School Finance and Budget Planning
Superintendent and Executive Leader Seminar Series
April 25, 2012
Presented by
Mark Dufendach, Business Manager, Polytech School District
Jerry Gallagher, Finance Director, Smyrna School District
Understanding a Budget
•
Key concepts:
– No “money” exists in the
budget. Budget is based on
amount of money you have or
will have available.
– It is a thoughtfully prepared
plan.
– It should reflect the priorities of
the district.
– It may need to be amended
during the year.
– It is always a document
discussed and approved by the
Board in open session.
Timing of the Budget
•
Preliminary Budget –
customarily prepared in
Spring. Serves as a
“starting point” for the
budget year.
•
Final Budget – timing
varies by district. Usually
prepared after Unit Count
is complete and state
allocations are known.
Must be published on
District website.
The Basics – Sources of Funds
• School districts rely primarily on three
different funding sources.
– State of Delaware Funds (General Funds)
– Local Funds
– Federal Funds
There can be other funds that school districts
receive.
There are separate “rules” for each category.
State Funds
• Some state funding is restricted.
– Division I (state salaries)
• Some state funding affords limited flexibility.
– Division II - Energy
– Division II - All Other Costs Vocational
Some state funding allows total flexibility.
– Division II - All Other Costs
– Division III - Equalization
Restricted State Funds
• Division I funds can only
be used to pay for the
state share of salary and
benefits for positions that
the state certified as part
of the September Unit
Count or for positions that
the state categorically
granted to the district
through state laws –
custodians, etc.
• State salaries are
determined by published
state salary scales.
Division I Unit Requirements
■
With few exceptions, units must be used to staff positions as
authorized – teachers, secretaries, custodians, etc.
■
State law requires a student-instructor ratio of 22:1 at the K-3
level.
■
Requirement is at the classroom and can be waived by through
local board action.
￭ Units are generated district-wide but 98% must be allocated to
schools that “earn” them. This requirement may also be waived
through local board action.
State Funds With Limited Flexibility
Some Division II State funds allow only limited
flexibility.
Examples: Energy money may be used for
electricity, heating oil, natural gas or propane.
All Other Costs Vocational: Funds may be spent
for material, supplies, equipment and
contractual services for approved vocational
programs in classes with certified vocational
staff. Cannot be used for salaries or energy.
State Funds with Total Flexibility
•
•
A limited number of state
funds offer total flexibility.
This means the money may
be spent on anything that the
board approved in the
budget – personnel costs,
materials, contract services,
equipment, etc.
No restrictions: Equalization
(Division III) and Division II All Other Costs (Division II)
Division III Unit Funding
Equalization
■
Goal is to alleviate local funding disparities between property
rich and property poor districts
■
Inversely related to district ability to tax itself
(full value of property/units)
■
Proportionately related to district’s effort in taxing
itself(taxes collectable/full value of property)
￭ Division III funding can be used for any local purpose –
usually used to offset a portion of the local share of
salaries
￭ Formula has been “frozen” for several years over concerns
with the formula distribution
Basic Rules of Local Funds
• Funds are kept
separate.
• Two rates are limited
by referendum
– Current Expense and
Debt Service
• Two rates are
controlled by Board
Action
– Tuition and Match
Local Funds
• Raised by the school district through local tax levies.
• Four categories:
– Current Expense – funds general operations.
– Tuition – funds special needs students in identified programs
(not special education).
• In district; in other school districts; in private placements
– Match – funds state programs that authorize a local match.
• Minor cap 60/40; technology maintenance and block grant; extra
time 70/30; Reading Resource teachers 70/30; Math Specialists
70/30.
– Debt Service – funds the principal and interest payments on
local bonds.
Federal Funds
• Federal funds are
always restricted as to
purpose and the time
period during which the
money may be spent.
• State approves
application and grants
funds to districts as
“sub grantee” of state.
Typical Federal Grants
• IDEA – this grant is spent on services
and materials for special education
students.
• ESEA Title I – this grant provides
enhanced educational opportunities and
materials for children who meet certain
income standards
Race to the Top
• Delaware won this grant opportunity to
improve the quality of education in the
state
• Goals:
– Rigorous standards, curriculum and
assessments
– Effective Teachers and leaders
– Sophisticated data systems and practices
– Deep support for the lowest-achieving
schools (Partnership Zone schools)
Race to the Top
• Provides $119 million for 4 year grant$59 million to districts and $59 million to
State to complete initiatives included in
the grant application
• Districts developed Scope of Work to
outline their plan and budget for the
funding
• Most of the state funding goes to support
districts through data and development
coaches, dashboard development, etc.
Education Jobs Funding
• Funding from the federal government for
salaries and benefits for staff at the
school building level
• Can not be used for district level staff
• One time funding that must be used by
September 2012
American Recovery and Reinvestment
Act (ARRA) &
State Fiscal Stabilization Funds (SFSF)
• ARRA - Supplemental funds in certain
categories like IDEA and Title I;
additional funds to supplement
appropriations limited by state funding
cuts
• SFSF – Backfill of portion of state
revenues that no longer come to districts
• These funds have expired during FY12
Getting it All Together
• Once the district
knows the total funds
available then the
spending plan is put
together.
• It always requires
balancing
expectations and
ability.
Budget Process
• School Districts establish internal procedures
for development.
– Start development in the Spring for the next year
– Information gathered from Unit Count
– Spending requests gathered from schools and
departments
– Fixed expenses determined; discretionary spending
planned.
– Review and feedback to/from DO/Schools and
departments.
• State law requires the Superintendent to
present prepared budgets to the Board, the
Board to act on the Budgets and BoardApproved Budgets submitted to the State.
Budget Considerations
• Building a sustainable budget
• Since 2008, State funds to Districts have
been reduced by $59.4 million
• Federal funds are being reduced and
others have expired
• Governor’s Recommended Budget for
2013 restores $27.4 million
Budget Considerations
• Decline in traditional funding to schools:
– Federal
– State
• Impact of Assessment Rate growth patterns
• Tax rate policy
• Economic pressures
• Market Volatility – interest earnings
• Transparency
• Support and Involvement – committee and
community
Budget Considerations
• Uncertainty in State Equalization Funding
• Increased Operational Costs of New and Existing
Schools
• Need to Maintain Competitive Salaries/Benefits
• Increasing Costs of Maintaining Technology
• Increasing and Volatile Energy Costs
• Threat of Federal and State Funding Reductions
• Projected Reduction in Discretionary Local Revenue
• Projected Reduction in Assessment Growth
• Need to Minimize Tax Rate Increases
After the Budget
Monitoring Financial Health
• Monthly Financial Reporting and Board
Review
• Public discussion and Board Action
• Open, candid, frequent conversations
about finances
The Path to Transparency –
Legislative Action from FY2007
• Requires school board member attendance for
financial responsibility training.
• The addition of a third Local Financial Position
Report, February 1.
• Authorization for DOE to intervene when a
school district meets the criteria for financial
distress.
• Authorization to hold remaining 25% share of
state funds until Aug 31 report received.
The Path to Transparency –
Legislative Action for FY 2010
• District Financial Advisory Groups
• Financial Reporting on District Website
• “Checkbook” on District and State
Website
• Emphasis on Financial Transparency
• Heightened Emphasis on Accountability
– Board and District
Major Capital Funding
•
State funds between 60% and 80% of approved new
construction and building renovations projects. State
special schools are 100% state funded.
•
State support comes either through bond proceeds or
general funds
•
Funds are typically appropriated based on a projects cash
flow need
•
Process allows for the movement of funds between
projects to meet cash flow demands or project needs
Questions?