A member of the Traverse City Area Public Schools (TCAPS) Board of Education has one question for Mike Hill, superintendent of the Traverse Bay Area Intermediate School District (TBAISD): Why does the ISD have such a significant fund balance, while area school districts are financially strapped and being forced to make massive cuts?

The TBAISD is one of 56 intermediate school districts in Michigan and it encompasses 16 public school districts, five public districts and 14 private and parochial schools across the region. One of its primary roles is to provide local districts with programs that are too expensive or too extensive to be offered individually, including special ed services.

A majority of its funding comes from taxpayers – a 2.93-mil annual tax levy comprises 55 percent of its total $61 million dollar budget. Two of those mils are dedicated to special education services. 

Until TBAISD board action earlier this month, the district was sitting on close approximately $18 million in its special education fund – representing more than 40 percent of the total fund.

Last winter, TCAPS’ Paul Soma – who is serving as interim superintendent for the 2014-15 school year – along with the other districts’ leadership, approached Hill about the fund balance asking for support for their financially strapped budgets. Soma says the district was running its own special ed programs at a $2 million dollar deficit.

At Hill’s direction, the ISD board agreed to take a look at its budget. One of the outcomes of that process was to reduce its fund balance from 44 percent to 30 percent over a 5-year period – a drawdown recommended by consultants, according to Hill.

The first step, taken earlier this month, was a $1.2 million disbursement to its member districts – a total of $500,000 to TCAPS, which represents 44 percent of the ISD’s population.

That disbursement, along with a second annual payment of $500,000 for transportation costs, “ends up meeting my expectations for the budget,” says Soma. “It’s been an open dialogue and I’m pleased. We’ve put this year to bed.”

But TCAPS Board Member Scott Hardy says he’s asked ISD leadership for an explanation as to why the fund balance is that high to begin with.

Hill maintains the ISD has no fund balance percentage set in stone.

“Is 30 percent the right number to keep the ISD fiscally healthy?” questions Hill. “That is still very much in discussion. Our board has said, ‘This is a start.’”

But Hardy says 30 percent has been the goal for a long time.

“I don’t think they need to retain a 30 percent fund balance,” says Hardy, but adds that if the ISD insists on it, then it should disperse all funds above and beyond it.

Hill defends the ISD’s now $16 million-plus fund balance for its special education services – emphasizing facility needs that need to be addressed starting this spring and costs that have doubled over the last decade compared to regular ed.

“We’re looking at a projected deficit of up to $2 million for this year, based on projected expenses and revenue,” says Hill. “We need to have the fund balance available, in addition to our facility needs.”

Hill adds the district will continue to look at what is a responsible number to get out to the districts. “Now we have a more formulated process, which is good.”

But ultimately, Hardy sees the fund balance situation as “a misconception” of the role the ISD is playing.

“Are they an aggregator of educational services or a fund distributor?” he asks.