Q: How much does the State require East Side to keep in general reserve?
A: The State general reserve requirement depends on the size of the district average daily attendance (ADA). East Side is required to have a minimum of 3% of the district's General Fund Expenses (unrestricted and restricted combined).
Q: How much is 3% of East Side's General Fund expenses? How much does East Side have in its general reserve?
A: As of 13/14 Unaudited Actual, 3% of East Side's General Fund expenses is $6.5 million dollars. East Side's Board approved that the District should maintain a minimum of 6% general reserve in November 2012. Currently, East Side has 18.7% in general reserve for 2013/14. The reserves help support the district in regard to budget balancing and provides an additional reserve in the event of another economic downturn.
Q: What happens if a district does not have the required minimum reserve?
A: The State minimum requirement for general reserve is for 3 years, the current fiscal year and 2 projected budget years. If a district, has only enough reserve for one out of the three budget years, the district would have a "Qualified Budget". If a district that cannot meet the minimum reserve requirement for all 3 years, (current fiscal year and 2 projected budget years), the district would have a "Negative Budget".
For a "Qualified Budget" district, its senior administrators are required to come up with a budget plan for the County of Education and the State to show that the district will cut expenses or increase revenues to build up the general reserve to meet the requirement.
For a "Negative Budget" district, the County will send staff to help monitor the district's budget. In a very severe case or the or the district declares "bankrupt"' the State will take over and run the district. All district senior administrator will be dismissed. District's teacher and classified unions will not be able to ask for any additional benefits and could also suffer a reduction in salary and/or benefits based on a determination of State assigned administrator. Additionally, the district's Governing Board would lose all power of decision making.