Budget Development

Transcription

1 Budget Development Jason Hoffman, Chief Financial Officer, Jefferson City Public Schools & Richard Asbill, Superintendent, Cassville R-IV School District March 14 & 15, 2018 Budget Development Doug Hayter, Executive Director MASA March 14 & 15,

2 A Welcome From our Workshop Sponsors Budget Development Greetings From: Kim Cranston Executive Director Missouri Association of School Business Officials (MOASBO) Roger Dorson Interim Commissioner Department of Elementary & Secondary Education (DESE) David Tramel Coordinator, Financial & Administrative Services Department of Elementary & Secondary Education (DESE) 2

3 Key Budget Axioms to Consider Budgeting Axiom #1 Effective budgeting evolves & is an ongoing, year-round process. 3

4 Budgeting Axiom #2 Effective budgeting requires a focused & deliberate effort to always do what is best for kids. Budgeting Axiom #3 Budgeting is a lonely & underappreciated job. 4

5 Budgeting Axiom #4 Perceived wants are always greater than actual needs. Budgeting Axiom #5 Be conservative on revenue projections & liberal on expenditure projections. 5

6 Budgeting Axiom #6 Keep everyone fully informed & involved in the entire budget development process. Budgeting Axiom #7 Individuals are only safe & solvent if the organization is safe & solvent. 6

7 Budget Development Revenue Projections Jason Hoffman, Chief Financial Officer, Jefferson City Public Schools & Richard Asbill, Superintendent, Cassville R-IV School District March 14 & 15, 2018 Budgeting Revenues Key Revenues Object Code Local Property Taxes Current Taxes 5111 Delinquent Taxes 5112 School District Trust Fund (Proposition C) 5113 Basic Formula-State Monies 5311 Basic Formula-Classroom Trust Fund 5319 Transportation

8 Budgeting Revenues Local Property Taxes Assessed Valuation (AV) x Tax Rate x Adjusted Historical Collection Rate =Budgeted Property Taxes Local Property Taxes Talk to your county assessor(s) for preliminary 2018 AV information: 1. What is the county s current assessment strategy & plan? 2. Compare this information with AV figures for the current & upcoming years. 3. What is AV for New Construction and Improvements? 4. Keep in mind that 2018 is not a reassessment year. *Consumer Price Index (CPI) ended Dec. 2.1% (identical to the CPI last year) *handout in packet 8

9 Local Property Taxes Reminder: 1-If your district has a voluntary Operating Tax Rate roll-back, you CAN reduce or eliminate the roll-back this year. 2-You can only do so in a non-reassessment year. If you do a voluntary roll back this year, you have to do the same rollback in ! 3-Your next opportunity to reduce or eliminate a voluntary roll-back will be in (the next nonreassessment year). Local Property Taxes A voluntary reduction would be found on Line H. of your State Auditor s Office (SAO) 2017 Tax Rate Summary Page (if applicable). 9

10 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 AV (Personal and/or Real Property). 10

11 Tax Levy Calculation Information can be found at: 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, 2018 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, 2018 to total budgeted for (again compare relative to prior years). 11

12 Historical Collection Rate 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. Historical Collection Rate Example December 31, 2016 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. *handouts in packet 12

13 Historical Collection Rate Example Historical Collection Rate Example 13

14 Budgeting Local Property Taxes One Final Thought 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. State Budget Overview Net General Revenue Collections Increased 4.4% for the year: o Individual income tax +6.1% for the year o Sales and use tax collections +2.2% for the year o Corporate income & franchise tax collections +21% for the year (YTD collections=$246,232,495) o Refunds +14.6% for the year FY 18 revenues will come in above the $150 million growth trigger the tax cut under SB 509 for the 2018 calendar year 14

15 Derived from Jim Moody s General Revenue Update Derived from Jim Moody s General Revenue Update 15

16 Consensus Revenue Estimate (CRE) The CRE for FY 18 was revised in early January to 1.9% from the original 3.8%. There have already been withholds to account for this amendment and unless something changes, it is not believed additional withholds are necessary The Governor and the General Assembly are working with a 2.5% growth rate as the CRE for FY 19 FY 19 Governor s Recommendations $51 million increase to Foundation Formula $92 million for Transportation $15.9 million increase in Proposition C (dedicated tax) $8 million increase in Early Childhood Special Education (mandatory) $68 million cut to Higher Education 16

17 FY 19 Pending House Budget CommiUee Recommendations House Bill 2 $98 million increase to Foundation Formula $92 million for Transportation $15.9 million increase in Proposition C (dedicated tax) $8 million increase in Early Childhood Special Education (mandatory) Missouri Preschool Program (MPP) cuts of $6 million due to increased Pre-K funding in the Formula Discussion of partial restoration to the Governor s $68 million cut to Higher Education Once the House recommendations are final, we will then wait on the Senate s Budget recommendations. Budget Developments There is still uncertainty regarding the impact of the federal tax changes and SB 509 tax cuts Congress funded the CHIP program in the last budget deal & this has freed up approximately $81 million in General Revenue (discussed being used to restore cuts to Higher Education) The amount of mandatory Medicaid spending has been reduced by $55 million Blind pension will receive approximately $20 million in back payment 17

18 Cost of Public Placement Last year, the General Assembly reduced funding for reimbursement to districts with facilities within their boundaries from $11 million to $5 million. $3.2 million was restored to that fund by the House Education Appropriations Committee. However, the House Budget Committee tentatively returned it to $5 million. Proposition C 18

19 Proposition C (Current Year FY 18) Reminder: paid on statewide prior year WADA *Estimated WADA ( ) = 912,339 (as of the February 2018 payment) *Estimated FY 18 revenue = $901,600,000 *Estimated payment = $988/WADA DESE is optimistic the projected amount per WADA will be realized. Proposition C (Next Year FY 19) Paid on prior year WADA *Estimated WADA ( ) = 912,000 *Estimated FY 19 revenue = $917,500,000 *Estimated payment = $1,006/WADA Projected growth is a revenue increase of $15.9 million (1.76%) over FY

20 Proposition C (Next Year FY 19) Some scenarios for Prop C revenue estimates: No growth: $988 per WADA Median growth: $997 per WADA Projected growth: $1,006 per WADA Proposition C *Multiply your best Prop C estimate by your estimated weighted average daily attendance (WADA) ADA estimate worksheet online at: school-finance/calculation-tools Continue to monitor receipts monthly as you finalize your Prop C revenue estimate for

21 Basic Formula (Current Year-FY 18) The SAT used in the Formula for the February transmittal was $6,241 based on the actual appropriation of $3,392,907,149 Barring any withholds or unforeseen shortfalls (which are not expected), the SAT will remain at $6,241 Regarding the trigger for Pre-K programs (students eligible for free and reduced lunch) to be included in the Formula calculation, DESE has amended its interpretation from distributed to appropriated Deputy Commissioner s Comments February 2018 School Finance Monthly NewsleUer There has been much discussion about the full funding of the Foundation Formula in FY 18. The majority of this discussion is due to the trigger for the inclusion of Pre-K ADA in the formula. Full funding can be achieved by using a State Adequacy Target (SAT) of $6,241, which is the SAT that was used in the February payment. Based on the Formula Weighted Average Daily Attendance (FWADA) for this year and the financial projection for the remainder of the fiscal year an SAT of $6,241 should be able to be maintained. While paying out at an SAT of $6,241 is one trigger, another trigger is the language in the statute that uses the word appropriated only and does not use this in conjunction with expended. The Department believes this language also triggers the inclusion of Pre-K for ADA in the formula. 21

22 House Bill House Bill 1689, passed during the 2014 legislative session, allows for a school district that operates an early childhood education program to receive state funding through the foundation formula for students between the ages of 3 and 5 who are eligible for free and reduced lunch. This legislation will allow these students to be included in the average daily attendance calculation (ADA) of the district or LEA charter school. The total number of such pupils included in the ADA calculation cannot exceed 4% of the total number of pupils eligible for free and reduced lunch between the ages of 3 and 18 who are included in the district s ADA calculation. House Bill Barring change in statute or DESE interpretation of pupils, this will reduce the number of students districts will receive state funding, especially in districts with high mobility Regardless of final SAT distribution, the General Assembly appropriated enough for full funding and Pre-K will be triggered for FY 19 22

23 House Bill 1689 CLAIMING The method for determining how many PK students you can claim for state aid is different than any other method used for school finance o Headcount not FTE Other differences as well October 10, 2017 DESE recorded a webinar to explain how to handle PK students. claiming-pk-attendance-hours Basic Formula The SAT has been recalculated for FY 19 & FY : $6,308 (statutory 50% of total recalculation) 2020: $6,375 Statewide WADA will be greater in FY 19 due to two primary factors: Pupils eligible for free & reduced lunch that are enrolled in district sponsored Pre-K programs can be included in ADA for FY 19 Further reduction in thresholds Total increase is approximately 10,000 23

24 Threshold Changes FY s 17 & 18 FY s 18 & 19 Free & Reduced Lunch 36.12% Free & Reduced Lunch 31.42% Special Education (IEP) 12.16% Special Education (IEP) 12.06% Limited English Proficiency 1.94% Limited English Proficiency 2.50% Basic Formula In total, an increase of approximately $98 million is necessary to fully fund the formula in school year: $48 million to ensure the SAT remains at $6,241 due to the expansion of WADA $50 million to fund the growth of the SAT to $6,308 24

25 Probable Formula Factors 1. State Adequacy Target (SAT) A. Full Funding ($98 M)= $6,308 (Current House recommendation) B. WADA Funding ($48 M)= $6,241 (Approx. Governor s recommendation of $51 M) C. *No Funding= $6,177 *(Based on $48 M/$750,000. The SAT changes $1 + or - for approx. every $750,000) Probable Formula Factors 2. Weighted Average Daily Attendance (WADA) ADA estimate worksheet online at: school-finance/calculation-tools 25

26 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 to current fiscal year) 2. Assessed value Dec. 31, 2016?? fell below Dec. 31, Municipal court established in county, use fines in Probable Formula Factors 5. FY 06 state funding: Fixed 6. Classroom Trust Fund: Current best estimate at $414 per WADA. 7. DESE will have further guidance in their monthly Finance Memos each month through June. 26

27 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 $275 and $156. Approximately 190+ schools; not expected to change much. Transportation (Current Year- FY 18) Originally, $105 million was appropriated for transportation in the FY 18 budget Subsequently, through the withholding process, the Governor reduced that amount to $90 million Current year payment on the $90 million results in payment of 29.6% of the 75% Allowable Cost or 22% of Total Cost 27

28 Transportation (Next Year- FY 19) The Governor s budget recommendation contains $92 million for transportation This is a $13 million decrease from the core amount last year ($105 million) but a $2 million increase to the FY 18 amount that is currently being distributed This should result in a fairly stable transportation reimbursement percentage for FY 19 Following recent historical trends, the final number included in the budget tends to be the high point in funding and could be subject to withhold once the fiscal year begins *Historical 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 18. ü Early Childhood Special Educationfully funded (as mandated) ü High Need Fund-fully funded 28

29 Other Local & County Revenues Review Historical Data Review the past 3-5 Annual Secretary of the Board Reports (ASBR) for historical information regarding: 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 ü More will be discussed regarding the ESSA coding changes in the expenditure portion of the presentation. DESE webinar at: webinar/essa-coding-guidance-discussion 29

30 Other Revenues ü Bond Sales ü Tuition ü Miscellaneous Questions? 30

31 Budget Development Expenditures Jason Hoffman, Chief Financial Officer, Jefferson City School District & Richard Asbill, Superintendent, Cassville R-IV March 14 & 15, 2018 Lots of Help on How to Spend District Resources 31

32 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! 32

33 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 (78.34% salary and benefits-fy2017). 33

34 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 34

35 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% Medical 15% Rx Factor in increased PSRS/PEERS costs 35

36 Items to Consider- PSRS/PEERS Changes in PSRS/PEERS Rate Rate stays same for FY19, but not guaranteed to stay the same going forward. 7.2% - Est. FY18 Return Through February Assume 7.6% Rate of Return 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 36

37 Items to Consider- Other Change in Property/Liability/Work Comp Check with MUSIC or your broker for projections. Was there a change in your emod? 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 37

38 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 38

39 FY 19 Changes in Expenditures FY18 PRELIM BUDGET- Fund Balance Description of Fund Balance Change $ Amount FY2018 Change in Fund Balance $851,233 FY2017 Ending Fund Balance % 22.2% + Change in Revenues FY18 vs. FY17 $1,325,000 - Change in Expenditures FY18 vs. FY17 $1,590,410 - Change In Transfers Out of Operating Fund FY18 vs. FY17 $ 0 TOTAL CHANGE IN FUND BALANCE FY2018 $585,823 FY2018 Ending Fund Balance % 22.5% 39

40 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 40

41 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 41

42 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!!! 42

43 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 43

44 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 44

45 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! 45

46 Questions and/or Comments? Coding Changes Many Resources Available o Written Manuals and Webinars DESE has provided numerous resources on their website. MoASBO Presentation 3/14/18 & 3/15/18 o Recorded and Available for Viewing DESE will be presenting at MoASBO Spring Conference. 46

47 Coding Changes Coding Changes 47

48 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. 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. 48

49 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 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 49

50 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 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. 50

51 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 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) 51

52 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. 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 ) 52

53 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 Additional Topics Budget Cycle: Preliminary Semi-Final Final 53

54 Financial Summary Final Questions? 54

55 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: Budget Development Jason Hoffman, Chief Financial Officer, Jefferson City Public Schools & Richard Asbill, Superintendent, Cassville R-IV School District March 14 & 15,