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Budgeting: Applying Policy Values

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Budgeting: Applying Policy Values

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    1. Chapter 11 Budgeting: Applying Policy Values

    2. A Budget Directs Expenses Savings Expenses Fixed: Variable A budget includes savings and expenditures. Expenditures can either be fixed, such as for mortgage or car payments or variable, such as for doctor’s expenses, fixing the car, or eating out in restaurants.A budget includes savings and expenditures. Expenditures can either be fixed, such as for mortgage or car payments or variable, such as for doctor’s expenses, fixing the car, or eating out in restaurants.

    3. A Budget Directs Expenses, cont. Savings Expenses Those budget parts that we decide for ourselves -- how much we spend each month on a mortgage, car, or dining out --- represent what is important to us.

    4. A Budget is a “Snapshot” A budget – like cancelled checks -- is a “snapshot” of what we spend and where we spend it. The difference between educational & personal budgets is that one is public information and one is private.

    5. Budgets Are Controversial “The management of resources is one of the most important and one of the most controversial areas of educational administration.” The public varies greatly in how they believe their tax monies should be spent Johns, R., Morphet, E, and Alexander, K. The Economics and Financing of Education. Prentice Hall, Englewood Cliffs, NJ, 1983. Johns, R., Morphet, E, and Alexander, K. The Economics and Financing of Education. Prentice Hall, Englewood Cliffs, NJ, 1983.

    6. School Budgets Reflect Our Community’s Values Our education budgets involve a public process that reflects the economics, politics, & the moral values we hold as a community and society

    7. Budgets Reveal Our Priorities Examining the particulars of how public monies are budgeted shows the priorities we as a society have for education and other public services This can be seen at the federal, state, local, and building levels

    8. Roe defined education budgets as, “The translation of educational needs into a financial plan which is interpreted to the public in such a way that when formally adopted, it expresses the kind of educational program the community is willing to support, financially and morally, for a one-year period.” Roe, W. H. (1961). School Business Management (New York: McGraw Hill), p. 61.Roe, W. H. (1961). School Business Management (New York: McGraw Hill), p. 61.

    9. Comparison of 2 District Budgets

    10. Comparison of 2 District Budgets

    11. Similarities & Differences Same number of pupils Same total budget Same per pupil basis All schools built at the same time Two budget categories are the same (Instruction at 75%, Debt Service at 3%) School District A has 17 schools; School District B has 22 schools 5 additional schools means additional administration & transportation costs District A spends 12% of its budget on Operations and Maintenance while District B spends only 6%. District B may not be maintaining its buildings as well as District A

    12. Issues with Facilities Maintenance Putting off roof repair costs exponentially more next year than it does this year In the meantime, the public makes a determination about the quality of schools by how they are maintained Deferring maintenance costs increased expenses later and lost community relations now

    13. Selected States with School Budget Categories 1999-2000 school year1999-2000 school year

    14. Selected States with School % of Total Spending 1999-2000 school year1999-2000 school year

    15. The per-pupil spending ranges from a low of $5,278 in Utah to a high of $11, 510 in the District of Columbia The average per pupil spending in the United States is $8,032 The variance alone between the high and low state is $6,232, or more than double the per-pupil spending in Utah

    16. Spending Reflects Community Values The variance in state percentage spending on Instruction ranges from a low of 36% in the District of Columbia to a high of 54% in Arkansas & Utah Spending on Administration varies from a low of 5% to a high of 8% Spending on Operations and Maintenance ranges from a low of 7% to a high of 11%

    17. State Budget Categories Besides Education Public Education (K-12) Higher Education Public Assistance Medicaid Corrections Transportation “All Other” Percentage range in state budgets for Public Education is from a low in Connecticut of 13.2% to a high of 35.3% in Wyoming

    18. State Budget % Spending on K-16 Public Education New England – 20.73% Mid Atlantic – 20.58% Great Lakes – 22.46% Plains – 20.97% Southeast – 20.93% Southwest – 22.98% Rocky Mountains – 26.16% Far West – 21.38%

    19. Budget Priorities Just as states have priorities with and within their budgets, the federal government has priorities with its budget With limited resources, decisions must be made as to where those resources should be placed

    20. Federal Budget Spending, 2003

    21. Federal Budget Spending, 2003

    22. Three Main Sources of Revenue for Public Education Local State Federal Notice that the federal percentage appears relatively flat since 1970

    23. Government Budgets Are A Relatively New Phenomenon In 1314, the British Parliament insisted that the King spend tax revenue for the purpose for which the taxes had been levied In 1742, the authority to levy taxes was taken from the King and his Ministers and placed with the Parliament The Cabinet held the responsibility for preparing the budget and presenting it to the House of Commons By law, the English people controlled the country’s finances through a popularly elected legislative body

    24. Process for Developing Budgets Today, virtually all democratic governments use a similar method for the budget process developed by the British: The executive branch develops the budget The legislative branch receives the budget, amends and approves it, & levies taxes to support it The executive branch then administers the budget

    25. A government budget is ultimately a process by which people govern themselves.

    26. U.S. National Budget Process In 1921, Congress passed the first law requiring a national budget President Harding signed the legislation the following year

    27. Local School Budgets Likewise, local school boards moved slowly to adopt a formal budgeting process Accurate historical records of school budgeting are not available Today, every school district employs some form of budgeting process with varying levels of effectiveness and efficiency

    29. The Budget Process

    30. Budget Plan, Defined A budget is a comprehensive financial plan that involves 4 distinct essential elements: (1) Planning for the needs of the school district (2) Seeking adequate funding for the program (3) Spending the received funds (4) Evaluating the results of the process and program

    31. Planning Budgets With the Community in Mind This is a vital stage of the budgeting process It involves a 4-step process of Identifying school district’s needs Establishing goals and organizing objectives to obtain those goals Building a program to meet the objectives Costing-out the program/s to develop the budget

    32. Identifying School Needs Identifying the needs in the schools and the school district involves data analysis In today’s world it is impossible to examine programs without using student achievement data in the decision-making process

    33. School Leaders Bring Data to Community Good principals and superintendents obtain data & have a constituents involved in analyzing & interpreting what the data mean Parents, business & community leaders, teachers, administrators, clergy, students and other vested groups meet to determine needs They seek patterns and meaning to what the data indicate and achieve a consensus about the school or district’s pressing needs

    34. School Leaders Bring Data to Community, cont. Once the schools’ needs have been determined through this extensive and collaborative data analysis process, goals can be established and objectives can be organized In this step, it is important to maintain the community involvement People will not support what they do not understand

    35. Program Building Follows Consensus Build the program that meets the schools’ & community’s goals & objectives Develop programs “in house” by the school district staff or purchased by outside developers Maintain the community involvement in this stage Explore various programs and select the best fit

    36. Costing-Out the Program Constituent groups involved at the beginning of the planning process should continue in the phase of costing-out the program Their continued support for financing the programs is essential Once these programs’ costing-out numbers are determined, the various program budgets are combined to form a total dollar value for the planned programs

    37. Seeking Adequate Funding Funding sources vary district to state The school board may seek budget approval from: The municipal authority or the governing body The community The school board, itself, may set the tax rate (sometimes called a school tax) Regardless of which funding source is determined, a majority of the public must support the budget if the budget is to be approved

    38. Maintaining Community Support Assures Funding When school officials & budget planning team members speak in local civic & religious gatherings, the public can see the community involvement in the budget process Involving influential community members from the start benefits school finance – they already understand the educational needs, support its funding, & bring public credibility to the process & product

    39. “Closing the Deal” Once a critical mass of the community has established support for the school budget, the school board and the superintendent’s role changes from “selling” to “closing the deal”

    40. Appropriating School Funds States and localities have various methods for appropriating funding to local school boards. 1. “Lump sum” appropriation While the school board budget may be divided into categories (instruction, administration, transportation, and the like), the funding is by the total amount and not by each of the categories In this case the school board is usually free to transfer funds between categories to meet various needs as they may arise during the year

    41. Appropriating School Funds, cont. 2. Appropriated by category The governing body may either allow or not allow the school board to transfer funds from one category to another This tends to be restrictive to meeting the school district’s needs

    42. Appropriating School Funds, cont. 3. Appropriate funds by category on a monthly basis Would require the superintendent or designee attend the governing body’s monthly meeting & request that funds already approved, be appropriated by category to the school board so the bills can be paid Highly restrictive and inflexible in meeting the school district’s needs Worst case scenario.Worst case scenario.

    43. Know Your Funding Status! It is important that the superintendent be aware of the funding status The story is told of a superintendent who fired a long-standing high school principal on appropriate grounds. Unaware that the principal was best friends with the Chairman of the City Council, the superintendent received a phone call from the Council Chair warning of the long standing ties the principal had in the community. The superintendent proceeded with the dismissal.   This superintendent’s budget was appropriated monthly by category. At the last City Council meeting of the fiscal year the superintendent attended the meeting to request appropriation of the school board’s funds (by category). The chair told the superintendent that it would be a long meeting and asked if he were in attendance only for the school board appropriation. When the superintendent responded that there were no other agenda items, he was told by the chair, “I will take care of you.” The superintendent left the meeting and the City Council chair never brought the appropriations forward to be voted on. The superintendent did not check to make certain the action was taken and proceeded to authorize spending. The chair later called the State Police to report that the superintendent expended funds he did not have – a felony. The superintendent was arrested and a deal was struck behind the scenes for the superintendent to leave and charges would be dropped. The principal was rehired.   The story is told of a superintendent who fired a long-standing high school principal on appropriate grounds. Unaware that the principal was best friends with the Chairman of the City Council, the superintendent received a phone call from the Council Chair warning of the long standing ties the principal had in the community. The superintendent proceeded with the dismissal.   This superintendent’s budget was appropriated monthly by category. At the last City Council meeting of the fiscal year the superintendent attended the meeting to request appropriation of the school board’s funds (by category). The chair told the superintendent that it would be a long meeting and asked if he were in attendance only for the school board appropriation. When the superintendent responded that there were no other agenda items, he was told by the chair, “I will take care of you.” The superintendent left the meeting and the City Council chair never brought the appropriations forward to be voted on. The superintendent did not check to make certain the action was taken and proceeded to authorize spending. The chair later called the State Police to report that the superintendent expended funds he did not have – a felony. The superintendent was arrested and a deal was struck behind the scenes for the superintendent to leave and charges would be dropped. The principal was rehired.  

    44. Spending the Received Funds Once the new fiscal year begins, the new budget cycle starts The purpose of administering the budget is to spend the funds wisely in accordance with the education plan To have a surplus at the end of the year can make the school board and the superintendent appear less than trustworthy and competent in the budget process

    45. Budget Planning Does Not Anticipate Every Need Superintendents and school boards do not want to go back to their funding bodies and request more money for these unexpected occurrences

    46. Planning for the Unexpected First, a “contingencies” line item can be inserted into the budget to allow for the unexpected situations Unfortunately, the public can see “contingency” as a way of “padding” or “putting fat” into the budget The public can also interpret “contingency” as the school board and superintendent have put insufficient thought into the overall school system operation

    47. Planning for the Unexpected, cont. Another way to handle unanticipated expenses is to “expand” another budget area One old trick used frequently is to “overestimate” the fringe benefit factors for the employees’ wages A 2% pad on a $10 million salary and fringe benefit factor budget allows for an additional $200,000 to be used at the discretion of the school district

    48. Return on Investment With No Child Left Behind legislation, schools are more likely to evaluate their spending patterns to determine the value of spending In business circles, this is akin to Return on Investment Superintendents, as the Chief Executive Officers (CEO) of the school system, are responsible for ensuring that the funds that were devised in developing the education plan, for which the funding was sought, and spent in accordance with the plan, effectively and efficiently met the budget goals. This involves evaluating the results of the budget’s process and spending program. Superintendents, as the Chief Executive Officers (CEO) of the school system, are responsible for ensuring that the funds that were devised in developing the education plan, for which the funding was sought, and spent in accordance with the plan, effectively and efficiently met the budget goals. This involves evaluating the results of the budget’s process and spending program.

    49. Evaluating the Spending Process Superintendents provide the school board with periodic (monthly printouts) budget updates budget line items in major categories the amount of funds expended to date the %age of funds expended to date anticipated problems with over-financed or under-financed budget categories Keep the school board informed in case of need to shift funds from one category to another

    50. Improving Budget Accuracy & Effectiveness Over Time Each year’s budget should build on the previous year’s data and allow for refinements in forecasting needs Superintendents’ relatively short job tenure means the new leader reassesses all the budget practices and implements a new budgeting system that disturbs the refinement process

    51. Evaluating the Spending Program An accountant or business manager can evaluate the spending process Instructional leadership is required in evaluating the spending program It takes an instructional leader to be able to determine if spending one million dollars on middle school science labs is making an achievement difference for students. It takes an instructional leader to be able to determine if spending one million dollars on middle school science labs is making an achievement difference for students.

    52. Evaluating Student Progress: AYP In light of NCLB requirements that all subgroups make adequate yearly progress (AYP), it is increasingly necessary for instructional leaders to make certain that all children benefit from the program, including those: ·       receiving special education services ·       receiving free or reduced lunch ·       English language learners ·       of a minority background

    53. Evaluating Subgroup Achievement Disaggregate student achievement data to determine appropriately which students are not progressing satisfactorily The planning process involves these students’ achievement (or lack thereof) and determining programs that may improve achievement Enact plans, solicit funds, spend monies, and wait for the accountability test results to return. Review results & revise programs

    54. Types of Budgets  Percentage Add On Zero-Base Budgeting Planning/Programming/Budgeting/Evaluation (PPBES)

    55. Percentage Add On Most common method Advantage – simplicity Disadvantage – it may be removed from the school district’s real needs Adding a percentage to the previous year’s funding level If the governing body granted a 5% increase over last year’s funding, the Superintendent would usually involve staff to make recommendations about what programs should receive additional funding

    56. Zero-Base Budgeting Advantage - staff involvement, program evaluation, public confidence in selecting funded programs Disadvantage - time and complexity in administering this budget Requires the budget start from zero each year – unlike a percentage add on Everything is reevaluated each year Each budget inclusion must be justified

    57. Planning/Programming/ Budgeting/Evaluation (PPBES) Advantage - more flexible, realizes goals, objectives, & modifications are not met in a single fiscal year Disadvantage - few school district and governing body budgets are flexible enough Designed to be a more flexible & fluid process that extended budget cycle to 5 years Planning and establishing goals Determining the cost and alternative plan’s costs for achieving the goal Evaluating the results of the plans Modifying and improving the goals Establishing and improving alternative plans to achieve the modified and improved goals

    58. Site-Based Budgeting Advantages – Builds community support in meeting student needs Disadvantage – More work for principals and staff Develops a district budget at each building level with staff and community input Allows the school site decision-making latitude for aligning goals with resources

    59. A good educational leader promotes the success of all students by understanding, responding to, and influencing the larger political, social, economic, legal, and cultural context* The budgeting process, as described in this chapter, lets educational leaders demonstrate that they understand, respond to, and influence the larger contexts * This comes from ISLLC Standard #6, but in truth, all the ISLLC Standards apply. ISLLC Standards available through the Educational Testing Service, Teaching and Learning Division, P.O. Box 6051, Princeton, New Jersey, 08541-6051. * This comes from ISLLC Standard #6, but in truth, all the ISLLC Standards apply. ISLLC Standards available through the Educational Testing Service, Teaching and Learning Division, P.O. Box 6051, Princeton, New Jersey, 08541-6051.

    60. Budgeting & Professionalism As education is increasingly politically-driven towards a business management model, good budgeting knowledge – especially in the area of program evaluation – can establish a professionalism about our practices and encourage community support for education funding

    61. The process of developing, amending, approving, and providing tax moneys to support and administer a budget is a uniquely democratic process and the means by which people govern themselves

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