GOLDRICK: Drawing from our town’s cash reserves is our moral responsibility

Sean Goldrick was a member of the BET for four years.

Public school parents have reacted with outrage to the BET Republicans’ slashing more than $3 million from the Greenwich schools’ proposed budget. And well they should, especially since the cuts came in spite of the town’s sitting on $74.6 million in cash reserves.  But there is a good deal of confusion about what those reserves are, and how they’re supposed to be used.  So I’ll try to explain.

Those cash reserves, often referred to as the town’s “rainy day fund,”  are equivalent to nearly 17% of the town’s operating budget.  The reserves were accumulated to be used in precisely the type of situation we’re facing today: a short-term economic downturn or natural disaster, that requires higher cash outlays, or results in a short-term reduction in tax and other revenues to the town.  They’re meant to bridge the short-term gap until either the town’s revenues recover; the town can access capital markets for longer-term borrowings; or make adjustments to spending and property tax rates.  
The town’s cash reserves are held in three funds.  The largest, containing $63 million, is called the “general fund balance,” or more specifically, the “general fund balance- unallocated.”  There are also two smaller funds.  The “capital non-recurring fund,” holding $10 million, is tapped when a capital asset is damaged or destroyed, and the town needs to use its own cash to repair or rebuild it before insurance reimburses the town.  We accessed that fund after Hurricane Sandy, and to pay for repairs to the GHS auditorium after flooding caused by broken pipes.  The third fund, with $1.6 million, is called the “risk fund.”  It is used to pay for legal settlements against the town.  Both the capital non-recurring and risk funds are considered “allocated,” meaning that they cannot be used for other purposes, such as filling a budget deficit.

Some have claimed that the BET Republicans’ education budget cuts were justified, because the budget is already taking $19.1 million from fund balance: $15 million to balance the budget, and $4.1 million to cover a deficit at The Nathaniel Witherell nursing facility.  

In fact, the town of Greenwich taps the general fund to balance its operating budget every year.  Over the past five years, that amount has ranged from $11.5 million to $14.4 million.  Three years of the past five, the town has used an additional $3-4 million to replenish the operating fund for the town-run Nathaniel Witherell nursing facility.  So this year’s total projected use of fund balance of $19.1 million is not unusually large relative to the amounts allocated from fund balance in previous years.

It’s important to understand that even though we allocate between $11.4- $19.7 million each year from cash reserves to “balance” the operating budget, and though the town appropriates millions of dollars annually in additional interim appropriations, at the end of each fiscal year for the past decade, fund balance has actually increased.  Indeed, the town has accumulated the entire $74.6 million in cash reserves over the past decade despite supposedly drawing down those reserves each year to balance the budget.  The reason is that the town inadvertently builds in operating surpluses of millions of dollars every year.  This year is likely no different.  So even should the town draw down more cash to support the schools budget, the fund balance is not likely to decline significantly, if at all.

One more thing. I asserted cash reserves total nearly 17% of operating budget; RTM finance committee chairman Mike Basham recently claimed that the town will have only $49.6 million at the end of the year, just 11% of the proposed budget.  Why the discrepancy?  Simply put, he’s quoting a figure based on a formula rating agencies use when calculating cash reserves for their fiscal metrics, which subtracts the use of fund balance and ignores the “allocated” funds.  It also fails to acknowledge that the town routinely ends up with greater cash balances every year.  The point is that the town has tens of millions of dollars in cash reserves available to support our schools budget, millions that were taken from taxpayers’ pockets to be used in precisely this type of short-term situation in order to avoid the cuts that the BET Republicans are demanding we incur.  We were not taxed tens of millions of dollars to have that money sit unused forever.  

Drawing an additional $4.5 million from cash reserves to support special needs children, prevent teacher layoffs, and retain our critically important support staff is not just common sense, it’s our moral responsibility.  Doing so also affirms our respect for teachers’ right to collective bargaining by honoring the contracts that the town and teachers union entered into in good faith negotiations. To do otherwise would damage our schools, and shortchange our children’s educations.