MSBA Leadership Conference

1. MSBA Leadership Conference Communicating School Finance to Your Community January 13, 2012

2. TABLE OF CONTENTS • Definition of terms • Formulas for school funding • Revenue Categories • Expenditure Categories • Why maintain a fund balance? • Budget Management • Funding formula history • Impact of the state aid payment delays • Communications tips

3. Definition of Funds • The General Fund is used to account for all revenues and expenditures of the school district not accounted for elsewhere. K-12 educational activities; instructional and student support programs; superintendent; district administration; normal operations and maintenance; transportation; and operating capital expenditures (including health & safety). • The Food Service Fund is used to record financial activities of a school district's food service program. Food service includes activities for the purpose of preparation and service of milk, meals, and snacks in connection with school activities

4. Definition of Funds (cont.) • The Community Service Fund is used to record all financial activities of the Community Service program. The Community Service Fund is comprised of four components, Community Service, Community Education, School Readiness and Early Childhood Family Education. • The Debt Service Fund is used to record revenues and expenditures for a school district's outstanding bonded indebtedness.

5. Definition of Terms • Reserved revenue, expense & fund balance • State restrictions and mandates to reserve and spend funds toward a specific purpose • Categorical Revenue • State restrictions and mandates to spend funds toward a specific purpose. No reserve requirement, rather no funding if no expenditure. • Secondary Vocational Handicapped • Special Education • Non Public Transportation Aid • Health & Safety

6. New Fund Balance Definitions • “Nonspendable” funds that cannot be spent since they aren’t in spendable form or are legally required to be maintained intact. (i.e. inventories, prepaid items) • “Restricted” formerly “reserved” funds that have legally enforceable constraints placed on their use that are externally imposed by resource providers (i.e. learning & development, basic skills, operating capital, career & technical). • “Committed” funds used for specific purposes by formal action of the school board (i.e. 2% for cash flow and Federal JOBZ funds)

7. New Fund Balance Definitions • “Assigned” formerly “designated” unrestricted funds constrained by the school district’s intent to be used for specific purposes (i.e. Fund 21 - donations). • “Unassigned” formerly “unreserved/undesignated” fund balance amounts are the residual amounts in the general fund not reported in any other classification. • Revenues minus expenditures • Similar to personal savings account • Necessary for sound financial management of District • Necessary for cash flow, credit ratings, unexpected changes in enrollment, revenues, and expenditures • Local school Board control to allocate funds

8. Basic Formula for Determining Revenue • Basic General Education Revenue x Pupil Units Plus • Operating Referendum Revenue (Voter Approved) • Plus • Categorical Revenue • Plus • Other Local Revenue • (I.e. tuition, fees, interest, rentals)

9. Formula for Calculating pupil units (AMCPU) • Pre-Kindergarten x 1.25 • Plus • Handicapped Kindergarten x 1.0 • Plus • Kindergarten x .612 • Plus • Grades 1-3 x 1.115 • Plus • Grades 4-6 x 1.06 • Plus • Grades 7-12 x 1.30

10. Basic Formula for Calculating Revenue AUTHORITY FOR SCHOOL LEVIES Authority for School Levies A School District Tax Levy Must Be Either: Set by State Formula OR Voter Approved Authorized Total Revenue Minus Local Property Taxes Equals State Aid

11. School FundingA Formula for Confusion The formula allowance - is the main source of school funding. It is a dollar amount per pupil unit set by the state. The general fund - is like the school district checkbook. It pays the operating expenses (i.e. salaries, fuel, supplies, equipment, utilities)

12. There are other funds, too, but the GENERAL FUND is what covers basic education services. Other funds in the budget: construction, food service, community service, debt service, trust fund and agency fund. Money is designated to a specific fund, and it can’t be moved around unless lawmakers allow it.

13. Revenue Categories • Local Levy • Operating Referendum • Categorical Levy • State Aid • Basic General Education • Operating Referendum • Categorical Aid • Federal Aid • Other (i.e. tuition, interest, fees, rentals)

14. Expenditures Categories • District and School Administration • School board, superintendent, principals, and director of instructional areas • District Support Services • General and other administrative support, human resources, community relations, elections, census, legal, business support services, and information systems services • Regular Instruction • All activities dealing directly with the teaching of students K-12, English Language Learner, Co-Curricular, Athletics, and Area Learning Center

15. Expenditure Categories (cont.) • Vocational Instruction • Agriculture, Distributive Education, and Special Needs • Exceptional Instruction • Speech, Mild, Moderate and Severe Disabilities, Physically Impaired, Hearing Impaired, Visually Impaired, Specific Learning Disability, Emotional/Behavior Disorder, Autistic Spectrum Disorders, Early Childhood, and Federal Programs • Instructional Support Services • Activities for assisting the instructional staff with the process of providing K-12 learning experiences. Curriculum, Staff Development, Technology Integration, Education Media

16. Expenditure Categories (cont.) • Pupil Support Services • All services provided to students not classified as direct instruction. Counseling, Health Service, Psychological Service, Social Work, and Transportation • Site, Buildings and Equipment • Acquisition, operation, maintenance, repair, and remodeling of all physical plant, facilities, and grounds • Fiscal and Other Fixed Costs • Fiscal and fixed costs. Property liability insurance, and aid anticipation certificate cost

17. Why maintain fund balance? • Sound fiscal management has a long term positive impact on the success of students • Validates fiscal credibility with various reporting constituencies • Important to the establishment of a good credit rating for the District. • Necessary for unknown situations • Irregular payments of state and local revenues • State aid proration, metering of payments, tax shift, and state shut down • Mandated but not funded programs • Higher utility costs and/or other fixed costs • Start Up costs for new buildings • Greater than expected inflation • Changes in enrollment and state funding

18. Questions