During a recent Joint Finance-Appropriations Committee hearing on the public schools budget, policymakers asked questions or made comments about school district and charter school fund balances. Some raised concerns that schools may be holding onto money that could help address the state’s budget challenges. In that discussion, the terms fund balance and contingency reserve were sometimes used interchangeably.
They are different—and understanding the distinction is important for these budget conversations.
A simple household example may help.
Early in the year, you might deliberately set aside money for emergencies, like a broken furnace or major car repair. That’s a contingency reserve: planned in advance, limited in size, and meant only for unexpected costs.
At the end of the year, your bank account shows what remains. That’s more like a fund balance. But not all of it is available to spend freely. Some of that money is already committed to upcoming bills, next month’s rent or mortgage, contracts, or purchases. It’s a snapshot in time, not unused cash.
Idaho public schools operate the same way.
Contingency reserves are created before the school year begins, as part of the annual budget process adopted in June. Under Idaho Code §33-801A, school districts and charter schools may set aside up to 5% of their general fund budget, or the value of one support unit—whichever is greater.
These reserves are tightly limited in purpose. They can be used only for unforeseen costs such as sudden enrollment changes, unexpected increases in fuel, utilities, or insurance, unanticipated special education needs, or emergency repairs. Use of the reserve requires a vote of the local school board and a determination that the expense could not reasonably have been predicted.
Importantly, contingency reserves cannot accumulate over time. Any unused amount becomes revenue in the following year’s budget. The purpose of the reserve is short-term flexibility—to help schools avoid midyear cuts to staff, renegotiating contracts, or cutting programs midyear when costs rise faster than funding.
Fund balance, by contrast, is a year-end figure. It reflects what remains after all spending for the year has occurred and is reported in audits and financial statements through the Idaho Financial Accounting Reporting System (IFARMS).
The cited $716 million fund balance number is different from “contingency reserves” and it is not all discretionary. That total includes funds already committed for specific purposes, such as supplies ordered but not yet received, insurance or contract payments due shortly, and planning for larger, long-term expenses. Some portions are restricted or reserved under Governmental Accounting Standards Board rules and cannot be spent on new or unrelated expenses.
Contingency reserve numbers and unappropriated fund balances come from different points in time and measure different things. Contingency reserves are set during the budget process before the school year begins. The unappropriated fund balances being cited come from financial reports after the year has ended. They are not the same, and they are not meant to serve the same purpose.
At the end of the day, both of these tools support local governance teams in making informed local decisions that help keep schools operating smoothly for students, families, and communities throughout the year.
