Introduction to District Budgets

Lodi Unified School District

MARCH 8, 2011

Prepared by: Tim Hern & Staff

Topics

• What is a Budget• Budget Forms• Budget v. Cash (Money)• How did we get Here• AB 1200 AB 2756• Budget Time-line• Expenditure, Revenues and Reserves• Budget and Priorities

District Budgeting Operates Within a

Set Framework

“It’s clearly a budget. It’s got a lot of numbers in it.”

— President George W. BushReuters, May 5, 2000

1

What is a Budget?

• First priority is to be fiscally sound:– Represents the total estimated revenues and the maximum

expenditures authorized by the Board• The budget must also balance:

– The expectations with state and federal academic performance– Community expectations for services that schools should

provide– Staff expectations around their compensation and working

conditions– Board / District’s Strategic Plan with all other needs– The state’s legal requirements for fiscal solvency

• A budget is a living, breathing document. It is not concrete, it will change as the year progresses in both expenditures and revenues

2

Budget Forms?

• In simplest form: A proposed plan for revenues and expenditures for the following fiscal year

• In typical form: A proposed plan for revenues and expenditures in a format that meets county and state requirements

• In optimum form: A policy document to reflect the philosophy of the Board, the Administration, the Education Community

• A financial plan: To show where you've been and where you are going

• An operations guide: To guide administrative decisions and actions throughout the year

• A communications device: To share with the community the strengths and challenges of the instructional program

3

Money, Money, Money• Money takes a variety of different forms in a budget:

• Revenues – includes general funds / unrestricted and categorical / restricted resources

– Expenditures – one-time vs. ongoing, capital vs. noncapital, centralized vs. site level, – to name just a few

• But, bottom line, a budget is all about money

– Good budgets add up financially andeducationally

• Optimally expenditure are within +\- 2 % of any budget

• The right dollars are spent at theright time on the right stuff

• Budget is not cash

– State deferrals (now 33.5%) have misaligned Budgeted Revenues

• Borrowing cash to meet budgeted expenses adds additional expense to operations and removes resources from the operational budget. Anticipated cost of TRAN $294,240 for two notes of $27,865,000

4

California School Finance California School Finance Historical TimelineHistorical Timeline

1978

Pro

posi

tion

13

2011 and beyond

AB

120

0

1979

Gan

n Li

mit

1983

Sen

ate

Bill

813

1984

Sta

te L

otte

ry

1988

Pro

posi

tion

98

1974

K-1

4 C

olle

ctiv

e B

arga

inin

g

1971

Ser

rano

Prie

st

1972

Sen

ate

Bill

90

1992

-95

Econ

omic

Rec

essi

on

1995

Ado

ptio

n of

K3

CSR

1996

-99

Scho

ol R

efor

ms

2000

Res

tore

d D

efic

it Fu

ndin

gPr

op 3

9 20

00

2003

Will

iam

s Se

ttlem

ent

200

4 A

B 8

25 C

ateg

oric

al R

efor

mA

B 2

756

2004

Prop

ositi

on 9

8 Su

spen

ded

Ano

ther

Sus

pens

ion

of P

ropo

sitio

n 98

?

1971

1979

1978

1972

1983

1984

1988

1992

1974

1996

1999

2000

2003

2004

1995

2008

2003

1991

5

Understanding the State’s Funding of Public Schools

Revenues are limited (aka Revenue Limit)• 1968—Lawsuit filed by attorneys representing parent,

John Serrano, against Ivy Baker Priest, the State Treasurer at that time, for the state’s violation of the constitution’s “equal protection” rights of pupils

Revenue was largely funded through local property tax.

Higher property wealth districts generally had better educational opportunities than lower wealth districts

6

Understanding the State’s Funding of Public Schools, cont.

• 1972—SB 90 passed in response to the State Supreme Court ruling in the Serrano vs. Priest lawsuit.

Revenue limit controls were established with maximum revenues set at the current amount of general purpose state and local aid being received at that time. Unique Revenue Limit

Annual adjustments for inflation were applied.

7

Understanding the State’s Funding of Public Schools, cont.

• 1972—SB 90 , cont.

A statutory formula was used to determine the amount of state aid, differences between the RL and state aid were made up with local property taxes.

Districts had the authority to levy additional local property taxes for unreimbursed mandates, such as unfunded Special Education costs.

8

Understanding the State’s Funding of Public Schools, cont.

• 1974--CA Superior Court ruled that the state must reduce funding inequities between districts to “considerably less than $100 per pupil” by 1981.

Districts who were able to meet the revenue limit without state aid were still to receive a minimum of $120* per ADA from the state (Basic Aid Districts)

*As of 2003/04, the state meets this through state categorical funding.

9

Understanding the State’s Funding of Public Schools, cont.

• 1978—Proposition 13 enacted.

State reduced property taxes by an average of 60%.

General purpose tax revenues taken from property taxes capped at 1% and had to support all government agencies.

Changes to assessed values could occur through property sales and property improvements

10

Understanding the State’s Funding of Public Schools, cont.

• 1978—Proposition 13 enacted. (cont.)

Property values could be increased using the prior year’s CPI level, not to exceed 2% per year.

School districts no longer allowed to levy local property taxes for general purpose costs (mandated services including Special Education)

State now had to make up the difference between the revenue limit and local property taxes, including adjustments for inflation.

11

Understanding the State’s Funding of Public Schools, cont.

• 1979—Proposition 4, GANN Limits

State’s appropriation limit (spending) can not grow faster than inflation and the change in population.

Limited the state’s ability to fund districts beyond the established revenue limit formulas.

New educational programs, unfunded mandated programs, and greater equalization measures had to stay within the newly imposed limit.

12

Understanding the State’s Funding of Public Schools, cont.

• 1983—SB 813, school finance reform movement passed.

New programs added: longer school year & day, mentor teachers, increased salaries for new teachers, increased funding for instructional materials, and 10th grade counseling

A statutory COLA formula for the revenue limit was created using the U.S. Department of Commerce’s Implicit Price Deflator

Districts under the statewide average revenue limit amount would receive equalization aid

13

Understanding the State’s Funding of Public Schools, cont.

• 1988--Proposition 98 was an initiative created by the educational community and passed by the voters. This is a constitutionally protected part of the state budget. Guaranteed minimum funding levels for K-14 public schools were established.

14

Understanding the State’s Funding of Public Schools, cont.

• Suspension, Maintenance Factor, and Restoration

Suspension of the minimum guaranteed funding level occurs when Test 3 is triggered based on lower than normal state revenues

Suspension can also occur at will by a 2/3 vote of the Legislature and the Governor’s signature

15

AB 1200• Oversight by County Office of Education and the State

Superintendent of Public Instruction Including Stay and Rescind Authority given to a County appointed Fiscal Expert

• Budget must be submitted on State Forms• Requires a Public Hearing before Adoption• Within 45 days of State Budget adoption any major changes to the

District adopted budget must be approved by the board.• Requires the COE to Examine and determine if it meets the State

Board of Education Standards and Criteria• Determines if the District will meet its financial obligations in the

fiscal year and multi-year• Certifies Budget Positive, Qualified or Negative (Self Certification)• Takes Corrective Steps to return district to a going concern• Requires Unaudited Actual, Independent Audit, First and Second

Interim Report

16

AB 2756• This bill gives County Offices of Education additional oversight authority over the LEA

and strengthens AB 1200.

• The bill requires the district superintendent, chief business official, president of the school board, and any other member of the school board voting in support of a labor agreement to certify that the school district can meet the costs incurred during the term of the agreement.

• The county Superintendent of School has the authority to reject any labor agreement that is deemed to be fiscally unsound.

• Existing law provides standards and criteria to be used by local educational agencies in the development and management of annual budgets. This bill require the Superintendent of Public Instruction, the Controller, and the Director of the Department of Finance to update these standards and criteria.

• Gives authority to SPI to take control of School District, when a state loan is required, Appoint Trustee, suspend Board Authority (advise only) and Removal of District Superintendent

17

Budget Time-line

July 1 Fiscal Year Starts

September Unaudited Actual Budget

December 15 Independent Audit to Board

October 15 First Interim Report (Multi-Year)

January 10 Governor’s Budget• Budget Development Starts• SBAC / Board defines priorities

March 15 Second Interim Report

Multi-Year Based on Gov. Bud.

May Revise Known Changes to the Gov. Bud.

June 15 Legislature to pass budget for Governors’ signature

June 30 (no later than) Public Hearing and Board Approval Budget submitted to County Office

SJCOE Accepts, warns, or rejects

18

Lodi Revenues 2009-10 Actual• Base Revenue Limit 61.8%

– of which 72% comes from state and– 28% comes from local property tax

• Federal Revenue 10.9% Restricted– Special Ed– NCLB - RTTT– Vocational and Technology– Safe and Drug Free Schools

• Other State Revenue 24.7% Restricted and Unrestricted (Tier III Flexibility) – Special Ed– Home to School Transportation– Economic Impact Aid– Class Size Reduction– Lottery– QEIA– Categorical

• Other Local Revenues 2.5%– Fees for Service– Sales– Interest

19

Lodi Expenditures 2009-10 Actual$232,500,876.72

Contract and Services (5000)

9%

Capital (6000)<1%

Books and Supplies (4000)3%

BenefitsAll Employee (3000)

19%

Classified Salary (2000)17% Cetificated Salary (1000)

52%

Other Outgo (7000)<1%

Cetificated Salary (1000) Classified Salary (2000) Benefits All Employee(3000)

Books and Supplies (4000) Contract and Services (5000) Capital (6000)

Other Outgo (7000)

All Salaries and Benefits equal 87.789%

20

Reserves

• Reserves need to be transparent– They must define what they are intended for

GASB 54– In the age of deferrals, currently 33.5%, they

are needed for cash flow– If they are used they are one time– They are mandated by the state– A 3% reserve does not cover 1 month of

salary

21

District Priorities

Core Supplemental Enhanced

ResourceRestricted (first)\Unrestricted

The district must define core to have an effective budget. The budget directs limited resources to it own, state and federal defined priorities (Core).

22

Programs Affected by Categorical Reductions

Tier I – No Reduction, No FlexibilityAfter School Education and Safety

Advancement via Individual Determination

Child Development

Child Nutrition

Economic Impact Aid

Federal Resources

K-3 Class Size Reduction

Pupil Transportation

Quality Education Investment Act

School Bus Replacement

Special Education

State Lottery, including Proposition 20

Tobacco Use Prevention Education (TUPE)

Tier II – Funding Reduction, No FlexibilityAdults in Correctional Facilities

Ag Voc Ed Programs

Apprentice Programs

Charter School Facility Grants

Foster Youth Educational Services

English Language Acquisition Program

Multi-Track Year Round Grant Program

Partnership Academies

23

Programs Affected by Categorical ReductionsTier III – Reduction and Flexibility

Administrator Training Program (AB 430)Adult EducationAdvanced Placement GrantAlternative CredentialingArts and Music Block GrantBilingual Teacher TrainingCAHSEE Intervention GrantsCalSAFECenter for Civic EducationCertificated Staff Mentoring ProgramCharter Schools Categorical Block GrantChild Oral Health AssessmentsCOE Williams AuditsCommunity Based English Tutoring (CBET)Community Day SchoolsCounselors, Grades 7-12Deferred MaintenanceEducation TechnologyGifted and Talented Education (GATE)High Priority SchoolsHigh School Coaching TrainingIndian Education Centers

Immediate Intervention/Underperforming Schools Program (II/USP)

Instructional Materials FundInternational BaccalaureateMath & Reading Training (SB 472)Morgan-Hart Class Size ReductionNational Board Certification IncentivePeer Assistance and Review (PAR)Physical Education Teacher Recruitment GrantsProfessional Development Block GrantPupil Retention Block GrantReaders for the BlindROC/PSAIT and Corrective ActionsSchool and Library Improvement Block GrantSchool Safety Block Grants (Carl Washington)School Safety Consolidated Competitive GrantSpecialized Secondary ProgramsState Assessments (STAR, CAHSEE, CELDT, etc.)Supplemental Hourly ProgramsTargeted Instructional Improvement Block GrantTeacher Credentialing Block GrantTeacher Dismissal Apportionments 24