SCHOOL FINANCE 101
Presented by Brenda Burkett, CPA, SFO
Chief Financial Officer
Norman Public Schools
October 2015
Budget and Funding Timeline
JUN
Final State Aid
Allocation from
Prior Year
Inform returning
teachers of intent
to rehire
JUL AUG SEP OCT NOV
Tentative State Aid County Assessor
Allocation
Certifies Valuation
Estimate of Needs
Due to Excise
Board
Negotiations with
Employee
Bargaining Groups
Student Counts for
State Aid
DEC JAN
1st Half Taxes Due
to County by
Taxpayers
Staffing Adjs for
Enrollment
Changes
Budget Approved
by School Board
FEB MAR APR MAY
Legislature
Convenes
Final Certification of
State Revenue
Revised State Aid
Estimates
(Budget Shortfall?)
2nd Half Taxes
Due to County by
Taxpayers
Legislature
Adjourns (budget
bill is typically last)
Supplemental
Appropriations for
Funding Shortages
Note: School District Budget Act (Norman uses) establishes Budget July 1…and there is no Est of Needs in Oct.
School Board approves budget amendments throughout the year as needed.
Fund Balance
• What is a fund balance?
Fund balance is the “unencumbered” or “available” balance of funds
at the end of a fiscal year. This is also referred to as a “carryover” or
“surplus.”
• Why is a fund balance necessary?
1.
2.
3.
To pay operating expenses during the first half of the year before
the majority of ad valorem taxes are collected.
To meet any unanticipated expenses.
To help fund future budgets if planned expenditures exceed
anticipated revenues (e.g. funding cliff when one-time revenue
sources are not replaced or operating expenses are anticipated
to increase for reasons such as a new school opening).
8.7%
Funding Sources/Uses
Fund
Primary Revenue Sources
Primary Allowable Uses
General Fund
Local & county taxes, state aid,
dedicated state revenue, federal
program reimb, other reimb
Payroll, transportation expense, supplies,
materials, furniture, equipment,
textbooks, general operating expenses
Building Fund
Local & county taxes
Repair & maintenance of facilities,
furniture, equipment, utilities, custodial
Child Nutrition
Fund
Student & staff lunch purchases, state &
federal reimbursements
Food, payroll, supplies & equipment
Bond Funds
Sale of bonds after voter approval
Construction projects, furniture, equip.,
uniforms, textbooks, school buses, etc.
Activity Funds
Student activities, fundraisers, vending
commissions, donations
Student activities, supplies, materials,
equipment, refreshments
Sinking Fund
Local taxes after voter approval of
bonds
Bond principal and interest payments
Gift Fund
Restricted grants from private sources
As specified in grant
Sanctioned
Parent Groups
Fundraisers, donations, dues
Support of student and school activities
(wider latitude than activity fund)
(not District money)
Sources of Revenue
General Fund*
Federal
10%
Other
2%
Local
24%
State Dedicated
and Line Items
21%
Total
State
61%
County
3%
State Aid
40%
*Statewide All Districts General Fund 2013-14 from SDE transparency website.
Includes return of assets; does not include fund balance forward.
Sources of General Fund Revenue
Select Metro-area Districts
Local
100%
1%
8%
4%
5%
County
0%
8%
State
1%
8%
Federal
Other
0%
8%
0%
15%
90%
80%
43%
70%
56%
66%
60%
66%
57%
80%
50%
4%
40%
4%
30%
43%
4%
4%
4%
20%
10%
33%
22%
4%
24%
20%
7%
0%
Bethany
Source: 2012-13 OCAS Data.
Edmond
Guthrie
Mid-Del
Norman
Oklahoma City
Sources of Revenue
General Fund*
Local + County (27% combined)
• Primarily property taxes
Local
24%
Also includes:
• Investment Income, Rental Income
• Local Grants/Partnerships
Recent laws reducing property taxes:
SQ766 (2012) exempting intangible property from
taxation cost schools over $30 million statewide
SQ758 (2012) capped yearly valuation increases
at 3% vs 5% previously
*Statewide All Districts General Fund 2013-14.
County
3%
Ad Valorem Taxes
EXAMPLE:
Property Market Value
Assessment Ratio
$ 100,000
11%
Assessed Valuation
11,000
Less Homestead Exemption
(1,000)
Net Assessed (Taxable) Value
10,000
Mill Levy (1/10th of a cent)
117.95
Total Tax
$ 1,179.50
Ad Valorem Taxes - $10,000 Taxable Value
EXAMPLE (cont):
Entity
Mills
Tax
General Fund
35.88
$358.80
Building Fund
5.12
51.20
Sinking Fund
25.75
257.50
66.75
$667.50
4.11
41.10
15.38
153.80
2.57
25.70
County
10.28
102.80
City
12.75
127.50
6.11
61.10
117.95
$1,179.50
School District:
Total School District
County-wide School
Vo-tech
City-county Health
Metro Library
Total
Sources of Revenue
General Fund*
Federal
10%
Federal
Other
• 2011-12 was last year
of federal stimulus
• Two largest programs are subject to
sequestration (5%)/yr for 10 years:
-Title I (No Child Left Behind) 41% of
total
Other
2%
•
Reimbursements/Transfers
from other funds:
-Activity fund for lost books,
parking fees, etc
-Payroll, postage, printing
reimbursements
NPS: FY14 (4.14%); FY15 (6.59%)
- IDEA (Special Ed) 27% of total
NPS: FY14 +.59%; FY15 +.39%
*Statewide All Districts General Fund 2013-14.
Sources of Revenue
General Fund*
State Dedicated
• Gross production tax
• Motor vehicle tax
• School land earnings
State Dedicated
and Line Items
21%
• Rural electric cooperative tax
State Line Items
• Textbook allocation
• Employee health insurance
• Specific state programs and reform
measures
*Statewide All Districts General Fund 2013-14.
Sources of Revenue
General Fund*
State Aid
• Formula funding based on number of students
State Aid
40%
*Statewide All Districts General Fund 2013-14.
State Aid Funding Formula
Legislative Intent
• Recognize that cost of providing education varies with
students and districts
• Based on student membership and characteristics
• Attempt to equalize revenue among districts through
“chargeables”
• Perfect equalization would produce same revenue per
weighted student in every district
State Aid Calculation:
Weighted Average Daily Membership (WADM)
•
•
•
•
•
ADM (child count for days enrolled)
Pupil Grade Level Weight
Pupil Category Weight (special ed, gifted, free/reduced)
District Calculation (for small or isolated districts)
Teacher Index (for districts whose avg teacher is > the state
average-based on college degree and years of experience)
x State Aid Factor $3,079.60 (factor as of Aug 2015)
+ Transportation Supplement
(Average Daily Haul x $33.00 per capita x $1.39 factor)
Less - Chargeables
•
•
•
•
•
•
Local Ad Valorem
County 4-mill (75%)
Gross production tax
Motor vehicle tax
School land earnings
Rural electric cooperative tax
STATE AID FORMULA
AMOUNT PER WEIGHTED STUDENT
$3,500.00
$2,639.20
$2,622.40
$2,300.00
$2,490.40
$2,500.00
$2,673.20
$3,079.60
$3,075.80
$3,032.00
$3,035.00
$3,113.40
$3,210.05
$3,275.60
$3,040.20
$2,700.00
$2,864.20
$2,900.00
$2,919.60
$3,100.00
$3,189.00
$3,300.00
$2,100.00
$1,900.00
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16
08/17/15
State Aid Formula Then vs. Now
July 2009
• All formula dollars
committed to common
education = $3,291.20 per
weighted student.
Aug 2015
• All formula dollars
committed to common
education = $3,079.60 per
weighted student.
Difference in Funding
• For FY 2015-16, schools have $211.60 less per weighted student than
was allocated at the beginning of school year FY 2009-10.
• For NPS, $211.60 less per weighted student = FY16 ($5,257,536) !
Recession and Recovery:
Impact on Education Funding
• The recession of 2008 greatly impacted state revenues and
jeopardized public education.
• The federal government responded in 2008-09 by providing one-time
supplemental funding for Title I (disadvantaged) and IDEA (special
ed) programs.
• Further federal assistance was afforded to states 2009-10 in the form
of fiscal stabilization and education jobs funding to retain jobs and “fill
the hole” in funding.
• Once exhausted, one-time federal stimulus money was not replaced
by state funding, creating a “funding cliff” in 2012-13.
In FY11,
the State
Rainy
Day
Fund
was fully
depleted
By FY13,
the State
Rainy
Day
Fund
was
restored
to $535.2
million
Enrollment and State Aid Funding
2008-2015
$2,100
700,000
688,300
$2,050
$2,036
690,000
681,578
680,000
$1,993
673,190
670,000
State Aid (millions)
666,150
$1,950
659,615
660,000
654,542
$1,900
$1,894
$1,882
$1,878
644,777
$1,850
650,000
641,721
$1,838
$1,816
640,000
$1,816
$1,800
630,000
$1,750
620,000
$1,700
610,000
FY08
FY09
FY10
FY11
* State Aid includes Education Stabilization component of the American
Recovery and Reinvestment Act (ARRA) funding.
FY12
FY13
State Aid Appropriation
FY14
FY15
Enrollment
Statewide Enrollemnt
$2,000
2014 Legislation Affecting School Funding
• Supplemental appropriation to fund 2012-13 ad valorem reimbursement
for lost tax revenue due to manufacturing tax exemptions
• SB2127 $40 million additional in state aid formula
• HB2513 $40 million additional for employee health insurance
• SB1469 extended the moratorium on accreditation standards to include
class size limits and textbook and library media spending
• HB1378 required student CPR training; no funding provided
• SB1246 cut the top state income bracket from 5.25% to 4.85% triggered
by growth in the state’s General Revenue Fund
• Expiring horizontal drilling tax rate incentives were replaced. Production
tax rates were scheduled to return to 7% but will now be 2% for the first
3 years of the well, then increase to 7%
District Revenue Limitations
• Any growth in local taxes is deducted from state aid.
• Any growth in dedicated state revenue (e.g. motor vehicle
collections, gross production tax, school land earnings) is
deducted from state aid.
• Federal programs are being CUT due to sequestration.
• Grants and donations are usually specific in purpose and
are not intended for operating expenses.
• Money from other funds (e.g. Building Fund, Child
Nutrition Fund, Bond Funds) is restricted in the ways it
can be spent.
Expenditures
• Budget dollars must be reserved or “encumbered” prior to purchase.
• Legal budget is determined by projected local tax collections plus
revenue to be received from state, federal, and other sources plus the
beginning fund balance.
• Personnel is a high percentage of total general fund expenditures:
Statewide
81.8%
Bethany
73.4%
Edmond
95.5%
Guthrie
84.6%
Mid-Del
91.5%
Norman
90.7%
Oklahoma City
70.9%
Source: 2012-13 OCAS data, payroll and benefits object codes.
How Each Dollar of the General Fund is Spent
Instruction
59¢
Student
Support
Services
11¢
School
Administration
6¢
Operations &
Maintenance
10¢
Source: 2012-13 Statewide OCAS Data.
Other
2¢
Business
3¢
Child
Nutrition
2¢
Student
Transportation
4¢
General Admin
3¢
Legal Borrowing Methods
1. Non-payable warrants
• Short-term cash flow solution
• Similar to overdraft protection
2. Lease-purchase agreements
• Lease which transfers ownership of asset at end of term
3. Bonds
• Requires 60% approval by voters
• Restricted to capital expenditures
• At least 85% of proceeds must be spent on the projects listed in
the bond resolution approved by voters
• Bond proceeds and interest earnings CANNOT be8.7%
used to pay
salaries, benefits, or related costs
Bond Payments
Amount needed
to pay bonds in
upcoming year
is calculated on
“Estimate of
Needs”
County Excise
Board approves
Estimate of
Needs and
authorizes tax
levy
County
Assessor bills
property owners
Taxes are
collected by
County and
remitted to
school’s sinking
fund
Bond principal
and interest
payments are
made by school
district
8.7%
Resources
Oklahoma State Department of Education
Technical Assistance Document
http://ok.gov/sde/sites/ok.gov.sde/files/documents/files/FY%202014
%20TAD%20FINAL.pdf
Oklahoma County Assessor website
http://www.oklahomacounty.org/assessor/
Oklahoma State Department of Education
Transparency Website
https://sdeweb01.sde.ok.gov/OCAS_Reporting/StateReports.aspx