Why aren’t existing reserve balances being used to fund new spending priorities?
The purpose of reserve balances is to manage cash flow or to mitigate volatility in funding (such as during recessionary periods), address any unexpected/unanticipated costs, and obtain higher bond credit ratings. Reserve balances should not be used to fund ongoing operational expenses; this approach is not financially sustainable as it will continuously deplete the balance each year.
- Reserve balances are an important component in establishing credit ratings for school districts. Higher credit ratings equate to lower interest rates, and this is important to taxpayers who ultimately pay the interest costs when school districts sell bonds.
- Kyrene receives the highest bond credit rating in Arizona and shares that distinction with three other school districts. Reserve balances for Kyrene are closely aligned with the balances of the other highly rated districts, so a decrease in Kyrene’s reserve balance runs the risk of a downgraded credit rating resulting in additional costs to taxpayers.