Money in the bank used to generate a nice little piece of revenue for a school district — but that was before the recession.
Along with declining property tax revenue and dwindling state aid, school district financial officers say they're also contending with the dramatic dip in earnings on investments in the past five years.
At one time, interest revenue could equal millions of dollars for some school districts.
Take Parkway: Interest revenue on operating funds generated nearly $6 million back in 2006-2007. That number dropped to $2.77 million in 2008 and to less than half that amount in 2009. As Chief Financial Officer Mark Stockwell prepares his 2012-13 budget, he's predicting those earnings to drop to about $940,000.
"It's a huge impact for us. And it's totally, 100 percent attributable to the low-interest environment," Stockwell said.
In light of declining revenue and other shortfalls, the district is preparing to cut 3 percent to 5 percent of its nearly $222 million budget. Administrators are trying to find other sources of revenue, such as raising fees for summer school and school facility rental.
While lower interest rates have benefited those borrowing for homes, cars and other large purchases, investment interest rates have dropped dramatically, further weakening revenue sources for schools around the United States, as well as other countries, said Jay Snyder, a spokesman for the Association of School Business Officials International.
For many school districts, the reason for the decline in this type of revenue is twofold: There are lower rates of return, and there is much less principal available to invest, Snyder said.
Some St. Louis County school districts have seen more of a nose dive in interest revenue than in state funding.
For example, compared with 2008 levels, Parkway's $1.8 million drop in interest revenue is more than its projected loss of $781,000 in state money for the coming year.
This is the time of year — after local property tax revenue has been collected — that many school districts see their bank balances peak. It used to be the time when school district CFOs would shop for good interest rates to make a return on those balances.
Now, shopping for rates — which are all near rock-bottom — is hardly worth the effort.
"It's a bad way to free up some of your time," said Jason Buckner, assistant superintendent for finance for the Ladue School District.
In 2007, the six-month treasury bill rate was 5.07 percent. That could mean a return of more than $500,000 for a school district with $10 million in an account.
This month, that rate is .06 percent — a return of $6,000 for the same school district.
"Right now, the poor guys are getting almost nothing," said Rick Bagy, president of First National Bank of St. Louis.
The interest revenue from operating funds for the Ladue School District dropped from nearly $1 million in 2007-08 to a projected $25,000 this year.
And the poor return on investments is compounded by the fact that Ladue has had less money in its accounts in recent years. The district has spent down its reserves to nearly half of where they were three years ago — from $16 million in 2009 to $8.9 million in 2011.
The district is asking its voters for a 49-cent operating tax rate increase on the April 3 ballot.
The measure is aimed at offsetting some of the decline in revenue in the last several years because of reductions in local property assessments, officials say.
If voters reject the increase, the district will need to cut about $2.5 million to balance the 2012-13 budget, officials say. The cuts under consideration include increasing class sizes, eliminating teachers in elementary, music and physical education and high school counseling. Rockwood also has seen a decrease in interest revenue on its operating funds. Back in 2006-07, the district earned nearly $3.3 million. Last year, it was less than $94,000.
"It's a drastic reduction," said Shirley Broz, chief financial officer.