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Iowa School Finance: Five Key Measures

Iowa School Finance: Five Key Measures. Overview. What are the financial measures that every board member should know about their district?. Overview. Equip board members to answer the question “How are we doing financially?”

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Iowa School Finance: Five Key Measures

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  1. Iowa School Finance: Five Key Measures

  2. Overview What are the financial measures that every board member should know about their district?

  3. Overview • Equip board members to answer the question “How are we doing financially?” • These measures apply to the General Fund – so only part of the equation • Not exhaustive but knowing these five will give a fair and accurate representation of the financial health of the General Fund of the school district. • Need trend not a single data point. • Some are retrospective while others are prospective (and some need to be both).

  4. 5. Solvency Ratio • What is it? • Measures the fund balance (cash) position at the conclusion of the fiscal year. • General Fund measure • Unreserved/Undesignated General Fund Balance Divided by Total General Fund Revenues • What isn’t it? • A measure of the limit of spending. • Why important? • Can impact bond rating • Public “understands”

  5. 4. Enrollment Trend • Finance formula is per pupil – so trend in enrollment is a huge leading indicator of financial health. • Look not at just headcount enrollment but also enrollment served. • What are the implications of the following two trends?

  6. 3. Staff Costs as Percent of Total General Fund • Staff costs are the single largest expense in the General Fund. • School districts range from 75% to 85% of total General Fund expenditures are on staff. • Important because ultimately impacts spending authority. • Take out special education staff (ultimately doesn’t impact spending authority). • Consider the following example -

  7. Staff Costs • Is this a problem?

  8. Staff Costs • How about now?

  9. 2. Balanced Spending Authority Budget • Spending authority measure used during budget preparation. • Question: How much can I spend and not cause my Unspent Balance to decline? • Annual measure • Sets target for expenditure increase. • If planning to use Unspent Balance to finance ongoing expenditures you need to figure out how you will sustain.

  10. 1. Unspent Balance (Unspent Budget Authority) • The single most important measure. • Total amount of spending authority remaining at conclusion of fiscal year. • Why important? SBRC will not close you down for a negative solvency ratio – but go negative two years and you can be subject to Phase 2 (Russell). • Calculation: Beginning Unspent Balance + Current Year Spending Authority - General Fund expenditures = Ending Unspent Balance

  11. Unspent Balance • Trend is key • Project at least three times during the fiscal year (adopt budget, mid year and then when setting budget for upcoming year). • Project into the future – 5 years minimum • Tools on IASB website. • Use per pupil measures to compare to other school districts • Consider the following:

  12. Unspent Balance

  13. Conclusion 5. Solvency Ratio 4. Enrollment Trend 3. Staff costs as percent of total General Fund Expenditures 2. Balanced Budget for Spending Authority 1. Unspent Balance

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