School Finance101:
What HR Leaders Need to Know
Brett W. McFadden
Chief Business Officer
Pajaro Valley USD
ACSA 2014 Personnel Institute
Tanya Krause
Deputy Superintendent
Campbell Union HSD
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What we will cover
Four parts:
1.
LCFF and LCAP – a look back, a look forward
2.
School district budgeting
3.
Fiscal issues impacting human resources
4.
Working with your CBO / business office
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Part one:
LCFF / LCAP:
A look back. A look forward
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What a difference a year makes
October, 2013
October, 2014
• LCFF formula just enacted
• LCAP process successful
• Developing LCAP uncertain
• Adjusting to new system
• Promise of new money
• Learned what to do
• Rising expectations
• Learned what not to do
• Community engagement?
• Gearing up for next round
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The outlook for bargaining and budgeting
2014-15 and 2015-16

Expectations will remain high – but all parties have
one year of LCFF/LCAP under their belts

Unions will continue to advocate for their “share”

But be careful – watch LCFF revenue allocation
via the FCMAT Calculator

In an LCFF/LCAP era – HR leaders play a larger
and more critical role in the budget and LCAP
processes
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Bargaining overview:
Statewide perspectives

No surprise - Initial proposals from unions coming in high

Some districts seeing proposals for 15 percent (or more) in salary increases

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Average is10 percent across state
Many units seeking to raise benefit caps

Many proposals seeking greater involvement in LCAP process
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Language proposals also reflect greater demand for benefits and involvement
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LCFF / LCAP and Collective Bargaining:
Did it change anything?

LCFF/LCAP didn’t change the statutes, regulations, or mechanics of bargaining.
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But now there are more unknowns and more responsibilities.. More to look at
and consider within the context of bargaining

Have to negotiate language and intent related to LCFF - Formulas might need to
be changed

Budget for other things and needs within the LCFF base grant - Have to keep it
budgeted but no more funds from state
Conclusion:
LCFF/LCAP dramatically changed the context of
collective bargaining
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The realities of LCFF funding:
Not as much when broken down
New unrestricted funding is limited
Core Includes (but not limited to)
Teachers/classroom
Adult Ed
Professional Dev.
Sports/Athletics
Facilities/Planning
Books/Supplies
Educational Services
Utilities
Maintenance
Health & Welfare
Operations
BTSA For New Teacher
Textbooks
Gate
IT
Board of Trustees
Business Services
Safety and Security
HR
Student Services
State categoricals
Child Care
Transportation
Healthy Start
Nutrition/Food
Migrant Ed (State)
Nurses
Speech/Hearing
State/Federal Accountability
Unrestricted New LCFF Dollars
Concentration Grant
Supplemental
Grant
K-3 CSR
9-12 CTE
Core Staffing/Services/Programs
Keeping LCFF/LCAP in perspective
LCFF
• Funding sources defined
• Priorities for use identified
LCAP
• Accountability areas identified
• Sanctions defined
Central
Support /
Operations
• Alignment of support systems
• Optimal use of resources
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2015-16 LCAP review and update:
Round 2
You will need to have a process for LCAP review and update
• What worked well?
• What didn’t?
• What do we still need to do?
• What is projected funding?
• How much is available?
• What else do we need to do?
Initial planning:
This should begin at
board and cabinet
level
• What stakeholder groups
are required to talk to?
• What process do we
want to employ?
• What is the timeline for
all of this?
Community input
and review
Final development
and approval
• What does the board
want?
• How does the input
match with budget
realities?
• How do union proposals
fit into all of this?
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District reinvestment plan:
Multi-year strategy matched to funding
District revenues
Equates to
a 23%
drop in
state
revenues
Phased recovery over time
Return to 2007-08 per ADA
statutory funding levels
Eight year phase in of LCFF funding
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Heads up:
Watch out for LCFF revenue changes
LCFF Calculator
2014-15
2015-16
2016-17
Version 15.2
186.45
201.17
208.47
Version 15.2b
188.19
194.66
204.46
1.74
6.51
4.01
Difference
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Your district/COE and the LCFF

Each district will have its own relationship with the LCFF

Districts that are high-funded by LCFF are now at mercy of
state and formula

Now only one primary pot of state funding determined by
one formula

COEs have their own unique interaction with LCFF

Many districts are now subject to unexpected revenue
changes based on state LCFF decisions
Part two:
School district budgeting
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Where the money goes – PVUSD example
Services - 1.15%
Books & Supplies - 4.40%
Capital
Outlay 0.01%
Indirect Costs & Transfers Out (0.31)%
Other Uses - 0.41%
Employee Benefits - 31.37%
Certificated Salaries - 40.17%
Classified MgmtSalaries - 1.34%
Classified Salaries - 15.91%
Certificated Mgmt Salaries 5.54%
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The multi-year projection:
Still your most important budgeting tool
2014-15
2015-16
33.20
18.22
Revenues
186.45
201.17
208.47
Expenditures
201.40
205.30
211.80
Increase/Decrease
(14.98)
(4.13)
(3.33)
18.22
14.09
10.76
Revolving Cash/Rest.Bal
8.21
7.46
6.70
3% Reserve
6.04
6.16
6.35
Unapprop Reserve
3.97
0.47
(2.29)
Beginning Balance
Ending Balance
2016-17
14.09
Identify two
potential problems
with this MYP
As they relate to
LCFF/LCAP, what
might have
contributed to their
occurrence?
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Fingertip facts you should know

The basic fiscal facts you need to know:

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How much funding is unrestricted under LCFF
How much is restricted in CSR, CTE, supplemental, or concentration
grants
Multi-year projections – you live or die by these
Your fiscal history
What is one percent of expenditures?
Number employees and breakdown
Ave teacher cost (total comp)
In’s and out’s of employee benefit costs
Major cost centers – special education, transportation, health/welfare,
other?
Collective bargaining agreements and any MOUs, TAs, or side
agreements

Develop your own one-sheet “finger tip facts” about your
district

See www.pvusd.net budget narrative for example
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The district budget

The district’s budget is essentially a plan for revenues and expenditures in a given
fiscal year

But money most often drives policy – so it is above all a policy document that
reflects the district’s core mission and values

It will also serve as a guide for administrative and operational decisions over the
coarse of the fiscal year

But it is not intended to be static – it will change over the coarse of the year
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Fund accounting

All school districts and county office practice fund accounting

Major funds include:

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01
09
11
12
13
14
17
21
25
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General Fund
Charter Schools
Adult Education
Child Development
Cafeteria
Deferred Maintenance
Special / Unallocated Reserve (on top of REUs)
Building (bond proceeds only)
Capital Facilities Fund
Retiree Benefits
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District budgeting process:
This remains the same
Budget action;
Adopted budget*
Unaudited actuals (fiscal activity through year end)
Annual independent audit of prior-year budget
1st Interim Report (activity through Oct 31)
2nd Interim Report (activity through January 31)
3rd Interim Report (activity through June 30)
Federal fiscal year
Adoption date:
July 1
By September 15
October each year
December 15
March 15
If required by COE
Oct 1 – Sept 30
•If no state budget by July 1, a revised budget must be adopted within 45 days after the state budget is adopted
•Federal expenditure reporting will follow the federal fiscal year
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County office oversight

All California school districts adhere to the budget adoption process per Education
Code

School district budgets and interim reports must contain a three-year fiscal
projection – current FY plus two more

County offices of education are responsible for the fiscal oversight of districts within
their jurisdiction

County offices are authorized to approve and/or disapprove district budgets
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County office review categories

Per Education Code, the county office shall review and issue a certification
of all school district budget and interim reports

July budget adoption – positive certification, conditional, disapprove

1st and 2nd Interims – positive, qualified, negative


Positive – the district can meets its obligations over the 3-year forecast

Qualified – the district may not be able to meet its obligations over the 3-year
forecast

Negative – the district will not be able to meet its obligations over the 3-year
forecast
The COE can require the district to adopt fiscal stabilization plans to
address current and out-year fiscal shortfalls
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Reserves for economic uncertainty

All districts are required to maintain minimum reserves for economic uncertainty

Most districts are required to set aside 3 percent of total General Fund expenditures

Some districts will be 2 percent if above 50k ADA

Smaller districts are required to maintain 4 percent
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Reserves are not just about the amount of money in the fund, they are about time –
time to react, time to plan
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Part three:
Fiscal issues impacting human resources
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Some things have not changed
We recommend HR leaders develop a solid understanding of these concepts:

Need for appropriate reserves in an LCFF/LCAP era

Maintaining position control
l
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Understanding components of total compensation

District budget process and COE oversight

Multi-year projections
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Fund accounting and the district’s/COE budget, accounting, purchasing
processes
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A new approach and perspective
HR leaders will need to take new approach and perspective when developing and
implementing your agency’s LCAP:

Understanding the components of the LCAP

Work with both business and curriculum to determine district priorities and student
achievement goals for three to five years out.

Examine LEA Plan, PD plans, Site Plans, contractual costs, employee total compensation,
special programs, legal fees, etc.

Understand implications to districts formerly known as "Basic Aid"- dependent on local
funding
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Position control

Your most critical fiscal responsibility as the HR leader will be to maintain position
control

The HR department must implement and maintain accurate records regarding
positions, hiring, contracts, salary levels, etc.

The relationship between HR and the business office will often be strained when it
comes to this issues

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The HR office will want to fill positions fast

The Business office will want a very rigid systems with a lot of check and balances
FACT:
All districts that have gone into AB 1200 receivership do not
maintain position control
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Understanding revenue sources
Understanding revenue sources and the nature of funding is critical

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One time vs. ongoing funding
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Unrestricted vs. restricted

Categorical funding requirements

Supplemental vs. supplant

Breaking out costs – salary, benefits, stipends, etc
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Total cost of unit formula
S + SR + ST = TCU
S =
SR =
ST =
Salary - including Step and Column
Salary Related - Health and Welfare Benefits, Stipends, Bonuses, Etc.
Statutory Requirements - Retirement, Social Security, Medicare, Workers’ Compensation, and
Unemployment Insurance *
* If district in State Disability Insurance Program, employee pays .6%
Total Cost of Unit
17%
8%
50%
1
2
3
4
Legend
1 Certificated
2 Classified
3 Management
4 Programs and Operations
25%
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Factors that will influence the formula
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Health and welfare cost changes

Distribution of employees between types of plans
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Change in benefit coverage by employer

Carrier premium increases
Step and column costs

Dollar change between salary cells

Employee placement on the salary schedule

Retiree savings or turnover which offset step and
column costs
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Other factors to consider
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A more accurate formula would reflect:

Declining enrollment:

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Growth enrollment:

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Include the loss of revenues between fiscal years (if any) as part of
the formula
Recognize that your percentage ratio for salaries and benefits might
be able to be increased
Fiscal calamity:

Recognize that your percentage ratio might not be able to be
maintained
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The next class:
Things to know next
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Differences between ongoing and one-time revenue
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The cost of one percent
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Total compensation costs
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Comparative analysis

Reserves and ending balances
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Where unions get their data
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Common union arguments
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Strategy for reinvestment
Resources

ACSA Negotiator’s Symposium – every January
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ACSA Personnel Academy and Business Services Academy

SEAC Negotiator’s Certificate Program
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School Services of CA Fiscal Report and workshops

Your legal counsel
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Part four:
Working with your CBO
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The average business manager

School district business leaders often have common traits
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Your leadership challenge will be to balance your needs with theirs
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More often do not have instructional backgrounds
Tend to be process and rule oriented (“Type A” personality, a “gold” in True Colors)
Strengths lie more to administrative and accounting abilities
Will often think money and process before students and people
Develop a strong relationship and you can accomplish much
WARNING! – Just because they are good with numbers doesn’t mean they are
good at school business and finance
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Your relationship with the business manager

What’s the number one job of a CBO / business manager?

They won’t necessarily see themselves in this role

They may see protecting the General Fund as their most important role

For HR leaders – this is your most critical
relationship after the superintendent
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Closing remark
As a leader, you are only going to be as “popular” as your last
“yes”. Strive to be trustworthy, consistent, fair, and set a positive
model of the work habits and interpersonal behaviors you value
in the organization. The popularity will eventually follow.
Dr. Jeff Baarstadt, Superintendent
Conejo Valley USD
Former CBO, Principal and Teacher
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