Balanced books

October 27, 2011

"Run it like a business" is the mantra every now and again when people are running for election.

Never mind that not every business is successful and never mind that not every business turns a profit or manages to stay on top of the latest industry trends, just run it like a business.

Of course what is meant when the run-it-like-a-business critique is applied to government is simple: run it efficiently and don't be wasteful or outlandish. Curiously, a lot of businesses would do well to abide by this general rule.

Enter Harford County Public Schools, which this week reported a surplus of $6.1 million for the spending year that ended June 30. It's a lot of money. It's not PowerBall money, but it's enough for someone or a number of someones to retire on very comfortably. So why does the school system end up with such a large sum at the end of the year when governments are supposed to break even?

It's a bit silly to say it, but in the grand scheme of the school system, which had a budget of $422 million last year, $6.1 million is about 1.5 percent. Or, to put it in paycheck terms, it's about $7.50 to someone whose take home pay is $500 a week.

In other words, while a $6.1 million surplus doesn't necessarily mean the school system's budget is balanced on a razor's edge, it does mean there's a reasonable amount of care being taken to put a spending plan together. In the same story published in The Aegis on Wednesday that noted the size of the surplus there was another key number that looks big, except when it's compared to much bigger numbers. That dollar figure is $90,000 and is the shortfall the school system saw last year when it was figuring out how much money would be coming in for the year. This figure, a very healthy before-taxes annual salary, is a fraction of a percent of the school system's budget. In other words, the method of estimating revenue was a pretty good one last year.

Another key figure in the school system's budgeting process is the matter of what is politely referred to as an unreserved fund balance, but in business might be called a carry-over profit. Even as state and local governments are required by law to have balanced budgets and not spend money they don't have, so are they also precluded from turning a profit. Theoretically, budgets are supposed to be balanced to the penny. But such things aren't realistic, so the school system, like most governments, keeps an "unreserved fund balance" on the books as a hedge against big unforeseen increases in expenses for things like health care, fuel and electricity.

In Harford County, the fund balance for the school system had risen to $26 million, though the game plan is to spend nearly $11 million of that in the spending year that started July 1. This reduces the school system's standing surplus to a little more than $15 million, or about 3.5 percent of last year's operating budget.

So is the school system being operated like a business, or more appropriately, is it being run efficiently? Well, at least from a budgeting standpoint, and at least for last year, the processes seem to be working to prevent outrageous surpluses (which we've seen in local government in these parts before) and deficit spending (which is a problem of a different kind).

Whether the money is all being spent on things that are worth what's being paid for them is a subject for another day. Similarly, the question of whether the school system is giving Harford's taxpayers what was once described by school system administrators as a lot of bang for the buck is open for further discussion.

But at least it appears the school system can afford what it's been spending.

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