A report from the New York State Association of School Business Officials bolsters the decision by Moody's Investor Services to lower St. Lawrence County's bond rating.
In a recent survey of its members on the status of their fund balances, NYSASBO said that more than half of schools responding said they had used some of their fund balances to make up at least 10 percent of their budgets.
This survey was prompted by a previous report issued jointly with the NYS School Boards Association that reported 99 percent of school districts tapped their fund balances to plug holes in their budgets, due to limitations in state aid and the property tax cap.
Moody’s announced Wednesday it was downgrading to Baa1 from A3 the rating on St. Lawrence County's (NY) Series 2001 Lease Rental facility Revenues Bonds, affecting $6.2 million in outstanding lease revenue debt.
Moody’s said the downgrade was at least partly prompted by “the expectation that management will continue to use fund balance to support operations, further straining the county's financial flexibility and liquidity.”
The downgrade reflects the belief by Moody’s that “the county's financial position that has continued to deteriorate as a result of significantly weaker-than-expected fiscal 2011 financial operating results, further pressured by a significant receivable that may not be realized. The Baa1 rating also factors in the county's moderately-sized tax base with a below-average socio-economic profile, and a manageable debt burden with a slow amortization rate.”
St. Lawrence County is one among many municipalities and school districts who have been forced into using some or all of their reserves, or “rainy day” funds, to arrive at budget plans made more difficult by a state-imposed cap on tax increases just as revenues were reduced and expenses continued to climb.
The NYSASBO reports that 81 percent of respondents (250 of out 697 school districts) said they would exhaust or spend down their fund balances within five years if limitations on state aid and the tax cap remained in place. 31 percent of respondents replied they would exhaust their fund balances within the next 18 months.
More than half of school districts – 56 percent -- reported that at least 10 percent of their 2012-2013 operating budget consisted of monies from their fund balance.
"Many school districts, especially those in low wealth rural and urban communities, will be facing both educational and financial insolvency within the next couple of years," said NYSASBO Executive Director Michael. J. Borges.