SEE ALSO: Why school districts hang on to surpluses

The governor's office and state Department of Education are wagging the finger at school districts, saying they're pleading for more money at a time the state believes they should just turn to their reserve funds.

Pennsylvania Department of Education spokesman Tim Eller said the 500 districts statewide have a combined $3.2 billion in fund balance, and there's no reason not to use that before asking the state for more money.

Many districts have big surpluses, he said, much more than needed.

"This is a time when they need to dip into it," Eller said. "A certain level is prudent. But some districts have 10-30 percent of their budgets in reserve."

As school districts finalize their budgets this year, the state released financial data on districts' fiscal state at the end of the 2010-11 school year, the most recent available.

Those figures indicate:

---Districts in York County have on average less in their fund balance -- surplus tax revenue -- at the end of the 2010-11 school year than the

year before.

The dwindling surplus indicates districts were using it to make up for a lack of state funding or to reduce tax hikes. Five county districts didn't have a tax increase in 2011-12, and several others had a tax hike of about 1 percent.

---Even after using surplus to balance their budgets, districts in York County and statewide still have millions sitting around as they complain about a shortage of state funding.

Five districts ended 2010-11 with more than $10 million in their fund balances. Only York Suburban, which philosophically doesn't carry a large fund balance, had less than $1 million overall.

Districts' reaction: But local school district business managers say a website set up by the governor's office -- www.investinginpastudents.com -- highlighting how much districts have in their fund balances is misleading.

For one thing, $3.2 billion might sound like a huge amount but breaks down to about $6.5 million per district, right in line with what an average district's budget would call for, according to business managers.

Out of that $6.5 million, most districts set aside at least part of their fund balance for assigned, expected costs, leaving only a portion available for any other use, such as lowering taxes.

There are other explanations for high fund balances. Some districts, including Spring Grove and West York, have a higher fund balance because they self-insure and need extra money in case of an insurance claim.

In recent years, Spring Grove has eliminated positions, cut field trips and technology spending and undertaken other cost-saving measures, said Spring Grove business manager George Ionnaidis.

So the state's implication that Spring Grove or other districts are hoarding money is inaccurate, he said.

"We've done everything the Legislature and the governor and the public has said," he said.

York County business managers said it's also possible to have a healthy fund balance and minimal tax hikes.

Red Lion business manager Terry Robinson pointed out his district didn't raise taxes this school year; Red Lion ended the 2010-11 school year with $11.7 million in its overall fund balance, about $4.7 million of that unassigned.

Central York, which didn't have a tax hike this year and doesn't propose one next year, likes to keep its unassigned fund balance around 8 percent of its total expenditures, business manager Brent Kessler said. The state allows districts to have a maximum of 8 percent unassigned surplus at the start of the budget year if the district wants to raise taxes.

"We've traditionally hovered around that 8 percent. And we manage that with not raising taxes to the index," he said.

Still, Kessler said he understands lawmakers might see millions sitting in district coffers and question why districts are asking for more state funding without realizing those millions are there for a reason.

Timing: State Sen. Jeffrey Piccola, the education committee chairman, said it's time for districts to make tough decisions.

"It's an appropriate time for districts to use the fund balances. These are one-time sources for revenue, so they should have the foresight to use them very cautiously," he said.

When to use it: Several business managers said one thing a fund balance shouldn't regularly be used for is balancing the budget.

It can work in small amounts, but using that money to plug a $1 million gap in the budget on a regular basis can lead to long-term trouble.

That's because the budget deficit will be back again the following year -- cuts weren't made or additional revenues weren't found to prevent it -- but the surplus money will eventually run out.

Incremental tax increases can spare the fund balance, or program cuts can help create long-term reductions in expenses.

The prime example of what can go wrong is in York City. The district did not have a tax increase for four years, ending in 2010-11. Federal stimulus dollars and millions in fund balance were used to support the budget.

But the stimulus dollars ran out this year, as well as state funding for many programs.

York City board members raised taxes 5.2 percent this year -- well above the state limit -- and are planning on raising them 17 percent next year, on top of massive layoffs.

Meanwhile, the surplus that was as high as $11.5 million heading into the 2010-11 school year was down to $4.8 million heading into the 2011-12 school year.

And now, with the district facing a $19 million deficit next school year, the surplus is almost completely gone, district business consultant James Duff said.

That means in the span of three years, York City schools went from zero tax increase and $11.5 million set aside to a 17 percent tax hike and no money set aside.

If the unexpected happens next year, York City won't be able to deal with it, Duff said.

Duff, who joined the district this year, said he believes districts shouldn't use big chunks of surplus to make up budget gaps.

"It puts you in a difficult situation," he said.

Overtaxing?: Joel Sears said a fund balance proves districts are flat out overtaxing.

The York Suburban School Board member and co-president of the York County Taxpayers Council said it makes sense to have some money set aside for emergencies.

But what kind of contingency fund really requires $10 million, he asked. Some districts regularly keep their unassigned fund balance right around the 8 percent state limit just because they can, he said.

"It doesn't have to be based on some arbitrary feel-good percentage," he said.

Sears and several business managers agree on one thing: The current business model of relying on local tax revenue and setting some aside on the assumption state funding won't suffice isn't sustainable.

Devlin and other business managers said their five-year projections are grim. Even if they do exactly what the governor and some taxpayers demand by taking $1 million or $2 million from their surplus each year to balance the budget, they will quickly run out of fund balance and still need a tax hike and program cuts.

"By the year 2014-15, we have a negative ending fund balance. Expenses grow 4-5 percent. Revenue grows 2, 2.5 percent. How do I bridge that gap?" Ionnaidis said, adding that growing class sizes and program cuts are the outcome.

It's not a sustainable model, said Jim Buckheit, president of the Pennsylvania Association of School Administrators.

"The way the (surplus) is being used, it will be exhausted," sooner rather than later, Buckheit said.

The governor's office has repeatedly said education funding next year is projected to be at an all-time high, but districts pointed out that key areas, such as special-education funding, charter school tuition reimbursement and grant money, have been cut or left stagnant.

But that's what a rainy day fund is for, the Department of Education said.

"School districts are sitting on $3.2 billion. They are all crying that it's raining. They put these funds away for times like this," Eller said.

Ionnaidis isn't so sure.

"Part of it is having a rainy day fund. We understand that. ... But I can't be cavalier about it," he said.

-- Reach Andrew Shaw at 505-5431 or ashaw@yorkdispatch.com, or on Twitter @ydblogwork