Governor Mills Signs Bill Focused on Increasing Cash Flow for School Administrative Units

Public Law 2021, Chapter 213, An Act Authorizing an Increase to the Maximum Annual Fund Balance for Public School Districts was signed by Governor Mills on June 15, 2021.  This law will become effective 90 days after the end of the session, and will not impact the fiscal year 2020-21. This legislation updated the law to say:

Notwithstanding any other law, general operating fund balances at the end of a school administrative unit’s fiscal year must be carried forward to meet the unit’s needs in the next year or over a period not to exceed 3 years. Unallocated balances in excess of 5% of the previous fiscal year’s school budget must be used to reduce the state and local share of the total allocation for the purpose of computing state subsidy. School boards may carry forward unallocated balances in excess of 5% of the previous year’s school budget and disburse these funds in the next year or over a period not to exceed 3 years” 

Please note the increase from 3% to 5%.

This law also provides that for fiscal years 2021-22, 2022-23, 2023-24, and 2024-25, the unallocated balances in excess of 9% may be carried over for the same use.

The benefit of this law is that it allows Maine’s SAUs to retain more funds on hand to buffer any unexpected financial needs. While the current statute does provide a mechanism to expand reserve funds in an emergency situation, this increase to the annual fund balance provides Maine’s SAUs the ability to access cash resources without incurring costs of fund borrowing, should an emergency arise.

The Maine Department of Education fully supported this bill, as it helps Maine SAUs effectively address recent or future financial needs.

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