Mid-Year Budget Issues and Decisions

1. Mid-Year Budget Issuesand Decisions Presented by Chris Straub

2. Evaluating Your Current Budget • Always a good administrative practice, but essential in challenging economic times unless you: • 1. Believe nothing ever changes after your budget has been adopted;

3. Evaluating Your Current Budget • Always a good administrative practice but essential in challenging economic times unless you: • 2. Have a Board of Education that loves year-end surprises; or

4. Evaluating Your Current Budget • Always a good administrative practice but essential in challenging economic times unless you: • 3. Plan to retire at the end of the year and are a big fan of Clark Gable’s line in Gone With the Wind – “Quite frankly, Charlotte, I don’t give a damn!”

5. Evaluating Major Revenues Property Taxes Assessed Valuation X Tax Rate X Historical Collection Rate = Local Property Taxes

6. Evaluating Major Revenues Property Taxes ? Assessed Valuation X Tax Rate X Historical Collection Rate = Local Property Taxes Has Assessed Valuation and/or Tax Rate changed since the budget was adopted?

7. Evaluating Major Revenues Property Taxes Assessed ValuationX Tax Rate X Historical Collection Rate = Local Property Taxes ? Historical collection rate is normally determined by looking at last three years of data.

8. Evaluating Major Property Taxes Property Taxes Assessed ValuationX Tax Rate X Historical Collection Rate = Local Property Taxes ? Many districts found that 2008-09 collection rate was less than previous two years – most recent year may be a better prediction in these economic times.

9. Evaluating Major Property Taxes REMEMBER: Amounts retained by counties for assessment increase this year. (Approved by legislature in 2008) First Class, Charter Counties& St. Louis City Caps on Assessment Fees Increased From $100,000 to $150,000

10. Evaluating Major Property Taxes REMEMBER: Amounts retained by counties for assessment increase this year. (Approved by legislature in 2008) Other Counties 1.25% increased to 1.5% Caps on assessment fees increased from $50,000 to $75,000

11. Evaluating Major Property Taxes REMEMBER: Amounts retained by counties for assessment increase this year. (Approved by legislature in 2008) In larger assessed value counties, the effect on property tax collections will probably not be significant. Changes will have a larger impact on smaller assessed valuation counties.

12. Evaluating Major Property Taxes REMEMBER: Amounts retained by counties for assessment increase this year. (Approved by legislature in 2008) Recommendation: Beginning in December, analyze property taxes received versus last year on a monthly basis.

13. Budgeting Axiom #1 Property taxes levied rarely equal property taxescollected.

14. Evaluating Major Revenues Proposition C • 1. Last year (2008-09) the state distributed $804 per 2007-08 weighted ADA.

15. Evaluating Major Revenues Proposition C • 2. In May, DESE estimated that the state, in 2009-10, would distribute $794 per 2008-09 weighted ADA.

16. Evaluating Major Revenues Proposition C • 3. Through September, actual distributions were 10% lower than last year.

17. Evaluating Major Revenues Proposition C • 4. DESE has now revised their estimate and is predicting approximately a 5% reduction to $758 per 2008-09 weighted ADA.

18. Evaluating Major Revenues Proposition C Recommendation: Revise your Prop C budget according to your final 2008-09 WADA and the revised DESE distribution estimate and pay close attention to further updates from DESE.

19. Budgeting Axiom #2 In uncertain economic times,people tend to reducetheir spending

20. Evaluating Major Revenues State Receipts Recommendation: Compare budget with DESE current calculation for formula, transportation, small schools grant, etc.

21. Evaluating Major Revenues State Receipts • BIGquestion: Will the state of Missouri be able to distribute all of the money appropriated for public schools this year (2009-10) ???

22. Evaluating Major Revenues State Receipts – Sobering Considerations • A. 90% of Missouri General Revenue comes from personal income and sales taxes.

23. Evaluating Major Revenues State Receipts – Sobering Considerations • B. The current Missouri unemployment rate is 9.8%

24. Evaluating Major Revenues State Receipts – Sobering Considerations • C. Governor Nixon vetoed, in June, several legislative approved expenditures based upon a projection that general revenue collections would decline by 1% from 2008-09.(2008-09 collections declined 6.9%from 2007-08.)

25. Evaluating Major Revenues State Receipts – Sobering Considerations • D. General revenue collections in the first quarter of this budget year (2009-10) declined 10% from the same period a year ago.

26. Evaluating Major Revenues State Receipts – Sobering Considerations • Governor Nixon will announce soon withholdings to balance this year’s state budget. • Will public schools be affected?

27. Evaluating Major Revenues State Receipts – Sobering Considerations • DESE has requested a $43 million supplemental increase for this year to keep programs funded (formula, etc.)

28. Evaluating Major Revenues State Receipts – Sobering Considerations • Will the Legislature and the Governor be able to find the money in the upcoming legislative session to meet DESE’s supplemental request?

29. Evaluating Major Revenues State Receipts – Sobering Considerations • G. The 2009-10 foundation program (formula, transportation, etc.) budget includes $105 million of increased casino taxes due to the passage of Proposition A last November. Current projections indicate that the actual receipts may be much less.

30. Evaluating Major Revenues State Receipts – Sobering Considerations • Will the Legislature and the Governor be able to find money to replace the casino tax shortfall?

31. Evaluating Major Revenues State Receipts Recommendation: Pay attention to state budget developments the remainder of the current (2009-2010) year.

32. Budgeting Axiom #3 Unemployed peopledo not pay muchincome tax.

33. Evaluating Expenditures • Budgeted Salaries - • Compare to actual contracts.

34. Evaluating Expenditures • Budgeted Fringe Benefits - • Compare to actual contracted amounts. (Retirement – 13.5% for PSRS; 6.5% for PEERS)

35. Evaluating Expenditures • Budgeted Other Items- • Compare to current expenditures and projections.

36. Developing A Plan of Action • Review Projected Fund Balances

37. Developing A Plan of Action Questions to Be Answered • What is the new bottom line? • (Revenues minus Expenses)

38. Developing A Plan of Action Questions to Be Answered • Can your fund balances cover any projected short-fall?

39. Developing A Plan of Action Questions to Be Answered • Can some expenditures be delayed if necessary?

40. Developing A Plan of Action Questions to Be Answered • Which expenditures can be reduced if necessary?

41. Budgeting Axiom #4 Only the federal governmentcan print money.

42. Developing A Plan of Action Recommendation: Involve appropriate staff members in budget reductions and keep all stake-holders informed about financial condition. (Board of Education, Staff, and Public.

43. Budgeting Axiom #5 Only a complete idiot keepsbudgeting problemsto themselves.

44. Get Help If You Need It! Recommendation: Take advantage of the expertise of your colleagues. Or call Roger Kurtz at MASA and arrange for a school finance consultant to provide assistance in analyzing your districts financial situation.