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Civic Federation Analysis on CPS

Civic Federation Analysis on CPS

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Published by Zoe Galland
Civic Federation Analysis on CPS
Civic Federation Analysis on CPS

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Published by: Zoe Galland on Aug 21, 2013
Copyright:Attribution Non-commercial

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02/16/2014

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CPS took the prudent step of adopting a fund balance policy in FY2008. As noted in the policy,
the goals of maintaining an adequate fund balance are to provide working capital for the District
to ensure uninterrupted services, to provide for capital improvements and to achieve a balanced
budget within a four-year period. The policy requires the District to maintain a minimum of 5%
of the operating and debt service funds for each new fiscal year. Once that unreserved,
designated fund balance is adequately established, any excess fund balance is unreserved,
undesignated fund balance or unassigned fund balance, which can be appropriated under certain
circumstances, including to offset a temporary reduction in revenues from local, state and federal
sources.67

If the stabilization fund falls below 5% of the upcoming operating and debt service
budget, the Chief Financial Officer must present to the Board of Education a plan to replenish
the reserves within twelve months. If restoration is not possible within twelve months, the Board
must approve an extension of the restoration plan.68

The Government Finance Officers Association (GFOA) recommends “at a minimum, that

general-purpose governments, regardless of size, maintain unrestricted fund balance in their
general fund of no less than two months of regular general fund operating revenues or regular

general fund operating expenditures.” Two months of operating expenditures is approximately

17%. Chicago Public Schools is a special purpose government, not a general purpose
government, but its size and the relative instability of its revenue stream make it prudent for the
District to maintain adequate reserves. The GFOA statement adds that each unit of government
should adopt a formal policy that considers the unit’s own specific circumstances and that a
smaller fund balance ratio may be appropriate for the largest governments.69

Considering the
large size of the District compared to other Chicago-area governments, their fund balance policy
appears reasonable.

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