As determined by the Office of the Superintendent of Public Instruction and the Washington State
Auditor, ending fund balance is composed of three components:
1. Reserved Fund Balance – portion of fund balance legally restricted for specific uses
2. Designated Fund Balance – portion of fund balance designated for specific uses
3. Unreserved Fund Balance – portion of fund balance available to spend for discretionary needs
A prudent ending fund balance, or financial reserve, is essential to: maintain an excellent bond rating that
saves interest costs; provide resources for capital investments including equipment and technology;
sustain district self-insurance programs; guarantee payment of principal and interest on debt; cover
unanticipated revenue loss due to enrollment decline; open new schools, which incur additional costs of
staffing, utilities, insurance, instructional materials and equipment; maintain warehouse inventories; and
cope with unexpected expenditures.
Following the recommendations of the state auditor, VPS has increased its unreserved fund balance from
four to 11.4 percent over the past nine years. The statewide average is 12 percent. The district spent down
its unreserved fund balance by $2.8 million for 2017-18 to make up a budget shortfall due to the state’s
failure to provide full funding for K-12 education. Further reductions of approximately $2 million per
year are forecast for the next three fiscal years.
Key point: The district maintains savings, which is crucial for financial responsibility. It is used to cover unexpected expenses.