In Part 1, we compared the various sources of revenue (income) for the school district. In this section we’ll explore the different funds that revenue flows to. Perhaps the biggest misunderstanding in school finance is that the district can move money around to cover expenses wherever they see fit. Instead, they are legally required to use money for the intended purposes. It would be illegal for the district to raise money to build a new school, and instead use that money to increase wages. Money cannot be moved between funds except for some limited circumstances. This is how the district can have both Fund Drawdown and Fund Growth in the same year across different funds. Careful management is required to ensure all funds balance revenues and expenditures.
General Fund
The General Fund (as the name implies) is used to pay for all expenses not assigned to another specific fund and covers the vast majority of the costs of providing K-12 education. Though that makes it sound like the money can be used for anything, a portion of the general fund is still restricted for specific purposes. With $352M (or 65%) of the $539M total expenses for the school year coming from the General Fund – it is by far the most important for the district’s fiscal stability.
Adult Basic Education Fund
This fund provides education for individuals aged 17+ who are not enrolled in elementary or secondary school, and provides instruction up to high school completion equivalent. This fund also serves adult immigrants with English courses.
Early Childhood and Family Education Fund
This fund runs the Early Childhood and Family Education (ECFE) program which provides classes and resource to expectant parents and caretakers to help them understand child learning and development. The fund is also used to provide outreach to the community.
School Readiness Fund
This fund is used to get children ready for kindergarten and also provides support for community kids preschool.
Community Service Fund
The Community Service Fund covers the expenses of pre-K and post-12th grade education. This fund reimburses the General Fund for certain overhead.
Food Service Fund
As you may have guessed, this fund covers nutrition services (school meals). This fund reimburses the General Fund for certain overhead.
OPEB Trust Fund
The “Other Post Employment Benefits” trust fund was created in 2018 to fund post-retirement insurance costs. This trust is irrevocable, protecting the assets for the retirees.
Debt Service Fund
The debt service fund covers principal and interest payments for the district’s long term debt. This fund is funded at 5% more than the expected debt payments for the year so the district can pay it’s debt on time despite late/delinquent tax payments from the community. However, the state will monitor this fund to ensure excess funds to not build up over time (and if they did the funding would be decreased – effectively giving the extra money back to the community).
Custodial Fund
The Custodial Fund has nothing to do with cleaning! Instead, when the school district agrees to serve as a “custodian” for third party agreements (ex: to award scholarships), the money is put here.
Construction Fund
This fund accounts for construction, addition, and renovation of district buildings. When a bond is issued to pay for construction projects, it is counted as “revenue” in this fund. As construction progresses, payment for services draws down the fund. In the 25-26 school year the Construction Fund received $134M in revenue but only expects to spend $107M by the end of the reporting period. The difference looks like a substantial increase in fund balance, but only because some of projects will not be finished until the following year and the district doesn’t fully pay until the projects are complete.