SCHOOL FINANCE 101 Presented by Brenda Burkett, CPA, SFO Chief Financial Officer Norman Public Schools February 2015
Budget and Funding Timeline JUN JUL AUG SEP OCT NOV Final State Aid Allocation from Prior Year Tentative State Aid Allocation County Assessor Certifies Valuation Estimate of Needs Due to Excise Board Budget Approved by School Board Inform returning teachers of intent to rehire Negotiations with Employee Bargaining Groups Staffing Adjs for Enrollment Changes Student Counts for State Aid DEC JAN FEB MAR APR MAY 1st Half Taxes Due to County by Taxpayers Revised State Aid Legislature Convenes Final Certification of State Revenue Estimates (Budget Shortfall?) 2nd Half Taxes Due to County by Taxpayers Legislature Adjourns (budget bill is typically last) Supplemental Appropriations for Funding Shortages Note: School District Budget Act (Norman uses) establishes Budget July 1 and there is no Est of Needs in Oct. School Board approves budget amendments throughout the year as needed.
Fund Balance What is a fund balance? Fund balance is the unencumbered or available balance of funds at the end of a fiscal year. This is also referred to as a carryover or surplus. Why is a fund balance necessary? 1. To pay operating expenses during the first half of the year before the majority of ad valorem taxes are collected. 2. To meet any unanticipated expenses. 3. To help fund future budgets if planned expenditures exceed anticipated revenues (e.g. funding cliff when one-time revenue sources are not replaced or operating expenses are anticipated to increase for reasons such as a new school opening). 8.7%
Funding Sources/Uses Fund Primary Revenue Sources Primary Allowable Uses General Fund Local & county taxes, state aid, dedicated state revenue, federal program reimb, other reimb Payroll, transportation expense, supplies, materials, furniture, equipment, textbooks, general operating expenses Building Fund Local & county taxes Repair & maintenance of facilities, furniture, equipment, utilities, custodial Child Nutrition Fund Student & staff lunch purchases, state & federal reimbursements Food, payroll, supplies & equipment Bond Funds Sale of bonds after voter approval Construction projects, furniture, equip., uniforms, textbooks, school buses, etc. Activity Funds Sinking Fund Student activities, fundraisers, vending commissions, donations Local taxes after voter approval of bonds Student activities, supplies, materials, equipment, refreshments Bond principal and interest payments Gift Fund Restricted grants from private sources As specified in grant Sanctioned Parent Groups (not District money) Fundraisers, donations, dues Support of student and school activities (wider latitude than activity fund)
Sources of Revenue General Fund* Federal 10% Other 2% Local 24% State Dedicated and Line Items 21% County 3% Total State 61% State Aid 40% *Statewide All Districts General Fund 2013-14 from SDE transparency website. Includes return of assets; does not include fund balance forward.
Sources of General Fund Revenue Select Metro-area Districts Local County State Federal Other 100% 90% 1% 4% 8% 5% 0% 1% 0% 0% 8% 8% 8% 15% 80% 70% 43% 56% 60% 50% 80% 4% 66% 66% 57% 40% 30% 20% 10% 0% 4% 7% 43% 4% 4% 22% 20% Bethany Edmond Guthrie Mid-Del Norman Oklahoma City 4% 33% 4% 24% Source: 2012-13 OCAS Data.
Sources of Revenue General Fund* Local + County (27% combined) Primarily property taxes Local 24% Also includes: Investment Income, Rental Income Local Grants/Partnerships Recent laws reducing property taxes: County 3% SQ766 (2012) exempting intangible property from taxation cost schools over $30 million statewide SQ758 (2012) capped yearly valuation increases at 3% vs 5% previously *Statewide All Districts General Fund 2013-14.
Ad Valorem Taxes EXAMPLE: Property Market Value $ 100,000 Assessment Ratio 11% Assessed Valuation 11,000 Less Homestead Exemption (1,000) Net Assessed (Taxable) Value 10,000 Mill Levy (1/10 th of a cent) 117.95 Total Tax $ 1,179.50
Ad Valorem Taxes - $10,000 Taxable Value EXAMPLE (cont): Entity Mills Tax School District: General Fund 35.88 $358.80 Building Fund 5.12 51.20 Sinking Fund 25.75 257.50 Total School District 66.75 $667.50 County-wide School 4.11 41.10 Vo-tech 15.38 153.80 City-county Health 2.57 25.70 County 10.28 102.80 City 12.75 127.50 Metro Library 6.11 61.10 Total 117.95 $1,179.50
Sources of Revenue General Fund* Federal 10% Other 2% Federal 2011-12 was last year of federal stimulus Two largest programs are subject to sequestration (5%)/yr for 10 years: -Title I (No Child Left Behind) 41% of total NPS: FY14 (4.14%); FY15 (6.59%) Other Reimbursements/Transfers from other funds: -Activity fund for lost books, parking fees, etc -Payroll, postage, printing reimbursements - IDEA (Special Ed) 27% of total NPS: FY14 +.59%; FY15 +.39% *Statewide All Districts General Fund 2013-14.
Sources of Revenue General Fund* State Dedicated Gross production tax Motor vehicle tax State Dedicated and Line Items 21% School land earnings Rural electric cooperative tax State Line Items Textbook allocation Employee health insurance Specific state programs and reform measures *Statewide All Districts General Fund 2013-14.
Sources of Revenue General Fund* State Aid Formula funding based on number of students State Aid 40% *Statewide All Districts General Fund 2013-14.
State Aid Funding Formula Legislative Intent Recognize that cost of providing education varies with students and districts Based on student membership and characteristics Attempt to equalize revenue among districts through chargeables Perfect equalization would produce same revenue per weighted student in every district
State Aid Calculation: Weighted Average Daily Membership (WADM) ADM (child count for days enrolled) Pupil Grade Level Weight Pupil Category Weight (special ed, gifted, free/reduced) District Calculation (for small or isolated districts) Teacher Index (for districts whose avg teacher is > the state average-based on college degree and years of experience) x State Aid Factor $3,074.80 (factor as of Jan 2015) + Transportation Supplement (Average Daily Haul x $33.00 per capita x $1.39 factor) Less - Chargeables Local Ad Valorem County 4-mill (75%) Gross production tax Motor vehicle tax School land earnings Rural electric cooperative tax
STATE AID FORMULA AMOUNT PER WEIGHTED STUDENT $3,500.00 $3,300.00 $3,100.00 $2,900.00 $2,700.00 $2,500.00 $2,300.00 $2,673.20 $2,490.40 $2,622.40 $2,639.20 $2,864.20 $2,919.60 $3,189.00 $3,275.60 $3,210.05 $3,113.40 $3,040.20 $3,035.00 $3,032.00 $3,074.80 $2,100.00 $1,900.00 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 02/02/15
State Aid Formula Then vs. Now July 2009 All formula dollars committed to common education = $3,291.20 per weighted student. Jan 2015 All formula dollars committed to common education = $3,074.80 per weighted student. Difference in Funding For FY 2014-15, schools have $216.40 less per weighted student than was allocated at the beginning of school year FY 2009-10. For NPS, $216.40 less per weighted student = FY15 ($5,380,208)!
Recession and Recovery: Impact on Education Funding The recession of 2008 greatly impacted state revenues and jeopardized public education. The federal government responded in 2008-09 by providing one-time supplemental funding for Title I (disadvantaged) and IDEA (special ed) programs. Further federal assistance was afforded to states 2009-10 in the form of fiscal stabilization and education jobs funding to retain jobs and fill the hole in funding. Once exhausted, one-time federal stimulus money was not replaced by state funding, creating a funding cliff in 2012-13.
In FY11, the State Rainy Day Fund was fully depleted By FY13, the State Rainy Day Fund was restored to $535.2 million
State Aid (millions) Statewide Enrollemnt $2,100 Enrollment and State Aid Funding 2008-2015 700,000 $2,050 $2,036 681,578 688,300 690,000 $2,000 $1,993 673,190 680,000 $1,950 $1,900 $1,850 641,721 644,777 654,542 $1,882 659,615 $1,894 666,150 $1,816 $1,816 $1,838 $1,878 670,000 660,000 650,000 640,000 $1,800 630,000 $1,750 620,000 $1,700 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 * State Aid includes Education Stabilization component of the American Recovery and Reinvestment Act (ARRA) funding. State Aid Appropriation Enrollment 610,000
2014 Legislation Affecting School Funding Supplemental appropriation to fund 2012-13 ad valorem reimbursement for lost tax revenue due to manufacturing tax exemptions SB2127 $40 million additional in state aid formula HB2513 $40 million additional for employee health insurance SB1469 extended the moratorium on accreditation standards to include class size limits and textbook and library media spending HB1378 required student CPR training; no funding provided SB1246 cut the top state income bracket from 5.25% to 4.85% triggered by growth in the state s General Revenue Fund Expiring horizontal drilling tax rate incentives were replaced. Production tax rates were scheduled to return to 7% but will now be 2% for the first 3 years of the well, then increase to 7%
District Revenue Limitations Any growth in local taxes is deducted from state aid. Any growth in dedicated state revenue (e.g. motor vehicle collections, gross production tax, school land earnings) is deducted from state aid. Federal programs are being CUT due to sequestration. Grants and donations are usually specific in purpose and are not intended for operating expenses. Money from other funds (e.g. Building Fund, Child Nutrition Fund, Bond Funds) is restricted in the ways it can be spent.
Expenditures Budget dollars must be reserved or encumbered prior to purchase. Legal budget is determined by projected local tax collections plus revenue to be received from state, federal, and other sources plus the beginning fund balance. Personnel is a high percentage of total general fund expenditures: Statewide 81.8% Bethany 73.4% Edmond 95.5% Guthrie 84.6% Mid-Del 91.5% Norman 90.7% Oklahoma City 70.9% Source: 2012-13 OCAS data, payroll and benefits object codes.
How Each Dollar of the General Fund is Spent Source: 2012-13 Statewide OCAS Data. Instruction 59 Student Support Services 11 Operations & Maintenance 10 School Administration 6 Business 3 Student Transportation 4 Other 2 Child Nutrition 2 General Admin 3
Legal Borrowing Methods 1. Non-payable warrants Short-term cash flow solution Similar to overdraft protection 2. Lease-purchase agreements Lease which transfers ownership of asset at end of term 3. Bonds Requires 60% approval by voters Restricted to capital expenditures At least 85% of proceeds must be spent on the projects listed in the bond resolution approved by voters Bond proceeds and interest earnings CANNOT be used to pay 8.7% salaries, benefits, or related costs
Bond Payments Amount needed to pay bonds in upcoming year is calculated on Estimate of Needs County Excise Board approves Estimate of Needs and authorizes tax levy County Assessor bills property owners Taxes are collected by County and remitted to school s sinking fund Bond principal and interest payments are made by school district 8.7%
Resources Oklahoma State Department of Education Technical Assistance Document http://ok.gov/sde/sites/ok.gov.sde/files/documents/files/fy%202014 %20TAD%20FINAL.pdf Oklahoma County Assessor website http://www.oklahomacounty.org/assessor/ Oklahoma State Department of Education Transparency Website https://sdeweb01.sde.ok.gov/ocas_reporting/statereports.aspx