School Finance 101

1. School Finance 101 Your LOGO HERE

2. School Finance 101 • Funding Associated with School Districts • Calculating A Local Tax Rate • Understanding The Expenditure Budget

3. FUNDING ASSOCIATED WITH SCHOOL DISTRICTS

4. OBJECTIVES • Historical Background • Understand the goals of the Arizona Finance System and importance of Arizona Revised Statute Title 15 and the Uniform System of Financial Records ( USFR) • Knowing the names and purposes of budget documents • Building a Revenue Budget (Your School) • Develop an understanding of Average Daily Membership (ADM) and how it affects the budget limit • Understanding Group A and B weighted student counts • Learning how the BLA, BRCL, TRCL, RCL, CORL, • budget limits are calculated and what they mean • Classroom Site Fund: How it is calculated and can be used • Soft Capital Allocation • What is it and how is it calculated

5. THE ARIZONA FINANCE PROGRAM HISTORICAL BACKGROUND • Maintenance and Operations Fund 001 • Unrestricted Capital Outlay Fund 610 • Soft Capital Fund 625 • Classroom Site Funds 011-013 Back in the early 1980’s the Arizona Legislature refined its school finance system to provideequal dollars per pupilfor school operations through abalancing of the local qualifying property tax rate and State of Arizona financialassistance. This concept, commonly referred to as the“equalization formula,”allowed public school districts throughout the State of Arizona to experience similar “effort” in raising educational dollars for their students irrespective of the value of property within their boundaries. Today it is responsible to set up spending limits for:

6. THE ARIZONA FINANCE PROGRAM ARIZONA REVISED STATUTE (ARS) TITLE 15 • Rules Established by the Arizona Legislature • Title 15 Refers to Education • Sections 15-901 to 15-1241 Refer to School Finance UNIFORM SYSTEM OF FINANCIAL RECORDS (USFR) The legislature has required that the Arizona Department of Education and the State’s Auditor General interpret Title 15 and design the State’s Uniform System of Financial Records (USFR) which is used in maintaining local school district financial records and preparing reports.

7. BUDGETARY DOCUMENTS“Knowing the Names And Their Purposes” In the State of Arizona, there are a number of forms which provide some uniformity in the manner that financial information is presented. Anyone can fill them out with reasonable accuracy, but few can understand and interpret their content. The Documents Are As Follows: EXPENDITURE BUDGET (Proposed & Adopted (Adopted by July 15th of the fiscal year) REVENUE BUDGET (Completed by September 15th of the budget year.) REVISEDEXPENDITURE BUDGET (Completed by December 15th and/or May 15th) ANNUAL FINANCIAL REPORT (Completed by October 15th)

8. Building The Revenue Budget

9. YOUR SCHOOL NAME District Demographics • ??? School District • PSD = 30 • K-8 = 5,000 • 9-12 = 1,500 • Growing District • Capital Override • Regular Ed Override • Career Ladder ?????

10. Funding Associated With Arizona School Districts BUDGET REVENUE LIMITS Foundation for Building a Budget

11. REVENUE SOURCES ASSOCIATED WITH SCHOOL FINANCE *General Budget Limit (??%) (M&O Budget)

12. GENERAL BUDGET LIMIT • Base Revenue Support Level (BRCL) • Transportation Revenue Control Limit (TRCL) • Capital Outlay Revenue Limit (CORL) • Overrides • Additions to the Budget What is It? The General Budget Limit results from a number ofsimplistic formulasheavily dependentupon thenumber of students or Average Daily Membership, (ADM) the district has over the cumulative effect of the prior school years’ first 100 days. The typical General Budget Limit is made up from the following formulas: GBL

13. General Budget Limit Component Calculations

14. Funding Associated with Arizona School Districts

15. Base Revenue Control Limit(BRCL) What is It? The Base Revenue Control Limit is made up of various components which determine the total funding amount each component generates. These include: BRCL Audit Services BRCL TEI Career Ladder Teacher Compensation Base Level Amount Group B Add On Count Group A Count Weighted Student Count Support Level Weight Average Daily Membership

16. AVERAGE DAILY MEMBERSHIP(ADM) Approximately 78??% Of All District Funding Is Dependent Upon The Number of Students (ADM) It Has

17. AVERAGE DAILY MEMBERSHIP(ADM) What is it? The average number of students which are enrolled each day during the first 100 days. ADM For each day the student is enrolled, we receive 1% of the funding for that student.

18. Historical Data ???___ has also (increased, decreased) in ADM an average of ??% over the last 5 years or ??? students.

19. Student ADMLast 6 Years Average increase over the last six years is 7.8%

20. 2002-2003 100TH DAY ADM TO 2003-2004 PROJECTIONS Based on historical data, we are estimating a 7.00% increase in ADM over last year.

21. Base Revenue Control Limit(BRCL) WSC SLW Weighted Student Count Support Level Weight Average Daily Membership

22. SUPPORT LEVEL WEIGHT What Is It? The effect of Weighted Student Count allows a student to be worth more ( for funding purposes), more than 1.0 SLW Example: A 5th Grade Hearing Handicapped Student

23. WEIGHTED STUDENT COUNT What Is It? The Weighted Student Count takes into consideration theassociated costof educatingcertain classifications of students (Support Level Weight) without utilizing dollars to do it. This student count takes into account thesize of the district,whether the students are in elementary or high school, the isolation of small rural school districts in the state, and special needs children. Weighted Student Count is specified per ARS 15-943. WSC Two Types Group A & Group B

24. Base Revenue Control Limit(BRCL) Group A Group B Add On Count Group A Count Weighted Student Count Support Level Weight Average Daily Membership

25. Your SchoolWEIGHTED STUDENT COUNT Group A

26. Base Revenue Control Limit(BRCL) Group B Group B Add On Count Group A Count Weighted Student Count Support Level Weight Average Daily Membership

27. Your SchoolWEIGHTED STUDENT COUNT Group B Add-ons

28. Base Revenue Control Limit(BRCL) BASE SUPPORT LEVEL What Are They? Audit Services All Others TEI Career Ladder Teacher Compensation Base Level Amount Group B Add On Count Group A Count Weighted Student Count Support Level Weight Average Daily Membership

29. BASE LEVEL AMOUNT What is It? The Base Level Amount represents theamount of money, perweighted student count(Group A and Bcombined), that thelegislature annually decides it willprovideto public schooldistricts. For budget year 2004-2005 thebase level is $2,893.18 and $2,929.34with Teacher Compensation.Career Ladderpercentage is then added to this amount should a district participate. BLA

30. OTHER BASE SUPPORT FACTORS Teacher Experience Index (T.E.I.) This factor is derived from the formula specified in A.R.S. §15-941. Its purpose is to allow extra budget capacity for school districts with teachers whose average years of experience exceed the State of Arizona average. Districts which qualify are allowed to increase the support level by 2.25 percent for each year of experience above the State of Arizona average. Audit Costs Districts required to conduct a single audit may increase the level by the cost of the last audit. Career Ladder and Performance Incentives A District may also increase its Base Level Amount by up to an additional 5.5% if it participates in a pay for performance program entitled, “Career Ladder”.

31. YOUR SCHOOL DISTRICTBASE REVENUE CONTROL LIMIT

32. Base Revenue Control Limit(BRCL) BRCL Audit Services TEI Career Ladder Teacher Compensation Base Level Amount Group B Add On Count Group A Count Weighted Student Count Support Level Weight Average Daily Membership

33. Funding Associated with Arizona School Districts

34. TRANSPORTATION REVENUE CONTROL LIMIT (TRCL) What Is It? ARS 15-945/946 provides for increased budget limits for districts that transport students to and from schools. Minimum distances that are approved are one mile for K-8 students and one and one half mile for 9-12 students. TRCL

35. TRANSPORTATION REVENUE CONTROL LIMIT (TRCL) The Limit is Calculated as Follows: • To determine the TSL • Eligible route milesdivided by the number ofeligible students,Area A non-alternative and alternative miles need to be separated. Incentive for alternative. • Annual route miles(175) times thestate support levelsof $1.71 or $2.11. • Add onfor Summer Special Ed, Vocational and Athletic trips. • Calculate the change in the TSL from the current year to the budget year. • Add the change in the TSL to the current year TRCL

36. Your School TRANSPORTATION REVENUE CONTROL LIMIT

37. Funding Associated With Arizona School Districts

38. REVENUE CONTROL LIMIT (RCL) What Is It? Transportation Revenue Control Limit(TRCL) is added to theBase Revenue Control Limit ((BRCL) to obtain theRevenue Control Limit(RCL). RCL The Revenue Control Limit is the basis for which M&O budget override amounts are determined

39. YOUR SCHOOL DISTRICTREVENUE CONTROL LIMIT

40. Funding Associated With Arizona School Districts

41. CAPITAL OUTLAY REVENUE CONTROL LIMIT(CORL) What is it? Level of funding which the District may utilize for Capital and or Maintenance and Operations purposes. District may move all into M&O if needed. CORL • Maintenance and Operations • Salaries • Benefits • Supplies • Purchased Services • Tuition • Unrestricted Capital • Furniture • Land Improvements • Building Improvements • Vehicles • Equipment • Leases

42. Capital Funds Associated with School Finance • Unrestricted Capital • Soft Capital Allocation • Bond Building • Deficiency Corrections • Building Renewal • New School Facilities STUDENTS FIRST

43. Capital Outlay Revenue Limit (CORL) Other Factors Growth Factor- If the unweighted counts for the budget year (next) are at least 5% greater than the current year, the CORL is increased by the same growth percentage. If under 5%, no adjustment is used. High School Texts- ARS requires that text books for high school students must be free. The district is allowed to budget 69.61 more for each unweighted high school student. CORL Shift- Students FIRST allowed for a complete shift of CORL funds to M&O on an annual basis. CORL that remains in capital outlay fund (610) remains unrestricted. How is it Calculated? The prior years Unweighted student count times (X) Base Level = For all districts over 600 PSH-8: 225.76 9-12: 267.94 CORL

44. YOUR SCHOOL DISTRICTCAPITAL OUTLAY REVENUE CONTROL LIMIT

45. CAPITAL OVERRIDE No restrictions to the type of capital expenditure. Expenditures may only be use for those described in the pamphlet with a 10% allowance for change and over run. Requires public meeting each year. What is it? ARS15-481 allows school districts to hold a Capital Override election on the first Tuesday in November for the purpose of exceeding state standards for capital improvements. C O

46. Funding Associated With Arizona School Districts

47. M & O OVERRIDE Two Types of Overrides What is it? Override Regular Education A.R.S. §15-481 allows a district to increase its budget by up to an additional 10% of its Revenue Control Limit if the voters of the district approve by election. The voter authorization is given for up to seven years. Special Academic A special override for academic achievement in grades K-3 may be sponsored by an elementary or unified district. An additional 5% of the Revenue Control Limit can be asked for under the provisions of A.R.S. §15-482 (seven years)

48. Funding Associated With Arizona School Districts

49. What Are They? ADDITIONS TO THE BUDGET The Maintenance and Operations Budget may be increase beyond the formula levels previously described under many circumstances. Some of the more common reasons are: Additions • Current Year Funding • Tuition Revenue • Budget Balance Carry Forward • Excess Utilities • Career Ladder Carry Forward • Desegregation Costs Examples

50. YOUR SCHOOL DISTRICT ADDITIONS TO THE BUDGET