The National Association Of Latino Elected And Appointed Officials (NALEO)

10th Biennial National

Institute For Newly Elected Officials

November 20 - 23, 2014

Washington, DC

UNDERSTANDING EDUCATION FINANCING AND

THE BUDGET-MAKING PROCESS

Presenter

Dr. Richard A. Stedry

Chief Business Officer

Kent School District

Kent, WA1

SESSION GOAL & PRESENTATION

SESSION GOAL

Provide institute attendees with information to better understand their school district’s, community college’s or educational agency’s budget.

PRESENTATION

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Budget Fundamentals

The school district budget looms as a mystery of

intertwined and complicated figures to many

school board members, school administrators and

community

Yet, the school budget is the single most important

element in the operation of a school district. For

everything that happens in a school district passes

through the school budget.

The school budget provides the structural shell within which a district’s educational programs operate.

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Budget Fundaments

Ye old budgeting axiom says: The only difference

between large and small school district budgets is

the number of digits to the left of the decimal and the

length of time it takes to calculate the numbers to the

left of the decimal.

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Budget Fundamentals

The School Budget - It’s Not Hard To Understand…But

What makes understanding the school budget “hard” is:

A. Educationese/Secret Code/Acronyms

B. Financial Language

C. Fear of “not knowing” the answer

D. Public Pressure

Remember, while they may not fully understand a school district’s budget, the public always understands an increase in their taxes!

E. Your check book

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Budget Fundamentals

The School Budget - It’s Not Hard to Understand …But

Budgeting’s DaVinci Code

Acronyms Terminology

ELL Categorical Programs

IEP “Robin Hood” Theory

IB Encroachment

MSOC Apportionment

PRCA Fund Balance

PASA Assessed Valuation

SIFE “Billy Goat” Theory

CCSS Unfunded Mandate

MOOC McKinney-Vento

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State Budget Form

The Good, The Bad, The Ugly

It’s hard to understand

It’s not transparent

It doesn’t tell the district’s budget story

It’s designed by and for “bean counters”

Budget Fundamentals

The School Budget - It’s Not Hard To Understand…But

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Budget Development

• Theoretically the budget development cycle is 3 years

• “Welcome new ideas but don’t let them all move in.” A Very Wise Man

• “The superintendent can only spend the same money twice; not three times.” R.A. Stedry

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2013-2014 2014-2015 2015-2016

2014-2015 2015-2016 2016-2017

Budget Planning/Development

Development process determines the

content of the budget• When process is disorganized, no one can answer

specific questions about what the budget contains

• When process is disorganized, it gives the impression,

right or wrong, that money may be wasted

Development of the budget based on the

district’s Strategic Plan(1) Strategic Plan – or the goals of the district

(2) Strategic Plan: Tells everyone what’s important to the

district and what the district is going to do

(3) Strategic Plan: Allocate resources to the plan

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Budget Development

Kent School District Kent, Washington

August 6, 2014

Instrument Bids

AGENDA ITEM: BOARD GOAL: Supports KSD Goal: High Student Achievement Maximized Resources (Money, Time, People, and Facilities) BUDGET IMPLICATION: RECOMMENDATION: The recommendation is for the Board of Directors to approve ….

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Budget Development

Budget development’s three important questions:

Which programs do we need to continue funding?

Which programs do we need to modify funding?

Which programs do we need to eliminate funding?

Use good data for budget development

Start the yearly budget development process when?

A) At the minimum, the 1st day of the new fiscal year

B) Two to three years before expenditure year

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Budget Development

Leave some unencumbered budget authority

Keep a “sharp eye” on your State Legislature

What about budget reduction restorations?

− As a school board have a “restoration plan”

− As a school board consider instead of restoring a

budget reduction enact sometime new

Budget Development Calendar

− What is it?

− Why important

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Budget Planning/Development

Common Core State Standards (CCSS)

Transition to CCSS can be a “little” or “a lot” of work and cost.

If the state already had “rigorous state standards” the school board may only need to budget for alignment of content standards and determining if the rigor of their school’s standards measure up to the new CCSS.

If the state did not have rigorous state standards, then the school board may have to budget quite a bit to train staff on the CCSS.

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Budget Planning/Development

Common Core State Standards (CCSS)

CCSS tells teachers “what” to teach, it doesn’t tell them

“how” to teach.

Teachers and administrators may need time, resources

and personnel to help staff develop a deeper

understanding of not only what to teach but how to most

effectively teach.

School boards may need to budget for district personnel

to help with the transition, extra time for teachers to

prepare and plan and develop common assessments.

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Budget Planning/Development

Common Core State Standards (CCSS)

School boards also need to think about their

assessment system that will be measuring CCSS.

An assessment system could take money as many

districts have to give this assessment entirely online

and will need to have the technology infrastructure.

Textbooks and other instructional materials may

need to be purchased that support the CCSS.

Yearly staff development and substitute costs.

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The Budget

Non-Personnel18% - 14%

Personnel82% - 86%

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The Budget: Personnel - Salaries

SalariesCertificated Personnel

Classified Personnel

Administrators

Board of Education Members

Substitutes

Supplemental Contracts

Stipends

Overtime

Extra Duties (open house, etc.)

Workshops

Staff Development

Authorized Positions What are they

Why have them

How many do we need

Enrollment – Projections & Actual

Position Control What is it

3 Kinds of Authorized Positions

a) Filled & Budgeted

b) Vacant & Budgeted

c) Vacant & Not Budgeted

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The Budget: Personnel – Payroll Taxes

STATUTORY BENEFITS Certificated Classified

FICA – Social Security 6.20% 6.20%

Medicare 1.45% 1.45%

Retirement 8.25% 9.71%

Unemployment .30% .30%

Workers Compensation 1.25% 1.25%

Total Statutory Benefits 17.45% 18.91%

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The Budget: Personnel - Benefits

Medical – Dental – Vision – Life Insurance – Etc.

Premium costs for each

Medical insurance rates: composite or tiered

Composite rate: same monthly premium for all

Tiered Rate: Single $ 807.33

Employee + One $ 920.36

Employee + Family $ 1,210.32

Plan year

Self Insured

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The Budget: Personnel - Benefits

Manage your district’s benefits – Why? How?

Dependent audit

Prescription insurance

Pooling

Plan for really sick individual(s)

Audit your claims

OPED: Other Post Employment Benefits

SERP: Supplemental Employee Retirement Plan

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The Budget: Personnel – Total Compensation

Teacher HVAC Repair

Salary 59,000 36,000

Supplemental Salary: Head FB Coach

5,000 -

Stipend: Refrigerant Certification

- 2,200

Total Salary 61,000 38,200

Statutory Benefits:Certificated 17.45%

10,645 -

Statutory Benefits: Classified 18.91%

- 7,224

Benefits: Medical, Dental, Vision, Life Insurance

7,200 7,200

TOTAL COMPENSATION 78,845 52,624

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The Budget: Non-Personnel - Utilities

UTILITIES (2nd largest expenditure after personnel)

Electricity Solar

Gas Wind

Water/Sewer Net-Zero Facility

Water Irrigation Co-Generation

Telephone People

Water Mitigation/Run Off

ENERGY MANAGEMENT PROGRAM

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The Budget: Non-Personnel – Contracted

Services

Legal Services (In/Out of District)

Insurance – Property & Liability (P&L)

Transportation: to/from, special education, act./ath.

Food Services

Service Contracts

Audit Contract Crossing Guards

Armored Car Services Personnel

Copiers Maintenance

Staff Training Workers Comp Insurance

Computer Services Purchasing Contracts

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The Budget: Non Personnel – Capital & Supplies

CAPITAL EQUIPMENT

SUPPLIESSchool Instructional SuppliesDistrict Office Department SuppliesTextbooks: new, replacement, consumable materialsMaintenance & OperationsTravelDistrict OperationalBoard of Education: travel, membershipsD

is

cr

et

io

na

ry

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The Budget: Non Personnel – School Allocations

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The Budget: Non Personnel – School Allocations

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The Budget: Technology

The Three Important Technology Questions

(1) Can you afford technology?

(2) Can you afford not to have technology?

(3) Can you continue to afford technology?

_______________________________________________

Defined Technology Plan

Maintaining Expanding

Replacing Funding

Staffing Training

Licensing Up Dated Yearly

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The Budget: Revenue

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The Budget: Revenue - State

Basic EducationFoundation Formula

Enrollment: FTE, ADA

Equalization

COLA – Cost of Living Adjustment

Weighted Student Funding Formula

Prototypical School Model

Sales Tax/State tax

Revenue Limit

EIA Education Improvement Act

Lottery

Special Education

Transportation

Textbooks

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The Budget: Revenue - Federal

• PL 874 Title II

• Forrest Land Title III

• Title I Migrant Programs

• I.D.E.A. McKinney-Vento

• Carl Perkins ELL

• USDA

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The Budget: Revenue - Local

Override Election Tuition

M & O Election Traffic Fines

Tech Levy Election Jury Duty

Pay-to-Participate Property Tax

Impact Fees Interest

Facility Use Fees Food Service Sales

Reimbursements/Refunds

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The Budget: Revenue Categorical

Program specific revenue/expenditures

Revenue equals expenditures in most cases

Federal Programs: Title I I.D.E.A. ELL USDA

State Programs (States will have their own

programs)

Watch Out For:o Encroachment o Supplement not Supplant

o Maintenance of Effort o Time and Effort

o Excess Carryover

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The Budget – USDA Food Services

USDA’s National School Lunch & Breakfast Programs:

School food services is a business subject to P&L and must always show a profit.

School food services should not receive funding support from the district’s general fund.

School food services must balance the nutritional guidelines of the USDA and what today’s students want to eat.

_______________________________________________

The above must be accomplished in an ever changing food services environment. In some cases, school food service programs have taken on the operational characteristics of hospital dietetic programs.

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The Budget: Fund Balance

• Cash received and in the bank and not needed for expenditures on the first day of the new fiscal year

• This is the money that the “bargaining groups” want and claim that the district has this “huge” fund balance that they could spend for salaries and to avoid layoffs.

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The Budget: Fund Balance

Fund Balance Classifications Amount

Non-spendable Fund Balance 400,000

Restricted Fund Balance 4,020,000

Committed Fund Balance 12,814,314

Assigned Fund Balance 1,650,000

Unassigned Fund Balance 45,187

TOTAL FUND BALANCE 18,929,501

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Budget Transparency

Budget Transparency – What is it?

Presenting budget information so everyone, including

“Dickie Flat” in west Texas, understands the budget –

Providing budget information so everyone understands

the educational and financial direction the district is

headed-

The CBO/CFO/Board not hiding money in the budget-

The Answer – “YES” depending on who you are-

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Budget Transparency

How do you get budget transparency?

Budget presentations with written explanations of

what’s in the budget and the budget numbers-

Explaining the budget using graphs and charts –

Posting the budget on the district’s web page to

explain the budget-

Achieving the Government Finance Officers

Associations (GFOA) Certificate of Achievement for

Excellence in Financial Reporting (CAFR Award)

Not explaining the budget using “budgeting’s DaVinci

Code”-

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The Budget: Non-Personnel – District Operational

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The Budget: Staffing

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Source: Office of the Auditor General FY13 Arizona School District Spending ReportAvondale Elementary School District #44, Avondale, AZ

Financial Transparency

Financial Services DepartmentDenver Public Schools

“We invite you to become familiar with the District’s operations and financial performance by clicking upon an area of interest.”

• Board of Education Fiscal Management Policies• Charter for Finance and Audit Committees• Financing Documents• Budget Documents• Other Financial Services Documents

Comprehensive Annual Financial Reports (CAFR)Payment Review DatabaseInvestmentsSingle AuditQuarterly Financial StatementsSalary SchedulesBond and Mill Levy Information

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NALEO

10th Biennial National

Institute For Newly Elected Officials

November 20 – 23, 2014

Washington, D.C.

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