School District Revenues

School District RevenuesBenny L. GoodenASBO July 9, 2012SF101A-School Finance - RevenuesReasons for AttendanceASBO Certification Credit

Personal Knowledge Base

Revenue portion of Tier 1 initial training

Tier 1 annual update or Tier 2 annual training

Professional Interaction with Colleagues

To avoid the wrath of the State Board of Education

To add excitement to an otherwise dull life

Plan for the DaySources of Revenue

Issues in making projections

Revenue Trends

Related Issues/Legislative Updates etc.

Issues which lead to TroubleLegal Authority for School District Revenue in ArkansasConstitution of Arkansas (1874 as Amended)Article 14 1. Free school system

2. School funduse Purposes

3. School taxBudgetApproval of tax rate Amendments 11, 40 & 74

4. Supervision of schools

Legal AuthoritycontinuedConstitutional AmendmentsAmendment 40Budget publication/restricted use of school funds

Amendment 59Tax rate rollbacks after reappraisals

Amendment 7425 mill uniform rate of tax

Amendment 79Property tax reliefSelected Statutory Guidelines for School District Finance-Powers & Duties of Board of DirectorsAttend meetings of school board.Determine mission and direction of district.Adhere to state and federal laws.Enact, enforce and obey policies.Employ staff. Understand and oversee school district finances.Manage facilities.Approve curriculum and ensure that it is taught.Visit district schools and classrooms. Obtain training and professional development.Do all other things necessary and lawful.. 6-13-620 A.C.A.Revised 2009(6)Understand and oversee school district finances required by law to ensure alignment with the school districts academic and facility needs and goals, including without limitation:(A) Reviewing, adopting and publishing the school districts budget;

(B) Overseeing and monitoring the school district finances, including:RevenuesExpendituresInvestmentsDebtsObligationsInventoryReal Property(6)Understand and oversee school district finances (C) Borrowing money as necessary, but in no case shall the school board of directors permit the school district to end the fiscal year with a negative legal balance;

(D) Entering into contracts for goods and services necessary to operate the school district;

(E) Buying, selling, renting, and leasing real property and personal property on behalf of the school district; (F) Receiving, reviewing, and approving each annual financial audit report and presenting it to the public.Statutory GuidelinescontinuedPublication of budget--Amt. 40 6-13-622Appointment of Treasurer 6-13-701Deposit of School Funds 6-20-222Requirements for financial reporting 6-20-2103 & 6-20-2201 et.seq Records as required by ADEDistrict debt-current & bond 6-20-401 6-20-801 et.seq. 6-20-1201 et.seq.

Public School Funding Act 6-20-2301 et.seq.

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PenaltyStatutory Guidelines..continuedBoard disbursing officer 6-13-618Best Financial Practices 6-15-2301Classified School Employee Minimum Salary Act 6-17-2203Teacher compensation guidelines 6-17-2104 and 6-17-2403Independent Audit deadlines 6-20-180Training Requirements 6-20-1805Educational Excellence Trust Funds 6-5-307

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Certifications by SuperintendentTwo of many.. X 98 pages

X 9

6 pagesState RevenueLocal RevenueArkansas schools receive more than 90% of resources in these categories.The Big Question:How much Total Revenue will your school district receive in 2012-2013?What effect does Legislative action or changes in local economic conditions have on resources for the coming year?ADM increased or decreasedAssessed valuation changed

Total RevenueGuessing is not Preferred

Using systematic techniques to develop reasonable and defensible estimates of school revenue

Why are accurate projections important?To provide a stable fiscal environment

To gain the confidence of board of education, staff and community

To verify the revenue calculations of others

To avoid fiscal distressAll Categories of Revenue Must be ConsideredLocal

State

Federal Local RevenueFactors Determining Local RevenueAssessed Valuation

Tax Rate (Millage)

Collection Rate

Other Local Revenue/Miscellaneous Funds Assessed ValuationReal PropertyResidentialBusiness/IndustrialAgricultural/TimberMineralsPersonal PropertyBusinessVehicles/AircraftLivestockUtility PropertyAbstract of Assessed ValuationSource: County Assessor/Clerk

Current Taxes/40% 36%Pullback From Abstract of Assessments

Source: ADE Website How Does 40% Pullback work in Arkansas school finance?ASSESSMENT YEARFISCAL YEARJANJANJANJANJANJULYJULYJULYJULY40% Pullback60% Current40% Pullback60% Current40% Pullback60% Current40% Pullback60% CurrentEach FISCAL year contains: Taxes due and payable in that FY (Current Tax) Taxes due and payable in the next FY (40% Pullback)Ending Soon !!!!!A 40% Pullback Transition VocabularyRevenue receipts: include local taxes actually collected from July 1-June 30 regardless of assessment year.Deferred: revenues in excess of 40% to which district is entitled for future fiscal year.

Accrued: revenues included in the imputed 40% from the future fiscal year, but not actually received.

Phase-out: Adjustments made to accrued revenues during a period of up to ten (10) years following June 30, 2012.

Defined by 6-20-401 Know statusKnow statusTransition options to end 40% PullbackImmediateAbsorb either accrual or deferral revenue in the current year budget. Advantage: This makes change in one year. Disadvantage: There will be an apparent increase or decrease in the legal fund balance. Phase inAccrual may be reduced by 10% per year, i.e. 36% in 2011-2012, 32% in 2012-2013, etc. Advantage: Effect in one year is minimized.Disadvantage: Accounting can become problematic for a number of years. Revenue Estimation after the 40% Pullback Concept is eliminatedLook at collection trends from several past years.Determine tax revenue received as current taxes in the July 1-December 30 period.Determine tax revenue received as current taxes in the January 1 June 30 period.Make estimates based on past history-TRENDS.Consider changes in assessed valuation in estimating for future fiscal year. During the 40% Pullback TransitionRemember:The immediate or gradual transition away from 40% pullback does not result in additional revenuenor does it result in less revenue.

The effect is only a matter of timing for the recognition of revenues resulting from ad valorem taxes.

This point must be made clear to educators, school board members and the public. Abstract of AssessmentADE Certification Signature

ADE Certification SignatureAssessment Abstract IssuesSignatures by appropriate officials

Accuracy of Data

Amendments during the year

If you dont check it, who will?Establishing Trend DataAssessed Valuation-by CategoryCollection RatesCurrent TaxDelinquent TaxAmendment 79-Homestead CreditExcess Commissions36%40% PullbackIf ApplicableInterest on taxes held by CollectorTiming of Revenue ReceiptsAverage Daily Membership (ADM)

Historical Trends in Assessed Valuation

Growth in dollars and Percent

5-year averagesTrends areInfluenced byA variety of Factors

EconomyUnusual activityAppraisal CyclesMistakes

Review Trends in ContextPast History

Environmental Changes

Economic Growth or Decline

Population Changes

Reappraisal Cycles

Legislative ActionAssessed Valuation/Tax RateVerify Assessed Valuation as Certified by County Assessor and Clerk to ADE

Verify Tax Rate as Certified by the Quorum Court in accordance with ballot language approved at Annual School Election

Verify millage allocation as approved by votersOther Property Tax IssuesMandatory Reappraisals3-year vs. 5-year cycleLimits on annual additions to individual property assessments Amendment 79Frozen assessments for those 65/overAmendment 59 rollbacks10 % maximum increase from all sourcesReview of Assessed ValuationFrom A Sample DistrictYear 1Real $ 94,533,310

Personal $ 36,722,125

Utility $ 6,562,305

Total $ 137,817,740Year 2Real $ 83,400,923 -11,132,387 -11.77%Personal $ 48,638,552 +11,916,427 +32.45%Utility $ 7,092,685 + 530,380 +8.08%Total $ 139,132,160Increase of $ 1,314,420 +.95%Property Taxes Include:Current Taxes *Amendment 79 Replacement Homestead Credit (* Included in both current taxes and 36% pullback)36% Pullback *Delinquent TaxesExcess CommissionsInterest on taxes held by CollectorAll used to calculate 98% factor for Foundation AidAll these comprise Net RevenueEnding SoonOr NOTCollection Rate DeterminationDelinquent TaxesTax Collector/TreasurerExcess CommissionsAssessorNever CollectedTotal Tax Deductions =Current Tax & 36% Pullback

Monitor Property Tax Rebate PaymentsWhy is This Important?Ending SoonEstimating Collection Rate1.48%Never Collected3.49%Delinquent .75%Tax Collector/Treasurer2.10%Excess Commissions2.0 %Assessors Office90.18%Current Taxes/36% PullbackIncludes Homestead Rebate100% Total Source: Fort Smith Public Schools Ending SoonNOWTax Rate ConsiderationsTimeline for Budget of Expenditures and Proposed Tax Rate Publication 60 days prior to annual school electionMultiple County Districts

Consolidation/Annexation of DistrictsMultiple rates in merged districts

ADE Certification of Bonded Debt Payment and Available MillsProperty Tax Timelines JulyJan July Jan JulyYear 1AssessmentsTax Bills IssuedTax Pmt DeadlineFiscal YearSchool ElectionPublicationPublicationPublicationFiscal YearFiscal YearSchool ElectionYear 2AssessmentsTax Bills IssuedTax Pmt DeadlineCalculation of Revenue:Checking your estimateAssessed Valuation X Millage RateTotal Property Tax RevenueX Collection Rate Allocated as: Current Taxes 36% Pullback Amdt. 79-Homestead Credit Plus:Delinquent TaxesExcess CommissionsImportant: Total must not exceed 100% of collection in any year!Ending SoonMillage Rates-Schools25 mills for maintenance and operation(Amendment 74)Additional maintenance and operation(Approved by Voters)Debt Service Mills to pay debt (Approved by Voters)Regular bonds/Mandatory Call bondsDedicated Maintenance and operation(Approved by Voters)Voted Millage vs. Actual Application- A Sample DistrictVoted Millage

6.90 Debt Service 25.00 M & O N/A Dedicated M & O 31.90 TotalActual Application

6.45 Required Debt 25.45 M & O Avail. 25.00 Amdt 74 N/A Ded/M & O .45 Excess Debt

31.90 Total

Property Tax Reminders36% Pullback is at 100% Collection

Delinquent tax, Excess Commissions, Fee Office Costs and taxes not collected are taken from Current Tax Estimates

M & O Tax Rate must be 25 mills or higher

The BEST estimate is one supported by past collection history!Ending SoonOther Local RevenuePayments in lieu of TaxesMineral leases, Severance Tax, etc.ContributionsInterestPrivate, Foundation, Corporate GrantsRentals of district facilitiesFees for tuition, services, etc.All Activity Funds *Maintained SeparatelyVending/beverage contracts

Payments in Lieu of TaxesAct 9 of 1960 authorized issuance of exempt bonds to finance industrial development.Cities and Counties must authorize with notification of affected taxing entities.Payments in lieu of taxes are negotiable. Payments made by financing recipients are distributed by the County Collector. Revenues are included as miscellaneous funds for the purpose of Foundation Aid calculations.Miscellaneous Funds Defined by Act 825 of 2007 Clarified by Act 266 of 2011Federal forest reservesFederal grazing rightsFederal mineral rightsFederal impact aidFederal flood controlWildlife refuge fundsSeverance taxesRevenue in lieu of taxesLocal sales and use taxes dedicated to Education 6-20-2303 Miscellaneous Funds included in Foundation Aid calculationAverage of previous five-yearsIf a district did not receive a category of miscellaneous funds in the previous year, then that category of miscellaneous funds will not be included in the calculation for the next school year. Payments in lieu of taxes only are counted in proportion of URT to total millage rate.Calculations are made annually.Local Revenue Issues to Cause Insomniaor WorseReappraisal of residential property with a decline in value(Re)determination of the reappraisal cycle

Litigation regarding gas well values/determination of well values

Taxpayer challenges to values

Economic impact of recession

Tax Increment Financing Districts (TIF)Local Revenue-RecordingPentamation Reports from Levels II and III

Recorded using Revenue Code Series 1xxxxRefer to Financial Accounting Handbook provided by ADE to secure latest revenue codes. Additional changes may be announced in Commissioners Memos.State RevenueADE State Aid NoticeSource: Arkansas Department of Education

Keep all State Aid Notices for future referenceRevised State Aid Notice

Compare changes to original and askWhy?State Foundation Aid is a combination of:Local Funds per student based on local assessed valuation x URT x 98%State Funds to bring total aid to established adequacy level per student $ 6,267*$ 2,816 $ 3,451Rate for 2012-2013EXAMPLES Amendment 74Approved in 199625 mill Uniform Tax for Maintenance and Operation @ 98% CollectionAssessed Valuation X .025 X 98%This revenue source should grow 3-4% annually in a normal economic environment as statewide assessed valuations increase. Based on the Arkansas Supreme Court decision, state general revenue can be decreased when URT revenues exceed required funding for adequacy.2012-2013 Foundation Funding per ADMAid Per StudentThe Foundation Aid per Student is not subject to adjustment for fluctuations in state revenue. However a higher amount must be approved by the General Assembly each biennium as Adequacy is defined. $ 6,267*State Foundation Aid for each school district is determined by:Legislative Appropriation for Foundation Aid per studentDetermined to be ADEQUATEUniform Tax (Amendment 74) Assessed Valuation x 25 mills x 98% 100 % of Miscellaneous Funds (Five-year average) TOTAL Prior Years ADM (3 quarters) Used to compute Total Aid 2012-2013 ExampleFoundation Aid Adequacy $ 6,267AV $139,132,160 X URT .025 X 98% $ 3,408,737Miscellaneous Funds $ 73,200TOTAL LOCAL RESOURCES $ 3,482,4373 Qtr. ADM for prior year 1,236.54

2012-2013 Examplecont. Total Local Resources $ 3,482,437Students (ADM) 1,236.54LOCAL RESOURCES PER ADM $ 2,816Adequate Foundation Aid $ 6,267State Aid per ADM $ 3,451Total State Foundation Aid ????? 2012-2013 Examplecont. Total State Aid Per ADM $ 3,451 XPrior Year ADM (3 Qtr.) 1,236.54 =Total State Foundation Aid $ 4,267,299Compare local calculations to State Aid Notice. Minor variations will likely result from rounding. Requirements for Tracking Foundation Aid as it relates to ExpendituresA unique Fund/Source of Fund Code is required for the several categories of expenditures paid with Foundation Aid and selected other state funds. Refer to FIN-09-047, FIN-10-008 and FIN-11-080 to clarify coding requirements. The purpose of this distinction is purportedly to determine the actual amount of educational services purchased by the level of state funding determined as Adequacy.Combinations of:Declines in Average Daily Membership (ADM)

Changes in Assessed ValuationAll require individual analysis in each districtWarning SignsCounting Students

Enrollment-Represents the number of students eligible to attend at any time.ADA-Average Daily Attendance Represents the average number of students in attendance on each day.ADM-Average Daily Membership Represents the average number of enrolled students in attendance and absent on each day.

Each statistic results in slightly different results in determining resources/expenditure per studentStudent Data CalculationADA Days Attended Days in SessionAverage Daily Attendance=ADM= ( Days Attended)+( Days Absent) Days in Session Average Daily MembershipEnrollment = AggregateCumulativeDate SpecificWhat about the 98% collection assumption used to compute Foundation Aid?Beginning in 2007-2008 Act 272 of 2007 provides a guarantee of funding equal to the 98% collection from local ad valorem taxes as anticipated in the State Foundation Aid formula.

Adjustments will be made following calculations of actual collections.

Supplemental payments will be made from a Legislative appropriation.

Refunds of tax collections in excess of 98% will be required.

Act 633 of 2011 modified data collection.

State Funding CategoriesUnrestrictedFoundation Funding AidGeneral Facilities FundingSupplemental Millage Incentive FundingSpecial Needs Isolated AdequacyDeclining Enrollment FundingDeclining Enrollment AdequacyStudent Growth Funding98% of URT State Funding CategoriesRestrictedAlternative Learning EnvironmentEnglish Language LearnersNSL State Categorical FundingNSL Growth FundingProfessional DevelopmentBonded Debt AssistanceIsolated FundingSpecial Needs Isolated FundingSpecial Needs Isolated TransportationEducational Excellence Trust Fund

National School Lunch Students (NSLA)Eligibility for free or reduced-price meals90% or greater at $1,549 per student70% but less than 90% at $1,033 per studentLess than 70% at $517 per student Paid in 2012-2013 based on student data from the previous October 1.Consideration for districts with significant growthDefined as 1% increase in three successive years.Transition process for increase or decrease--3 yearsAlternative Learning Environment (ALE)Based on $4,228 per ADM for FTE students enrolled during the previous school year. Subject to rules promulgated by the State Board of Education. Secondary Vocational CenterBased on $3,250 per student served during the prior year. MaybeUnless the pie is divided into smaller piecesEnglish-language learner (ELL)Based on $305 per student identified as an English-language learnerProficiency is subject to state-approved English proficiency assessment instrumentSubject to rules promulgated by State Board of Education.Professional Development FundingBased on an amount up to $ 52 per student as determined by the previous school year ADM. ($42.38 in 2011-2012)Subject to rules promulgated by State Board of EducationAdditional Reporting Required for Selected Revenue SourcesGeneral Facilities FundingDistance LearningGifted and TalentedStudent GrowthDeclining EnrollmentSpecial Education Catastrophic OccurrencesSpecial Education ServicesTechnology GrantsDebt Service funding supplement

6-20-2201 A.C.A.Spending Requirements for Categorical Funds Act 1220 of 2011Effective by June 30, 2012At least 85% of NSLA Funds must be spentTransfer authority among categories is grantedCommissioner may grant waiversBalance in categorical funds shall not exceed 20% of annual allocationProvisions for 10% annual reduction requiredFailure to comply results in deductionSubject to rules promulgated by State Board of EducationAcademic Facilities Partnership Funding Requires current local school district facility master planEstablishes standards for maintenance Requires that 9% of Foundation funding be dedicated for facility costsEstablishes standards for academic facilitiesProvides for designation of school districts in academic facilities distress with various sanctions and corrective actionProvides for state inspectionsProvides Partnership funding for approved facilities

Academic Facilities Wealth Index Computation Act Applicable wealth index is based on the value of one mill per student in each school district as determined by total assessed valuation of taxable real, personal and utility property divided by the ADM. The results for all school districts are ranked from lowest to highest and allocated into percentiles, and assigning the 100th percentile to the district corresponding to the percentile of student millage rankings of 99.5 percentile. State shares result from subtracting school districts percentage share from 100% and assuming that districts at or above the 99.5 percentile are at that level. Student Growth FundingBeginning in 2007-2008 Student Growth Funding is computed on a quarterly basis by comparing each quarter ADM with the three quarter ADM of the preceding year.

Payments will be made based on a quarterly computation.

Increases based solely on consolidation or annexation are excluded.

A final adjustment will be made in the following fiscal year.

Overpayments must be refunded. Declining Enrollment FundingRequires a decline in ADM over the two immediately preceding school years.

Funding equals the difference between the average of the two immediately preceding years ADM and the ADM for the previous year multiplied by the current year Foundation funding amount.No district shall receive both declining enrollment funding and student growth funding during the same fiscal year.Other State Aid IssuesEducational Excellence Trust FundIncrease above highest year since 1991 must be used to increase salaries to certified staff including FICA and Teacher Retirement matching

Salary Schedule RequirementsRequired Expenditures in targeted categoriesIncreases cannot be used for increments based on education or experience in 2005-2006 and thereafter. (Act 2165 of 2005)State Revenue-RecordingPentamation Reports recorded in Levels II and III reporting

Record State revenues using Revenue Code Series 3xxxxRefer to ADE Handbook for correct code designations. Revisions will be announced through Commissioners Memos. Federal RevenueFederal Aid IssuesBasic Premise: Federal Aid is categorical and tied to specific programs and purposes. If the Act approved by Congress, CFR language or ADE written interpretations do not authorize a particular use, Federal revenues must be segregated and used as specifically authorized. Key Federal ItemsSafeguard signed grant award letter.

Account for revenues as directed by ADE with Source of Funds code.

Be aware of timing.State FY, Federal FY, carryover provisions.

Keep careful records for all employeesespecially pro-rated employees paid from Federal funds.Federal AidRecording Pentamation Reports recorded in Levels II and III reporting

Record Federal revenues using Revenue Code Series 4xxxx

Refer to ADE Handbook for correct code designations. Additional rules and changes will be announced in Commissioners Memos. Use Available ResourcesResources Include:Arkansas Department of EducationTraining through Educational Service CooperativesADE/Professional Group Listserve(s)County OfficialsOther School LeadersAuditorsPublicationsASBOAAEATrust, but Verify!The Best Revenue Estimate is one based on past experience and upon Reasonable Projections!