Three Basic Funds
Operational funds are used to support the day-to-day activities of the school district. This includes the payment of salaries and benefits, utilities, student transportation, and supplies and services.
Capital funds are used to repair and maintain buildings and purchase equipment and furniture. While operational funds typically benefit the year the expenditure is made, capital expenditures generally provide benefits for many years. There is a special type of capital fund that is supported by the sale of general obligation bonds. Investors purchase the bonds and the proceeds are used for a major construction program.
Bond and Interest (Debt Service) Funds
The third type of fund is usually called a Debt Service fund, but Kansas law refers to this fund as the Bond & Interest Fund. This fund is used to repay investors for the amount borrowed plus accumulated interest.
Bond and Interest
The district must assess whatever property tax levy is necessary to pay the outstanding general obligation debt when it becomes due plus accumulated interest.
Special Revenue Funds
Kansas law requires districts to use additional accounting funds to separate program expenditures. These special revenue funds include adult education, at risk, bilingual (English Language Learners), drivers' education, food service, professional development, summer school, special liability expense, special reserve, federal funds, grants, declining enrollment, cost of living, KPERS retirement, contingency reserve, parent education, special education, student materials, textbook rental, and vocational education. For simplicity, these funds can be viewed as operational.
Pass Thru Funds
The district collects revenue in these funds and all proceeds are turned over to the state.
How can the district purchase equipment or refurbish buildings while operating funds are so limited?
State law places restrictions on the amount of operating funds a district can spend. This restriction is part of an equalization plan for all districts in the state. Currently state law does not place these restrictions on capital purchases.
The employer contribution to the KPERS retirement system is paid by the state. The state momentarily transfers the amount of the state contribution to the school district and then withdraws it. This procedure is used so districts will include the cost in their budget.
There is another special revenue fund called special assessments that is a type of capital fund. One reason it is difficult to understand school finance is because of the large number of funds and the mechanism to provide revenues to support the expenditures in each of the funds.