KS school finance fight could hurt credit scores ? Watchdog News

By Gene Meyer | Kansas Reporter

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Previous reductions in state aid to education and delays in school aid caused the district to deplete a $3 million reserve, or ?rainy day? fund, said Sarah Smaardyk, the S&P public finance securities analyst who lowered the rating.

?We?ve seen declines in school districts? reserves before, but this is the first one I?ve ever seen go to zero,? Smaardyk said.

But the issue has a B-side.

Not every school board that thinks its district needs a new gym or better classrooms runs into ratings problems. Voters in Unified School District 449 in Easton, for example, passed a $4 million bond issue and sold those bonds in April to investors at 2.86 percent interest. The resultant $600,000 in savings from what Easton expected to pay in higher interest rates?may be enough to keep local property tax assessments from twitching, Superintendent Chuck Colblenz told the Leavenworth Times.

Easton schools, relatively speaking, weren?t asking for much, and that could have helped, said Dale Dennis, Kansas? deputy education commissioner for finance.

?Usually these issues (questions surrounding bond quality) don?t come up unless someone is selling a lot of money,? Dennis said.

Such as Gardener Edgerton.

Voters approved the sale of $75 million in bonds to build an elementary school, a middle school, a wing on the high school and other improvements to help the district keep up with enrollment, which was growing by about 6 percent ? or 400 students ? annually.

S&P cut the school district?s credit rating one notch, because Smaardyk and her co-workers are a bit less sure the district can repay the bond. The cut ? to an A+ rating from a previous AA ? isn?t deep, but it may cost district taxpayers more, particularly if bond holders want higher yields to offset the additional risk.

The Topeka Capitol-Journal reports Gardener Edgerton?s lowered credit rating has heated up debate in the Kansas Legislature, which must decide how much to spend next year on schools. Lawmakers are scheduled to adjourn Friday. Fiscal hawks ? mostly conservative Republicans led by Kansas House Speaker Mike O?Neal, of Hutchinson ? say they want to hold the line on school spending, in part to help reduce taxes and spur economic growth.

O?Neal insists many schools aren?t tapping all available financial resources. He successfully sponsored legislation in 2011, allowing schools to use unspent money for things such as bilingual education, drivers? education, professional development and programs to fund day-to-day operations, if they so chose.

But so far, only 77 of the state?s 293 school districts have tapped those accounts, O?Neal said last week. The available funds in other districts ?are growing, not shrinking,? he said.

Shortly after O?Neal?s legislation passed last year, Kansas Reporter asked? the state?s school superintendents how they would advise their boards on spending that money. Two dozen said they would recommend using it to stretch school budgets, two dozen said they would recommend leaving it untouched for bigger emergencies, and 22 said they were unsure. Moderate Republicans, led by Senate Vice President John Vratil, of Leawood, say it would be imprudent for schools to pull money for day-to-day operations from money targeted for specific purposes.

?Too many people don?t understand the difference between dedicated funds and non-dedicated funds,? Vratil told the Capitol-Journal.

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