How Much Money Should a Tax District Have in the Bank?

Here’s what bond analyst Steve Willson suggests:

The amount of money a school district keeps is not a function of what other districts keep.

The amount of money needed is a well defined function in business.

It’s based on the variability of revenues and the greatest differential between revenues and expenditures during the year.

If revenues are difficult to forecast, then greater reserves are needed.

If revenues arrive with a high degree of regularity, then smaller reserves are needed.

Given that the District receives the vast majority of its revenues in property taxes, and that they know with a very high degree of confidence how much they’ll receive and when, this variable essentially disappears from consideration.

That leaves the greatest differential between revenues and expenditures during the year, i.e., the worst day of the year for cash flow imbalance.

Based on the monthly financial data, I would estimate the District really needs no more than 45 to 60 days cash on hand.

Any greater amount is simply excess taxation.

Now, if anyone can refute this argument or provide evidence to dispute the conclusion, I will withdraw my conclusion.

But unless or until that, this argument that they need the money, or what other school districts do, is simply irrelevant.


How Much Money Should a Tax District Have in the Bank? — 1 Comment

  1. Good work SW!

    —another perfect example of taxing district madness!

    Here’s a corrupt Mundelein school district that bought a golf course which quickly became a financial ‘albatross.’


    “Located at Midlothian and Winchester roads, District 120 originally bought the golf course for $8.4 million in 2004 when enrollment was on the rise. A management firm has maintained golf course operations ever since.

    When District 120 bid the golf course last year it designated a minimum price of $65,000 per acre, or just over $3.3 million for the 51 acres, must be met in order to win the bid.

    The board decided in April 2016 to begin the sale process after abandoning plans for a second campus in 2014. Plans that were unveiled last year and recently updated show the district selling 51 acres, with the remaining 38 acres being redeveloped into new athletic fields. The land is expected to be used for new houses.

    Superintendent Kevin Myers said prior school boards felt the golf course was an “albatross around their neck” and decided to explore the market in order to better evaluate the district’s options”


Leave a Reply

Your email address will not be published. Required fields are marked *