[EdTalks] Inside a $170 Million School Savings Account

Have you ever wondered why South Carolina's largest school district holds millions in reserve instead of spending it all right away? In this episode of Simple Civics Ed Talks, Catherine Schumacher and former trustee Derek Lewis break down the strategic mechanics of the Greenville County Schools fund balance. Tune in to discover how this financial safety net protects teachers' paychecks, saves taxpayer dollars, and ultimately drives better educational outcomes in the classroom.

While a multi-million dollar surplus might look like unspent cash to the public, it actually operates as a highly strategic "super rainy day fund" essential for stable public education funding. Derek and Catherine explore how conservative fiscal management and a strict 99-percent budget rule allow the district to float payroll during state delays and pilot innovative initiatives like the Elevate model without raising taxes. They also reveal a critical, often-overlooked financial metric that dictates how effectively the school district budget can handle emergency repairs and major capital investments. Find out exactly how this massive savings account transforms disciplined spending into immediate student resources and long-term community benefits.

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Episode Resources:

• GFOA Best Practices for Fund Balance Reserves

• Greenville County Schools Financial Transparency Portal

• InformEdsc

• Public Education Partners

Introduction to the GCS Fund Balance

Catherine Schumacher:

One critical component of Greenville County Schools' success is its careful fiscal management, and the GCS fund balance plays an essential role in ensuring that South Carolina's largest school district has resources that it needs for unexpected expenses, revenue shortfalls, and innovative investments in students and teachers. 

I'm Catherine Schumacher with Public Education Partners, and on today's Simple Civics Ed Talks, we are going to dig into where the fund balance comes from and how it is put to work. I'm joined by Derek Lewis, Executive Director of Greenville First Steps and a former Greenville County Schools trustee. 

Today we are going to talk about a very specific component of the Greenville County Schools budget landscape. We're going to talk about the fund balance, why it's important, and how it is used. Derek, putting on your former trustee hat, why don't you explain what the fund balance is?

Defining the Fund Balance as a Savings Account

Derek Lewis:

When I was on the school board, the question I got asked the most was, "Why do you have all of this money if you're not using it?" It's important to think of the fund balance as a savings account. It serves a bunch of purposes that we're going to get into today. 

It is not money that you would want to use for recurring expenses because it's one-time money. You would not want to go out and give every teacher a $10,000 raise because you would blow through your fund balance and then you would have to cut their pay in a couple of years. It's not a great place to get any expenses that are recurring.

Catherine Schumacher:

It’s like a super rainy day fund, but it does a lot more than just that. It doesn't solve recurring operating expenses.

How the Fund Balance is Accumulated

Derek Lewis:

One thing that is important to remember is how we get a fund balance. This district does something super smart: they remember that the amount of income a district budgets for is a fixed number. 

When we create a budget, if any of those departments go over budget, it could cause a real problem because we wouldn't be able to pay for those bills. So, all the departments are required to work at a 99% expense. 

If their budget is for a million dollars in computers, they can only spend 99% of that million dollars. That makes sure that if there's a price overrun in Chromebooks this year, that money can come from somewhere else. That fund balance part of it is just very conservative spending, which means we're basically saving money.

About 10 million could come from a billion dollar budget if everyone hits that 99 percent. The other place it comes from is just from unexpected places. For example, with food sales, you have to budget your expenses, but your income is based on the number of meals you serve.

Catherine Schumacher:

So you have no way of knowing what that might be.

Derek Lewis:

You might be bringing in more money in meals than you expected, and then that money needs to be spent back in food service. But you're not going to buy a new oven just because you have money; you're going to buy whatever the next thing is. 

Some of it is sitting in the fund balance as allocated dollars. They are there, but they're planned to be used in five years when that $10 million grows to $12 million and can be used to actually renovate that kitchen.

Catherine Schumacher:

That idea of a savings account or a rainy day fund is really important to think about. From a governance standpoint, it's a very smart, conservative approach. 

We are going to talk about how that fund balance gets put to work. While it might not be used for daily operating expenses like salaries, there are strategic ways to use it. Greenville makes the decision, and the board approves, smart investments of those dollars. Let's talk about the main purpose: the emergency fund.

The Emergency Reserve and Cash Flow Management

Derek Lewis:

Best practices in the federal government say that, in general, school districts should have 17 percent of their annual operating budget in reserve. For a billion dollar budget, we're talking about 170 million that needs to be sitting there that you will never touch. 

That is in case bad things happen or unexpected expenses arrive. That is your rainy day fund. That 17 percent is there so that if something happens, you don't have to borrow money to pay for it.

Catherine Schumacher:

Which would cost taxpayers dollars.

Derek Lewis:

The other part of it is that the district receives its money from the state government, and the state does not pay on a biweekly basis. It’s not a regular paycheck. Sometimes those payments are 90 days or 120 days late. 

In some places, particularly when there's a federal government shutdown that disrupts states getting federal funds, it could be six months late. You need money in addition to that 17% sitting there so that you can pay teacher salaries for those months. 

Catherine Schumacher:

Because you can't furlough teachers.

Derek Lewis:

No, they're going to get paid biweekly and they're going to get their check from you even if you haven't gotten the money from the state. There is a cushion that you need while you're waiting on this other money. 

There were districts in South Carolina that this year had to go to a bank and borrow money to make payroll. We have never had to do that. Even when the General Assembly cut our budgets by 10 percent during the 2008 freeze, we still had money in the fund balance to pay those teachers and not furlough them.

Catherine Schumacher:

That's a huge note.

Derek Lewis:

We didn't have to borrow money or lay people off. To say it's a rainy day fund, some people think of it like building a new building. But we might need to pay teachers for three months without any help from South Carolina.

Catherine Schumacher:

With 6,000 teachers, that's a big chunk. It’s a people business, and you can't change that sort of stuff on the fly.

Derek Lewis:

Those emergency funds are important. Then there are literal emergencies. We had a fire at one of our facilities this year. Insurance is going to reimburse the district for some of those costs, but school counselors need access to materials that need to be replaced immediately. Some of this fund balance is to do the thing right away.

Catherine Schumacher:

To fill in that gap until an insurance payment comes in.

Derek Lewis:

That's right. The highest and best use of it is keeping a fund balance for accounting purposes, having reserves for late payments from the state, and having emergency dollars.

Funding Innovation and Professional Development

Catherine Schumacher:

My favorite use for the fund balance is innovation funding. There have been several interesting applications of that lately. One we’ve talked about on the podcast recently is the Elevate model, which provides increases in base pay and incentive money for teachers at two of our schools in Greenville County.

Derek Lewis:

Which has had incredible success moving academic performance.

Catherine Schumacher:

It’s a really interesting way to use that pot of money. To pay those bonuses and all of that, the trustees approved a chunk of money out of the fund balance a couple of years ago when they committed to that pilot.

Derek Lewis:

It's great to think of it this way: you would not want to raise the millage to pilot something that may not work in three schools. To pull money out of the fund balance to try something to make sure it works before saying, "Okay, then we need to do this at 12 schools," is a really responsible way to use one-time money.

Catherine Schumacher:

Another thing they recently used the fund balance for was LETRS training. Elementary teachers had to go through this new phonics and science-of-reading training. 

The administration recommended the board create money to provide bonuses to help pay the teachers for that time. That additional professional development work is time above and beyond contract obligations, so it was a great investment.

Strategic Technology and Capital Investments

Derek Lewis:

I remember when I was on the board, the district wanted to put Chromebooks in front of every student in middle school and high school. The rollout plan, if we just used our budget, was going to be almost 10 years. That’s a student's entire career before the last kid got a Chromebook. 

By using the fund balance, we were able to purchase Chromebooks for all middle schoolers at the same time. One school didn't benefit while another one was waiting.

Catherine Schumacher:

And then you can cash flow the replacement in the operating or capital budget and phase that in. Another good example would be the turf replacement for all the high schools. That is also being paid out of the fund balance. 

The decision was made that it's more important to invest in that capital expense now. The ongoing operational management of the turf will be more cost-effective than it would have been for a regular grass field. 

Aside from those, there is the less fun part: bond ratings. It’s important for the district to have a high bond rating when you want to build an addition to a school. That's more technical.

Maintaining High Bond Ratings

Derek Lewis:

Because we have that 17% sitting there, we are more attractive to loan officers because we have the ability to repay those loans. We have AA1 or A-plus ratings. 

Those are things that not every school district has. Other school districts are borrowing money at higher rates, which is not great for the community. We're able to refinance our bonds or borrow to do work in a way that is more affordable because we have that higher bond rating.

Catherine Schumacher:

Ultimately, that strategy saves money for taxpayers over the long term.

Derek Lewis:

The biggest reason why I was comfortable with having a large fund balance was that there are things happening at the federal and state level that affect our ability to pay our bills, and they are not within our control. 

It would be irresponsible not to protect our teachers and parents who expect a teacher in that classroom by holding on to funds for salaries or the light bill. In the next 24 months, there will absolutely be a period where the district has to borrow money from the fund balance to pay a bill because we need to pay teachers before the General Assembly has allocated dollars to us.

Fiscal Strategy and Student Outcomes

Catherine Schumacher:

There is so much disruption in the education ecosystem right now. We have seen tremendous positive progress and growth in achievement in Greenville County Schools. 

This strategy and approach to fiscal oversight is in the service of student outcomes and investing in teachers. It just goes to show that being really thoughtful and looking at the whole big picture is important. Thank you, as always, for a conversation about budgets. It's good to have these resources to point people to. 

Derek Lewis:

Thank you.

Podcast Information and Resources

Catherine Schumacher:

Simple Civics Ed Talks is a joint project of Greater Good Greenville, Greenville First Steps, and Public Education Partners Greenville County.