Education Funding

Districts’ Reserves Tempting in Nevada

By Michele McNeil — March 08, 2011 1 min read
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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.

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A version of this article appeared in the March 09, 2011 edition of Education Week as Districts’ Reserves Tempting in Nevada


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