Policy Brief

Districts' Reserves Tempting in Nevada

Article Tools
  • PrintPrinter-Friendly
  • EmailEmail Article
  • ReprintReprints
  • CommentsComments

When a state is desperate for money, nothing is sacred. Not even rainy-day funds school districts have socked away to pay off their debt in rocky times.

Nevada Gov. Brian Sandoval, a Republican, is eyeing those funds to help balance his state’s 2011-13 biennial budget. The idea is to scoop up $425 million in construction-bond reserves from 12 of the state’s school districts and essentially send the money back to districts to pay their general operating costs, such as teacher salaries. The proposal would have the biggest impact, in sheer dollars, on the 310,000-student Clark County district, which would have to cough up $300 million.

The reserve funds are there to cover debt-service payments if existing revenue sources—real estate and hotel-room taxes—can’t. The Clark County district, which includes Las Vegas, is projecting that because of a continued slump in the economy, it will need to tap those reserves over the next seven years to pay off its debt.

If the state grabs $300 million from Clark County’s reserve fund, the district predicts it won’t have enough money to pay off its debt starting in the 2012-13 school year, which could force the district to raise property taxes or refinance its loans.

In addition, the district warns that bond-rating agencies, which influence how much interest the district must pay to bondholders, may frown on a depletion of reserve funds. Already last month, two major rating agencies—Moody’s and Fitch Ratings—downgraded the district’s bond rating slightly. Gov. Sandoval, however, in his State of the State speech in January, said the impact of diverting those bond funds would be far less significant.

Late last month, the Clark County school board passed a resolution urging the state to leave those funds alone.

District spokeswoman Cynthia Sell put it this way: Someday you have to pay the piper. Basically, it would dig our hole deeper.

Vol. 30, Issue 23, Page 17

Published in Print: March 9, 2011, as Districts' Reserves Tempting in Nevada
Notice: We recently upgraded our comments. (Learn more here.) If you are logged in as a subscriber or registered user and already have a Display Name on edweek.org, you can post comments. If you do not already have a Display Name, please create one here.
Ground Rules for Posting
We encourage lively debate, but please be respectful of others. Profanity and personal attacks are prohibited. By commenting, you are agreeing to abide by our user agreement.
All comments are public.

Back to Top Back to Top

Most Popular Stories