday as board members consider whether to spend some of their nearly 58 percent fund balance.
The public hearing, scheduled for 8 a.m. at TBAISD's administration building, is an annual event required by state law, but this year the ISD board will examine three years worth of budget projections as part of an ongoing fund balance policy discussion.
A local superintendents' committee proposed the ISD establish a set fund balance amount and a policy to trim its $35 million in cash reserves to reach that point over a five-year period through distributing funding or additional services to local districts. One ISD board member alternatively suggested lowering the local taxes that partially fund ISD operations.
TBAISD Board President Joseph Fisher said the ISD built its reserves over the years through responsible and conservative fiscal practices.
"We're not hoarding money because it looks good," Fisher said.
TBAISD's fund balance grew by about $11.6 million between 2008 and 2012, according to audit reports.
Revenues exceeded expenditures in vocational education and special education funds during that time, while the opposite generally was true in a general education fund, two capital project funds and a comparatively small Michigan Works fund.
In fiscal year 2011-12 property taxes accounted for $7.2 million of the $8 million in total vocational fund revenues.
Expenditures from that fund totaled about $6.8 million, with about $6.3 million designated for instructional and support expenses. The vocational education fund balance grew by about $460,000 that year to $5.4 million, an overall fund balance of about 65 percent.
The special education fund received $19.5 million from local property taxes in fiscal year 2011-12 and another $25 million from other revenue streams, including state and federal funding sources.
The special education fund budget was about $41 million that year, including $35.6 million earmarked for instruction and support services and $4.8 million earmarked for "transfers to other districts and other transactions." Special education reserves climbed from $13.9 million to $16.5 million in fiscal year 2011-12, giving the account an overall fund balance of about 40 percent.
TBAISD Superintendent Mike Hill attributed the additional special education cash reserves that year to the reception of three years worth of backlogged federal Medicaid dollars.
The ISD has received the Medicaid funding spikes at irregular intervals, which makes budgeting for them difficult. But those spikes in large part have led to the ISD's large reserves, Hill said.
"In the mid-'90s we were at 3 percent fund balance," Hill said. "Mostly due to Medicaid is the reason why we are in the position we are in now."
Other factors -- like reducing line items and not replacing retiring staff -- also contributed to higher fund balances, Hill said.
Kelly Hall, president of the Traverse City Area Public Schools Board of Education, said the origins of the ISD's high cash reserves aren't relevant.
"It doesn't change the fact that they have this fund balance that is supposed to be spent on services for kids and it's sitting in a bank account," she said.
Hill said TBAISD is now caught up on Medicaid reimbursements, and he worried the intermediate district will need to tap into its reserves if the budget estimates he plans to present to the board remain true, including a $2.1 million special education fund deficit, an $836,000 vocational education fund deficit and a $278,000 general education fund deficit.
Fisher said what board members learn at the budget hearing will play into their ongoing fund balance analysis, but he said the special education fund balance should remain untouched, due to unpredictable costs tied to those services.
The vocational education fund might be a different story.
"I believe our vocational education balance, by any measure, is too high," Fisher said.