Thank You to our Workshop Sponsors

Transcription

1 Budget Development Jason Hoffman, Chief Financial Officer, Jefferson City School District & Darin Ford, Superintendent, Centralia School District March 15 & 16, 2017 Thank You to our Workshop Sponsors 1

2 Budget Development Greetings From: Roger Dorson Deputy Commissioner, DESE Division of Financial & Administrative Services Six Budget Axioms to Consider 2

3 Budgeting Axiom #1 Effective budgeting is an ongoing, year-round process. Budgeting Axiom #2 Budgets continually evolve as better information is obtained throughout the school year. 3

4 Budgeting Axiom #3 The budgeting of estimated revenues is a lonely & underappreciated job because... Budgeting Axiom #4... everyone wants to assist the Superintendent or CFO as to how to spend the money, but no one else really understands where the revenue comes from or how much there actually is to spend! 4

5 Budgeting Axiom #5 The superintendent or CFO should and always does, receive lots of assistance and advice on budgeting expenditures. Budgeting Axiom #6 To be effective requires a deliberate effort to keep everyone informed & involved in the entire budget development process. (Faculty/Staff, Administration, Board, & Public) 5

6 Budget Development Jason Hoffman, Chief Financial Officer, Jefferson City School District & Darin Ford, Superintendent, Centralia School District March 15 & 16, 2017 Budgeting Revenues Key Revenues Object Code Local Property Taxes 5111/5112 (Current & Delinquent) Proposition C - Sales Tax 5113 Foundation Formula 5311 Classroom Trust Fund 5319 Transportation

7 Budgeting Revenues Local Property Taxes Assessed Valuation (AV) x Tax Rate x Adjusted Historical Collection Rate = Budgeted Property Taxes Local Property Taxes 2017 AV--talk to your assessor(s) for preliminary information: 1. What is the assessment plan for existing property values? 2. Compare the assessment plan to AV for the current school year. 3. What is the estimate on new construction and improvements? 4. Remember, 2017 is a reassessment year. The Consumer Price Index (CPI) ended Dec at 2.1%. 7

8 Local Property Taxes Estimate of Tax Rate for Is your Current Year Tax Rate Ceiling (SAO Tax Rate Summary Page, Line B.) below your Maximum Authorized Levy (SAO Tax Rate Summary Page, Line E.)? 2. If so, you may be able to recoup some or all of any potential decrease in existing assessment values (Personal and/or Real Property). 3. If you are unsuccessful in obtaining good information from your assessor, you may need to use your current tax rate for now and your best estimate for assessed value in your preliminary calculations. Local Property Taxes Reminder: If your district has a voluntary Operating Tax Rate roll-back in effect, and if you want to reduce or eliminate this roll-back, you CANNOT DO SO THIS YEAR. You are not be able to do so because 2017 is a reassessment year. Your next opportunity to reduce or eliminate a voluntary roll-back will be in 2018 (the next nonreassessment year). 8

9 Historical Collection Rate Example December 31, 2015 Assessed Valuation $25,000, Total Tax Rate $4.00 per $100 A.V. Current Tax Revenues : $940,000 Delinquent Tax Revenue : $40,000 Theoretical Tax Collection: Tax Rate x Assessed Value $4.00 per $100 A.V. x $25,000,000 = $1,000,000 Percent Collected as Current Taxes: Actual Current Collection / Theoretical x 100 (940,000/1,000,000 x 100 =94%) Percent Collected as Delinquent Taxes: Actual Delinquent Collection / Theoretical x 100 (40,000 / 1,000,000 x 100 =4%) Adjust historical collection rate with tentative data. Historical Collection Rate 1. Review this year s ( ) property tax collections. 2. Analyze this year s property tax collections through February as compared to February for prior years (for example last year, prior 2 years, prior 3-5 years, etc.). 3. Calculate the percentage collected through February, 2017 to the total collected by the end of year in (and compare relative to prior years as noted in #2). 4. Compare percentage collected through February, 2017 to total budgeted for (again compare relative to prior years). 5. Adjust the historical collection rate accordingly in budgeting property taxes for Repeat this process in March, April, May, etc. 7. Check with the County Clerk and Assessor regarding protested taxes for this year as well. 9

10 State Budget (Current Year-FY 17) 1. The revised Consensus Revenue Estimate is growth of 3.0% over FY 16. Barring actual revenue growth falling below the revised CRE, we would anticipate no additional withholds for the current fiscal year. April will be a key month to monitor in that regard. 2. Through February, 2017 as compared to February, 2016: Individual Income Taxes % Sales Taxes (Prop C) % Corporate Income Taxes % All Other % Refunds % Net General Revenue % 3. Fiscal year revenues are currently on target to exceed $150 M, which will trigger a tax cut from Senate Bill 509 for calendar year 2018 (we will address that issue later regarding calendar year 2018 & beyond). Corporate Income Taxes (Senate Bill 19 for C- Corporations passed in 2015) Net Corporate Receipts FY 15 $436 M FY 16 $281 M *FY 17 $ 83 M *8 months, YTD 10

11 State Budget (Current Year-FY 17) 4. The Classroom Trust Fund (Casino Gaming), which helps fund the formula, is slightly above expectations (approx. 2.0%) at this point in the fiscal year. 5. Lottery revenues are coming in significantly below the budgeted amount. But, the current SAT calculation is reflective of this shortfall. Key: One of you needs to be the next HUGE Missouri jackpot winner!!! J Proposition C (Current Year FY 17) 1. FY 17 Budget is $880.4 M, which is $974 per WADA. Through February, Proposition C revenues are up 2.28% over last year at the same time. 2. FY 17 sales tax revenues continue to be strong and if these final months remain constant, $974/ WADA is highly attainable. 3. In fact, a supplemental budget bill has been filed to increase this year s amount by $4.4 M. (which would equal approx. $980/prior year WADA). 11

12 Proposition C (Next Year FY 18) 1. The FY 18 Governor s Budget for Prop C is $901.6 M. Based upon the current WADA projection of 903,000 for FY 17, this would amount to approximately $998 per WADA. 2. *Based on the current fiscal year budgeted amount, Proposition C revenues would need to increase 2.4% next year, which would equal the additional $21.2 M in revenue recommended in the Governor s Budget. *This projection includes Amazon which began paying sales tax in February Proposition C (Next Year FY 18) Impact of growth in Prop C revenues next year: 1.0% growth: $984 per WADA 2.0% growth: $994 per WADA 2.4% growth: $998 per WADA (Governor s Recommended Budget Amount) If current revenue trends continue along with appropriate supplemental budget approval, the $998 estimate should be attainable. 12

13 Proposition C Multiply your best Prop C estimate by estimated weighted average daily attendance (WADA). See WADA worksheet in your packet Line 7 of 1 st preceding year ( ) &/or the DESE electronic tool at the address below: calculation-tools Continue to monitor receipts monthly this spring as you finalize your Prop C revenue estimate for Foundation Formula (Current Year-FY 17) 1. The State Adequacy Target (SAT) used in the Formula for the February transmittal was approximately $ According to DESE, there is likely to be an increase in the March SAT based on estimated versus first prior year calculations. 3. The amount per ADA distributed in February for the Classroom Trust Fund (CTF) was $405. A final CTF amount of $405 will be dependent upon collecting the appropriated amount of $343.9 M. 4. Pay attention each month to the formula transmittal regarding any modifications to the SAT and CTF. 13

14 Foundation Formula (Applies to Current & Future Fiscal Years) Remember: The amount of CTF receipts in can be used by your district for any purpose. Any additional CTF money your district receives in excess of the receipts must be used for General and/or Teacher Fund purposes. Senate Bill 291 (2009) State Budget (Next Year-FY 18) 1. The actual Consensus Revenue Estimate (CRE) is 4.6%. However, due to the Senate Bill 509 tax cut which would take effect 1/1/18 (equals a calendar year 2018 reduction of $80 M), a 3.8% CRE is being utilized in drafting the FY 18 Budget. 2. In succeeding years, the impact of SB 509 tax cuts will equate to a minimum reduction of $160 M each fiscal year until fully phased in over 5 years. 14

15 State Budget (Next Year-FY 18) 1. The Governor basically recommended flat funding ($3.2 M) for the Foundation Formula for FY The House is currently determining their budget recommendations for FY 18. It is our understanding they are planning to appropriate additional monies into the Foundation Formula. If so, could that mean full funding??? 3. If an additional funding amount from the House were to occur, where does that revenue come from? And what subsequently, would the Senate do in regard to recommended Formula funding? State Budget (Next Year-FY 18) In regard to full funding of the Formula, DESE has indicated their definition is the actual distribution of the fully appropriated amount in that fiscal year. Subsequently, the addition of Early Childhood ADA would not occur until the year after the full distribution occurred. We hope that is a conversation we will be having sooner rather than later. 15

16 State Budget (Next Year-FY 18) It is anticipated that the WADA in the formula next year will not increase greatly from this year primarily due to two factors: a. Provisionally accredited districts have already been allowed to include Early Childhood Free and Reduced lunch students in their WADA count starting this year. b. The lower thresholds in the latest (Fall, 2015) calculations by DESE (see WADA worksheet) have allowed districts that should estimate to have done so this year ( ) and get paid on a larger WADA number. DESE has been proactive in contacting districts to ensure this has occurred Probable Formula Factors (See worksheets in packet) 1. State Adequacy Target (SAT): $6,145 as a baseline amount, then potentially higher dependent upon the following factors: *An anticipated increase to the March SAT that would likely carry over into FY 18 *Change (+/-) in the final WADA *The actual increase in state appropriations for the Formula for next year 16

17 Probable Formula Factors (See worksheets in packet) 2. Weighted Average Daily Attendance (WADA) Again, refer to the WADA Worksheet in your packet Probable Formula Factors 3. New Dollar Value Modifiers-DVM s as calculated annually (handout in your packet & at the website below): FY18DVMCalculation.pdf 4. Local Effort (remains the same unless): 1. Fines in exceeded (two years prior of current fiscal year) 2. Assessed value Dec. 31, 2016 fell below Dec. 31, Municipal court established in county, use fines in

18 Probable Formula Factors 5. FY 2006 state funding: Fixed 6. Classroom Trust Fund: Current best estimate about the same amount as this year, $405 per WADA. 7. DESE will have further guidance in their monthly Finance Memos each month through June. State Formula Reminder Small Schools Grant - DESE will update this spring or summer the estimated amount per ADA ($10 M distributed) and the amount per tax rate weighted ADA ($5 M distributed) in Currently these are $277 and $159. Approximately 192 schools; not expected to change much. 18

19 Transportation 1. After withholds and the subsequent release of funds by both Governor Nixon & Governor Greitens, the current year s reimbursement rate is 16%. 2. For FY 18, an identical amount of transportation funds distributed in FY 17 would result in a reimbursement rate of approximately 15%. DESE will advise this spring on the specific Transportation formula factors for FY Transportation has been, and is, a relevant and important topic to legislators at this time. We will need to monitor the final appropriated amount for Transportation for both this year and next (FY 18). Interesting Fact: In 1990, the reimbursement rate was 80%. It was then mandated at 75% as a part of Senate Bill 380 (the Outstanding Schools Act) by Governor Mel Carnahan in Other State Revenues ü Early Childhood (PAT)-identical funding as FY 17. ü Early Childhood Special Educationfully funded. ü High Need Fund-fully funded. 19

20 Other Local & County Revenues Review Historical Data Last 3-5 Annual Secretary of the Board Reports (ASBR) for: Intangible Taxes 5114 M & M Surtax 5115 In Lieu of Tax 5116 Investment Income 5141 Fines & Forfeitures 5211 State Assessed Railroad and Utility* 5221 Update monthly as data becomes known *A much greater receipt this year than anticipated may have a negative implication for next year s tax rate that you will establish this August. Federal Revenues DESE will advise this spring on funding levels: ü IDEA ü Title Programs ü Grants 20

21 Other Revenues ü Bond Sales ü Tuition ü Miscellaneous Revenue Questions? 21

22 Budget Development Jason Hoffman, Chief Financial Officer, Jefferson City School District & Darin Ford, Superintendent, Centralia School District March 15 & 16, 2017 Lots of Help on How to Spend District Resources 22

23 Popular Belief Budget is like a pie If you spend more $, the pie does not get bigger! Instead, the rest of the pieces of pie just get smaller! 23

24 Budget Planning WHAT ARE YOUR PRIORITIES? Small Class Sizes Competitive Salaries Technology & Instructional Materials Avoiding RIF s Increase/Decrease Fund Balance New Programs First Order of Business Start with Operating Budget (Fund 1 & 2) Amend Current Year's Budget Since most expenses repeat (78.3% salary and benefits-fy2016). 24

25 Examine What Will Change If most of the expenses repeat, you simply need to evaluate what will be different. Start at 10,000 foot level Items to Consider- SALARY Cost to Operate Salary Schedule Service and Education movement Cost to give raises to rest of the staff Factor in increased PSRS/PEERS, Medicare, and OASDI costs with raises. Savings from Retirements Change Sub Rates Change Summer School Pay Change in Stipend Schedule 25

26 Items to Consider- Staffing Changes in FTE Does student enrollment warrant more or fewer classroom teachers Any new or deleted programs Changes to other classes of employee groups Expanded/Reduced Summer School Items to Consider- Health Insurance Health Insurance Rate Changes National Trend-United Healthcare 10.9% Medical 10.8% Rx Factor in increased PSRS/PEERS costs 26

27 Items to Consider- PSRS/PEERS Changes in PSRS/PEERS Rate Rate stays same for FY18, but not guaranteed to stay the same going forward. 8.1% - Est. FY17 Return Through February Don t forget to calculate the increased retirement costs with increases in Salary and Health Insurance. Also increased OASDI/Medicare on increased salary costs. Items to Consider- Utilities Changes in Utility costs Electricity, Natural Gas, Diesel Fuel I almost always budget a 10% increase to my UPDATED current year estimates to account for rate changes. Amend current year down. Have you done anything that would change consumption? Added square footage Added or removed bus routes 27

28 Items to Consider- Other Change in Property/Liability/Work Comp Check with MUSIC or your broker for projections. Supplies Are you adding or deleting programs? Technology, Technology, Technology Transportation Contract Items to Consider- One Time Costs Architectural Fees Software Implementations Transfers to Fund 3/Fund 4 28

29 Items to Consider- Fund Balance What level of funds do you need to keep in reserve? Need a higher percentage if rely more on local property taxes. Set goal with your Board of Education If too high, develop a long range plan to spend them down Spending reserves (non- reoccurring) on normal operating expenses (reoccurring) can be dangerous if you don t have a plan. Salary Recommendation 29

30 FY 18 Changes in Expenditures FY18 PRELIM BUDGET- Fund Balance Description of Fund Balance Change $ Amount FY2017 Change in Fund Balance - $351,585 FY2017 Ending Fund Balance % 20.9% + Change in Revenues FY18 vs. FY17 $1,400,000 - Change in Expenditures FY18 vs. FY17 $1,305,240 - Change In Transfers Out of Operating Fund FY18 vs. FY17 $ 0 TOTAL CHANGE IN FUND BALANCE FY $256,825 FY2018 Ending Fund Balance % 20.3% 30

31 Long Range Projections Since most of your expenses repeat, you are locking in a lot of expenses for more than one year. Make SWAG assumptions on major revenues and expenses to make sure your plan is sustainable 31

32 Revenue Assumptions Current Taxes Reassessment and Non- Reassessment Prop C Student Changes and State s Economy Basic Formula I m assuming flat formula increases in future years Any other known revenue changes Interest Income? Expenditure Assumptions Salaries - % Increase Every Year Health Insurance-% Increase Every Year Other Benefits - % Increase Every Year Utilities - % Increase Every Year Purchase Services Supplies Transfers to Fund 3/Fund 4 32

33 Fund 4- Capital Projects Expenditures Usually not re-occurring. Exception might be lease purchase payments Makes it easier to deficit spend Should have a multi-year capital projects plan!!! 33

34 Fund 3- Debt Service Expenditures Work with your bond advisor to line out these expenses Budget Reduction: The Plan Plan to reduce expenditures o Start communicating now, if you haven t already o Use a model or develop your own o Have staff and community input o Constant, continuing two-way communication is essential Communication is important, timing is critical o Establish clear-cut parameters/goals by the Board of Education Preferred ending fund balances Class sizes Reserve spending plan and plateau Honor staff and students throughout process Helping students achieve at a higher level is the continued mission of the school district 34

35 Budget Reduction: The Plan Prepare a list of potential cuts, complete with financial impact amount o Anything can be on the table at this point o Be specific o Attach a dollar amount to each proposal o No sacred cows at this time o Establish priorities Provide assurances potential cuts don t violate, but: o Meet state legal requirements o Meet Missouri School Improvement Program minimum standards o Meet federal requirements o Meet local Board of Education policies (or suggest changes) o Meet regional accreditation standards Board of Education makes the final decisions Need to do ASAP if not already implementing a plan Budget Reduction: The Process Begin early Establish a target amount Establish a timeline Allow for anonymous communication o account o Improvement/comment cards Communication Board of Education o Work sessions o Open forum/committee meetings o Buy into the plan Staff Explain financial conditions (state and local) Continuous meetings Do not pit people and programs against each other Community and students Web site with detailed information Reason for the necessary budget reductions Plan and process to be used Timeline 35

36 What else can you do? Stop transfers for a couple of years Debt Service Capital Projects Can you redirect separate funds? Food Service Adult Education/ Community Education Student Activities Any other Enterprise Operations within district Review financial impact of summer school Remember Have a plan AND Use good tools! 36

37 Questions and/or Comments? Salary Compliance Fund Placement is the most important factor in maintaining compliance. Statutory Requirements o 75% of Basic Formula (5311) placed in Teachers Fund o 75% of ½ Prop C (5113) placed in Teachers Fund o Out of compliance if you don t comply Make sure you place at least these amounts in Teachers Fund. 37

38 Salary Compliance If you place more than the statutory requirement in Teachers Fund it will give you more cushion to remain in compliance. Place up to 100% of Basic Formula and Prop C in Teachers Fund AS LONG AS IT DOES NOT BUILD A FUND BALANCE IN TEACHERS FUND. Fund Placement Example- Actual Fund 1 Fund 2 Fund 1 Fund 2 Fund 1 Fund Basic Formula $960,925 $0 $266,982 $800,946 $274,991 $824, Prop C $222,190 $0 $135,536 $81,321 $139,602 $83,761 Other Rev No Choice No Choice No Choice Fund 2 Expenses $1,636,131 $1,538,647 $1,418,401 Teacher Fund Xfr. $1,423,196 $502,054 $492,891 $ In Compliance $527,313 $258,778 $257,178 38

39 Fund Placement Example- Minimum Placement Fund 1 Fund 2 Fund 1 Fund 2 Fund 1 Fund Basic Formula $240,231 $720,694 $266,982 $800,946 $274,991 $824, Prop C $138,869 $83,321 $135,536 $81,321 $139,602 $83,761 Other Rev No Choice No Choice No Choice Fund 2 Expenses $1,636,131 $1,538,647 $1,418,401 Teacher Fund Xfr. $619,181 $502,054 $492,891 $ In Compliance $527,313 $338,242 $352,377 Difference From Actual $0 $79,464 $95,199 Fund Placement Example- Maximum Placement Fund 1 Fund 2 Fund 1 Fund 2 Fund 1 Fund Basic Formula $0 $960,925 $0 $1,067,928 $0 $1,099, Prop C $0 $222,190 $0 $216,857 $0 $223,363 Other Rev No Choice No Choice No Choice Fund 2 Expenses $1,636,131 $1,538,647 $1,418,401 Teacher Fund Xfr. $240,081 $99,536 $78,297 $ In Compliance $527,313 $338,242 $432,456 Difference From Actual $0 $79,464 $175,278 39

40 Reminders 1 Incidental/Teacher Fund Provision If ending Fund 1 unrestricted balance is greater than 50 percent of combined Fund 1 and Fund 2 expenditures, the excess balance above 50% threshold must be transferred to Fund 2. Reminders 2. Gifted Penalty v Number of gifted students served in future years must be at least 80% of gifted students served in to avoid financial penalty 40

41 Reminders 3. Fund Placement Teachers Fund 75% of Formula Money (Not Including Classroom Trust Fund (Gaming) monies 75% of 1/2 Proposition C monies Incidental Fund 100% of State Transportation monies Local Board Discretion Classroom Trust Fund (Gaming) monies (Additional monies in future years in excess of must be placed in Incidental and/or Teachers Fund) Reminders 4. Fund Transfer Options (Fund 1 to Fund 4) An amount not to exceed the greater of: o $162,326 or o 7% of state adequacy target ($6,060 -$6,076) times the district s weighted ADA for ) Satisfy current year Capital Project expenditures unless Board adopts resolution. 41

42 5. Fund Transfer Options Reminders Replacement of Designated Levy If not using the 7% or $162,326 transfer and not making payments on lease purchases (Section ), then may transfer from the Incidental Fund to the Debt Service and/or the Capital Projects fund the greater of: o State aid received in as a result of no more than 18 cents used in the foundation formula and placed in the Capital Projects or Debt Service fund or o 5% of state adequacy target ($6,060-$6,076) times the district s weighted ADA for ) Reminders Minimum Salary Requirements SB287 Year Beginning Teacher Masters Degree with 10 years experience $22,000 $30, $23,000 $31, $24,000 $32, $25,000 $33,000 42

43 Additional Topics Budget Cycle: Preliminary Semi-Final Final Financial Summary 43

44 Final Questions? Additional School Finance Assistance Please call MASA Executive Director Doug Hayter for any school finance-related questions or needs. We can help facilitate assistance for you as needed. MASA Office: Cell Number: