\n<\/p>\n
This isn\u2019t unique to my state, but it\u2019s my first time encountering it.<\/p>\n
Pennsylvania\u2019s state government runs on a July-to-June fiscal year, which means that it was supposed to have passed a budget for this fiscal year by July\u00a01.<\/p>\n
It hasn\u2019t passed one yet, and passage doesn\u2019t look imminent.<\/p>\n
This is becoming a problem.<\/p>\n
It\u2019s already a problem for our county, which has announced cuts. And it\u2019s increasingly a problem for the college.<\/p>\n
Based on previous years, we\u2019ve expected the state allocation to cover a little over 40\u00a0percent of the operating budget. (The county\u2019s figure is much lower.) So far this year, it has covered zero\u00a0percent, for a difference of\u2014let\u2019s see, carry the three\u2014millions. <\/p>\n
We have reserves, and they\u2019ve come in handy. But they\u2019re meant to even out cash flow over the course of a year, to cover emergencies and to help with large expenses. They were never intended to supplant the state\u2019s role in the budget. Our CFO recently had to calculate the number of months we could go without the state allocation, which is a number you never want to matter. <\/p>\n
For those keeping score at home, reserves at a community college are very different from endowments at universities. Endowments are generated mostly from a combination of donations and investment returns, and they\u2019re meant to \u201cthrow off\u201d a certain amount per year to pay for other things. Those other things can be the operating budget, or scholarships, or facilities, as specified. (Endowment funds are a mix of restricted and unrestricted. Restricted funds can only be used for designated purposes; unrestricted funds are more flexible.)<\/p>\n
Reserves, by contrast, are generated from operational savings and are meant to provide a bit of buffer. They\u2019re almost always invested very conservatively because they\u2019re meant to be liquid. Endowments can take greater risks because they\u2019re intended to have much longer time horizons. If endowments are like retirement accounts, reserves are closer to savings accounts.<\/p>\n
They\u2019re crucial for cash flow because peak revenue times and peak spending times don\u2019t always align. For a college on a traditional calendar, August shows high revenues and low spending, and October shows high spending and low revenues. That\u2019s because students pay tuition in August to take classes in October. <\/p>\n
Reserves can create perverse incentives for legislators. A legislator looking to pay for some other line item closer to his heart may see a public college with relatively healthy reserves as a painless target for cutting. But once reserves are spent, they\u2019re spent, and one of the dangers of public-sector math is that even a single year\u2019s cut can become a new baseline. At that point, climbing out of the hole can become a Sisyphean nightmare.<\/p>\n
In practice, that means that public colleges have to perform a delicate balance with reserves. Save too much, and you become a tempting target. Save too little, and you may find yourself in a tight spot if something happens.<\/p>\n
Right now, something is happening\u2014or not happening, to be exact\u2014with a major impact. The frustrating part is that the something in question is unnecessary. This isn\u2019t the aftermath of a natural disaster; it\u2019s collateral damage from a political standoff. The fact that it leaves us much more vulnerable to, say, a natural disaster doesn\u2019t seem to bother legislators.<\/p>\n
So, my request to the elected leaders of Pennsylvania, and to other states in similar spots: Pass a budget! Reserves weren\u2019t meant for this.<\/p>\n","protected":false},"excerpt":{"rendered":"
This isn\u2019t unique to my state, but it\u2019s my first time encountering it. Pennsylvania\u2019s state government runs on a July-to-June fiscal year, which means that it was supposed to have passed a budget for this fiscal year by July\u00a01. It hasn\u2019t passed one yet, and passage doesn\u2019t look imminent. This is becoming a problem. It\u2019s<\/p>\n","protected":false},"author":1,"featured_media":23807,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[57],"tags":[3454,913,1561],"class_list":{"0":"post-23806","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-education","8":"tag-budgets","9":"tag-pass","10":"tag-states"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/23806","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23806"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/23806\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/23807"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23806"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23806"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23806"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}