Balance Sheets for Schools

June 5, 2012 at 10:11 AM Leave a comment

Too many financial and facilities decisions are made under duress as school districts respond to critical needs that cannot be avoided. Often, competing needs that should have been considered arise soon after the ground is broken for a new building or a new round of debt financing has been completed. The process of allowing a district’s priorities to bubble up to the surface should be replaced with school-based balance sheets that allow a prospective and transparent look at the asset base for every education facility.

School districts make decisions to add new buildings or enhance old ones, often in isolation in response to critical needs. Each project is vetted publicly, but the opportunity cost of the choice often is only revealed after the fact. Districts need tools to strategically manage their portfolios of facilities, intending their investments in each and every school. And their choices need to be made with transparency for oversight by regulators and constituents.

Filing a complete financial balance sheet for every school is a fundamental requirement to support such an analysis on an ongoing basis. Similarly, debt is assumed by cities, towns, or school districts for capital outlays, pension funding, and operating cash needs. By matching the debt to schools, they can get a better picture of whether they are investing in the future, or mortgaging it.

Each school needs a solid asset base, current solvency, and long-term viability. Its age, benefits of modernization, and safety as a standalone structure should be known at any time. This does not mean that we should ignore the benefits of a balanced portfolio of shared resources…only that we must know the value of the home base for any group of students. And we must know the system’s exposure to risk at each facility as well.

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Entry filed under: Financial data, The Pension Trap. Tags: .

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