School Budgets 101
#adminproblems
In the Beginning
Terminology
Aid Payment Schedule - This refers to the schedule the state uses to make its education aid payments to schools. Schools do not receive their aid payments at the start of the fiscal year but rather the state delays aid payments to schools. It is paid out in smaller amounts twice during the school year.
Basic General Education Revenue - The general education program is the method by which school districts receive the majority of their financial support. The general education program is funded by a combination of state aid (from state collected taxes) and local property taxes.
- The basic general education formula establishes the base level of per pupil unit funding for Minnesota schools. The weighting counts kindergarten pupils as .557 pupil units; grades 1-3 as 1.115 pupil units, grades 4-6 as 1.06, and grades 7-12 as 1.3 pupil units. After the weights are applied, an adjusted marginal cost pupil unit calculation is performed, (also called pupil unit) to determine the amount of money the district will receive.
- Several additional restrictions also apply to the basic general education revenue:
- Class size reduction in grades K-6.
- Staff development money
- All-day kindergarten, class-size reduction, or to reduce special education student-to-instructor ratios.
- Pay for extra services required by students who are English Language Learners.
Categorical Aid: Funds paid by the state to school districts and designated for specific purposes, such as transportation, special education for disabled children, and vocational education. Categorical aids are relatively minor compared to general education revenue, the main school district funding stream.
Community Education - Districts that implement youth service programs are eligible for an additional $1 per capita. Districts with youth after-school enrichment programming also receive a small amount of additional funding.
Early Childhood Family Education -- As a part of the Community Education program, districts may offer an Early Childhood and Family Education (ECFE) program and educational services to families with children between birth and kindergarten. The program must focus on children from birth to age three.
Equity Revenue -- Equity Revenue is intended to reduce the disparity between the highest and lowest revenue districts on a regional basis.
Extended Time Revenue - Extended time revenue allows districts to change the weighting factor for students in order to increase basic general education revenue to support extended day, week or year programs.
Fiscal Year: A 12-month period between settlements of financial accounts. The fiscal year for the state and school districts runs from July 1 through June 30 and is identified by the calendar year in which it ends. A fiscal year 2015 is equivalent to the 2014-15 school year.
Operating levy/referendum revenue -- Referendum revenue (also referred to as operating levy or levy revenue) allows districts to increase the revenue available in their general fund with the approval of voters in the district.
Referendum revenue is capped at $905.77 per pupil unit, although districts qualifying for sparsity revenue may exceed this amount.
Pupil units - A pupil unit is the weighted count of pupils used to determine revenue in many of the state's funding formulas.
Referendum Cap - The highest amount a school district can ask for through voter-approved levy referendums.
Sparsity Revenue -- Sparsity revenue provides additional revenue for small and isolated schools. This revenue acknowledges the higher cost of necessarily small education programs. Options to increase the number of students would require students to travel an unacceptable amount of time.
Uniform Financial Accounting and Reporting Standards (UFARS): Rules and instructions adopted by the former State Board of Education under legislative mandate to govern the methods by which school districts record financial transactions and inform the Department of Education about their finances.
Where does the money come from and how?
- The State determines the amount of money a school district will receive, which is called the basic education funding, or basic formula allowance.
- The state sets funding formulas that both allocate money to the schools (state aid) and determine the maximum amount a school district can request from their voters through local property tax (bond or levy referendums).
- The state also decides what portion of funding comes from local property taxes, state aids and other sources.
- A school district receives basic funding from the state according to the average number of students attending school during the school year. This number, referred to as ADM, or average daily membership, is then transferred into units called pupil units.
Revenue Sources
1. Local Property Tax Levies
- Referendum/Levy
- Equity
- Transition
- Student Achievement
- Operating Capital
- Safe Schools
- Health and Safety
- Deferred Maintenance
- integration
- Career and Technical
- Re-employment
- Tax Credits
2. Special Program Revenues
- Season Ticket Sales
- Gate Receipts
- Drivers Education Fees
- Students Participation Fees
- Student Parking Permit Fees
- Facility Rentals
3. State Sources
- General Education Aid
- Operating Capital
- Permanent School Fund
4. Total General Education Revenue Sources
- Shared Time Aid
- Q-Comp Aid
- AG Market value credit
- Disparity
- Achievement and Integration Aid
- Transportation
- Special Education
- Literacy Incentive Aid
- Success for the Future Grant
5. Total State Sources
- Title I
- Title II
- Title VII
- Federal Special Education
- Federal Impact Aid and Children with Disabilities Aid
Expenditures
- Teacher Salary/Benefits
- Debt Services
- Transportation
- Special Education
School
- Licensing/Software Fees
- Maintenance
- Food Service
- General Supplies
- Teacher Supplies
- Instructional
- Non-instructional
It is a process!
Phase 1: Property Tax Levy Certification
- This phase begins with the submission of estimated property tax levy information to the Department of Education in July. The state then produces a detailed levy document that is reviewed by the School Board in September, then updated later in the fall, and ultimately certified by the School Board in December following the annual Truth in Taxation Hearing. The collection of the property tax levy occurs during the calendar year and is intended to be utilized during the upcoming school year.
Phase 2: Original Budget
- During the second half of the current school year, the district moves to the second step in the process and begins development of the original budget for the next school year. This includes the development of the capital expenditure budget during the winter and spring of the current fiscal year. A key component of the preliminary budget process is an enrollment projection completed near the end of the current school year. This projection is the basis for the budget process. The School Board must approve, by statute, a budget for the next fiscal year by the end of June. This gives the district statutory spending authority.
Phases 3 & 4: Two Budget Revisions
- The budgeting process happens during the late fall and early winter of the current school year. The Business Office updates the original budget with revised estimates and presents a budget revision to the School Board in October. A final budget revision in the winter is primarily a revenue update with revised enrollment information and updated data on federal and grant programs. This final budget is typically presented and approved in January. The Board and Administration monitor the budget on a monthly basis through the Monthly Financial Report.
Phase 5: Annual Financial Audit
- The budget process is closing the books in late summer and the beginning of the independent audit in September. The School Board usually reviews and approves the independent audit report in late October or early November.
Things every building principal should know about school budgets!
1. Where are the revenue sources coming from.
2. Process for developing budgets for your district.
3. Be aware of your role with the budget for your building/district.
4. Know legislation and funding/pupil.
5. Know appropriate coding - Don't be afraid to ask.
6. Be flexible.
Resources
Bolick, N.O. (1991). School budget blues. American School Board Journal, 178 (9), 34-36. Sept
Ebdon, C.. (2000). The Relationship between Citizen Involvement in the Budget Process and City Structure and Culture.Public Productivity & Management Review, 23(3), 383–393. http://doi.org/10.2307/3380726
- Marshall Public School District 413 website: http://marshall.k12.mn.us/Domain/19
- Minnesota House of Representatives: House Research Department website: http://www.house.leg.state.mn.us/hrd/topics.aspx?topic=7
- Minnesota School Finance: A guide for legislators. (November 2014); Research Department: Minnesota House of Representatives.
- Nespor, J. (1997). Tangled up in school: Politics, space, bodies, and signs in the educational process. Lawrence Erlbaum Associates, Inc. Mahwah, N.J.
- Redwood Area Schools website: http://www.redwoodareaschools.com
- Richards, S. (1992). The school budget, power and responsibility in grant-maintained schools. Educational Management & Administration, v20 (4). 249-257. Oct
- Spaulding, F. E.. (1918). The Making of a School Budget. The School Review, 26(9), 684–695. Retrieved from http://www.jstor.org/stable/1078320
- Worthington Public School District 518 website: http://www.isd518.net