LESC staff and district officials tell committee cash balances reflect timing, reimbursements and obligations — not simple 'cash hoards'

The Legislative Education Study Committee held an extended briefing on school and charter cash balances, receiving a data-driven presentation from committee staff and detailed operational testimony from district officials.

Daniel (LESC staff), who covers public school finance, told the committee cash balances ballooned from $141,200,000 in FY2011 to $656,400,000 at the end of FY2024 and noted the most dramatic growth followed the removal of statutory limits on cash balances in 2011 and the influx of federal relief funding during the pandemic. “Cash balances have grown from $141,200,000 in FY11 to $656,400,000 at the end of FY24,” Daniel said.

Deputy Superintendent Giovanna Hanks (Gallup-McKinley County Schools) explained accounting and reporting constraints that make unearthing how much cash is actually available difficult: cash is reported on a cash basis while annual financial statements use accrual accounting; carryover purchase orders, RFR (request for reimbursement) loans, payroll liabilities, revenue-bond obligations and other encumbrances are not visible in the standard OBMS estimated-cash reporting. “Operational is unrestricted in use, [but] it does not mean it is unobligated,” Hanks told the committee, describing legal and practical obligations that tie up operational cash.

Staff and witnesses emphasized the reimbursement process: when the Legislature funds below-the-line programs through HB2, LEAs often must spend locally first and then seek reimbursement from PED. Delays in award letters and PED reimbursement processing create a need for LEAs to hold cash to implement programs and cover large, time-sensitive costs such as NMSIA premiums and payroll while awaiting reimbursements.

Members asked whether below-the-line grants must be reimbursed that way; Daniel answered there is no statute requiring that design, but federal verification rules and administrative practices have led to the current model. Witnesses urged several potential remedies: improving PED reimbursement timeliness, considering partial upfront awards for certain programs (an “80/20” model was discussed), requiring long-term forecasts from LEAs and shifting some below-the-line programs to the SEG so districts do not have to carry cash to access them.

The committee also discussed equity and scale: cash balances are uneven across districts and charters, and rural districts sometimes carry cash to cover anticipated capital and revenue-bond payments because they have limited bonding capacity. Panelists recommended improving reporting to show encumbrances and obligations so policymakers can distinguish true unobligated cash from funds already committed to payroll, loans or construction.

What’s next: Staff signaled further joint work with LFC on moving targeted below-the-line programs above the line and asked the committee to consider statutory or administrative changes to decrease the need for large operational cash cushions.