Info on E&D Reserves

The level of Excess and Deficiency (“E&D”) funds for FY 2012 was a critical issue in determining the FY 2012 HWRSD budget.  E&D funds are the amount of unrestricted funds held by a regional school district at the end of the school year which it can use for unplanned future needs.  The revised FY 2012 budget adopted by the School Committee proposes that approximately $830,000, or 3% of the total district budget, remains in E&D for unplanned uses. Wenham voters approved a higher level of E&D than Hamilton voters, and this level is a compromise.  Another $682,000 of E&D will be used for operational expenses and capital expenses during FY 2012.  In the revised budget, E&D will be at its lowest level since June 30, 2007.

You can benchmark E&D among all the other regional school districts by determining the percent of their total budget represented by their E&D reserve.  As noted in The Community Connection and the memo from the Department of Revenue on Free Cash (another name for E&D), both posted below, 3% is a recommended minimum level for E&D. State law requires E&D in excess of 5% of the annual budget to be applied against expenses in the following year.   The chart below shows E&D as a percent of the total budget for 59 regional school districts (eliminating those which are technical, agricultural or vocational schools).

 

DOR certified E&D for FY 2011 as a percent of FY 2010 Spending

DOR certified E&D for FY 2011 as a percent of FY 2010 Spending (Click to enlarge)

The chart was developed using FY 2011 E&D levels reported by the MA Department of Revenue and FY 2010 Total Expenditures reported by the MA Department of Elementary and Secondary Education.  The chart shows that 61% of the districts have E&D at or above 3%. The average E&D level for all districts shown is 3.3%.  HWRSD’s E&D for FY 2011 (the current school year) was 3.4% of its FY 2010 spending, as shown in the chart.  Based on the position of the majority of the Hamilton Selectmen, the School Committee adopted a final FY 2012 budget that has E&D at approximately 2.3% of the budget, which would place us near the bottom quartile of the FY 2011 data.

The 2011/2012 Community Connection, published in April 2011, by the  Town/School Budget Process Committee – (PDF, 11 pages)

Department of Revenue Advice on Free Cash (E&D) – (PDF, 1 page)

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