Budgeting for

Transcription

1 Budgeting for Presented By Chris Straub & Jason Hoffman Budgeting Axioms Budgeting Is A Year-Round Process 1

2 Budgeting Axioms Budgets change as better information is obtained Budgeting Axioms The Superintendent or Chief Financial Officer should receive, and almost always does, lots of assistance and advice on budgeting expenditures. 2

3 Budgeting Axioms The budgeting of revenues is a lonely job. Budgeting Axioms Everybody wants to tell the Superintendent or the CFO, how to spend money but nobody else cares how much money there is to spend. 3

4 Budgeting Axioms Changing economic times mandate keeping everyone informed and involved in the budget development process. (Staff, Board & Public) Budgeting Revenues Local Property Taxes Assessed Valuation x Tax Rate x Adjusted Historical Collection Rate = Budgeted Property Taxes 4

5 Local Property Taxes Local Property Taxes ü Assessed Value (Talk to your assessor) 1. Assessment plan for existing property values 2. Estimate on new construction and improvements is a Reassessment year Budgeting Revenues Local Property Taxes Estimate of tax rate for Is your current tax rate ceiling below your maximum authorized tax rate? 2. If so, you may be able to recoup some or all of a decrease in existing assessment values. (Personal 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. 5

6 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 2015 is a reassessment year. Your next opportunity to reduce or eliminate a voluntary roll-back will be in Historical Collection Rate December 31, 2013 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. 6

7 Historical Collection Rate 1. Review this year s ( ) property tax collections. 2. Compare property tax collections through February compared to Calculate percentage collected through February, 2014 to total collected by the end of year in Compare percentage collected through February, 2015 to total budgeted for Adjust historical collection rate accordingly in budgeting property taxes for Repeat process in March and April. 7. Check with County Clerk and Assessor regarding protested taxes this year. Budgeting Revenues Local Property Taxes Assessed Valuation x Tax Rate x Adjusted Historical Collection Rate = Budgeted Property Taxes 7

8 Proposition C (Current Year FY15) 1. Last year (FY14) distributed : $793.1 M, $884 per WADA. 2. Budget this year: $827.5 M, $916 per WADA 3. It will take a 4.3% increase in revenue to meet this year s budget ($827.5 M). 4. However, a $10 M carry-over from last year is being distributed this year. 5. Revenues therefore only need to grow about 3% over the $803.1 M actually collected last year. Proposition C (Current Year FY15) 6. After adjusting for the $10M one-time carry-over, distributions through February 2015 are up 4.2% through February of Unless sales tax growth declines significantly in the next 4 months, as they did just two years ago, the budgeted amount of $916 appears to be attainable. 8

9 Proposition C (Next Year FY16) 1. The FY 16 Governor s Budget for Prop C is $848.7M. Based upon the current WADA, this would amount to approximately $939 per WADA. 2. Proposition C revenues would need to increase about 2.6% next year to meet the budget if the budgeted amount of $827.5M for FY15 is actually achieved. 3. It might be prudent to wait until June before finalizing your Prop C budget for By then, we will know how this year turns out. 4. At this point, a budget for next year that seems reasonable is $910 - $935 per WADA. Proposition C Multiply estimate by estimated weighted ADA. Changes in threshold percentages released by DESE in Sept for free and reduced lunch, IEP and LEP will apply to Prop C calculation for next year. See WADA worksheet (Line 7 of 1 st preceding year ) 9

10 Other Local and County Revenues Review Historical Data Last 2-3 ASBRs Intangible Taxes M & M Replacement In Lieu of Taxes Investment Income (update for current low interest rates) Fines and Forfeitures State Assessed Railroad and Utility* Update 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. FY15 State Budget (Current Year) 1. The revised General Revenue forecast is that revenues will grow 4.6% over last year (FY14). 2. Through February 2015 compared to February 2014: Individual Income Taxes +6.4% Sales Taxes +3.3% Corporate Income Taxes +4.0% All Other - 6.1% Refunds +6.1% Net General Revenue +4.9% 10

11 FY15 State Budget (Current Year) 3. The casino tax revenue (the Classroom Trust Fund) which helps fund the formula is stabilizing this year through February after declining the past two years. However, the state budget still reflects unreasonable revenues. 4. Lottery revenues are coming in significantly below the budget. FY15 Formula (Current Year) 1. DESE increased the proration of the formula in February from 96.8% to 96.9%. CAUTION: Lottery revenues are coming in way below budget. This may effect the proration. Projected range: 96% to 97%. 2. The amount per ADA distributed in January for the Classroom Trust Fund was $372. (February transmittal had an error) 3. Pay attention each month to the formula transmittal: the formula proration and the CTF payment. 11

12 FY15 Formula (Current Year) 4. 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 Incidental and/or Teacher Fund purposes. FY16 State Budget (Next Year) 1. The consensus general revenue forecast for FY16 is that revenues will grow 3.6% over FY15. (The Governor and the Legislature, unlike last year, were able to agree on this amount.) 2. Gov. Nixon has recommended a $50 M increase for the formula next year. (His budget also adds another $18-$20 M of general revenue to replace Classroom Trust Fund and other formula receipts that were overstated in the current FY15 Budget.) 3. Gov. Nixon did not recommend any increase for categorical programs except for a $5 M increase for Early Childhood Special Education. 12

13 FY16 State Budget (Next Year) 4. HB1689, which passed last year, provided that the SAT must be established each year by DESE, beginning in , so that no percentage reduction occurs in the formula. 5. Hold harmless school districts will receive all of their hold-harmless amount. 6. DESE estimated in February that if the Governor s recommendation for the formula is passed by the legislature, the SAT next year would be $6,076. Be Cautious: The size of the lottery short-fall is not yet known. FY16 State Budget (Next Year) 7. Tentative HB2 contains a $70M increase for the formula. The bill also follows the Governor s budget by decreasing the amount budgeted for the CTF and increasing other general revenues by $10M - $20M. 8. Suggested budgeting range (unknown exact impact of Lottery shortfall, WADA, final legislative action and Governor s action) : $6,076 - $6, DESE will be providing updated guidance as this fiscal year concludes in June. 10. DESE estimates that only eight school districts will receive less formula money in than they received in if the SAT ends up being $6,076. DESE also estimates that SAT would need to be at least $6,093 for all districts to receive at least the same amount of money they received the previous year. 13

14 Probable Formula Factors (See worksheets in packet) 1. SAT: $6,076 - $6, WADA Refer to WADA Worksheet in packet Probable Formula Factors (See worksheets in packet) 3. New DVMs (Handouts) 4. Local Effort: Remains the same unless: 1. Fines in exceeded Assessed value Dec. 31, 2014 fell below Dec. 31, Municipal court established in county, use fines in

15 Probable Formula Factors (See worksheets in packet) 5. FY 2006 state funding: Fixed 6. Classroom Trust Fund: Probably about the same next year as this year, $370 -$385 per WADA. 7. DESE will have further guidance in their June Finance Memo. State Formula Reminder: The amount of Classroom Trust Fund (CTF) monies received in can continue to be used at local discretion. Any CTF monies received in future years above amount must be placed in the Incidental or Teachers funds. 15

16 State Formula Reminder Small Schools Grant - DESE will update this spring or summer the estimate of amount per ADA and amount per tax rate weighted ADA in Currently these are $271 and $157. Not expected to change much. Other State Revenues DESE will advise this spring on Transportation formula factors. ü Transportation a) No increase likely. ü Vocational a) Cuts would impact Perkins funding, therefore difficult to cut. 16

17 Other State Revenues ü Early Childhood (PAT) a) $No increase ü Early Childhood Special Education a) Will be fully funded. Federal Revenues DESE will advise this spring on funding levels ü IDEA ü Title Programs ü Grants 17

18 Other Revenues ü Bond Sales ü Miscellaneous Questions 18

19 BUDGETING EXPENSES What do we do now? Jason Hoffman Chief Financial Officer/Chief Operating Officer Jefferson City Public Schools Lots of Help on How to Spend District Resources 19

20 Popular Belief Discussion In My Community WE CAN NOT BE THE VERY BEST AT EVERYTHING WITH OUR CURRENT RESOURCES! MO Ranks 30 th in Current Spending/Pupil (2012 Census Data) 3/4 of MO districts spend more per pupil than JCPS. $10,182 JCPS vs. $12,964 State Average $25 million more/year if JCPS spends state ave. 2/3 of MO districts have a higher total levy than JCPS. $ JCPS vs. $ State $4.6 million more revenue/year if JCPS levied state ave. 20

21 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! Budget Planning WHAT ARE YOUR PRIORITIES? Small Class Sizes Competitive Salaries Technology & Instructional Materials Avoiding RIF s Increase/Decrease Fund Balance New Programs 21

22 First Order of Business Start with Operating Budget (Fund 1 & 2) Amend Current Year's Budget Since most expenses repeat (78.2% salary and benefits-fy2014). 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 22

23 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 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 23

24 Items to Consider- Health Insurance Health Insurance Rate Changes National Trend is 8%-10% Most of ACA went into affect Jan 2014 Approx 2.5% in new taxes on premiums-fully insured Typical Rate Calculations are out the window. Factor in increased PSRS/PEERS costs Items to Consider- PSRS/PEERS Changes in PSRS/PEERS Rate Rate stays same for FY16, but not guaranteed to stay the same going forward. 4.0% - Est. FY15 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. 24

25 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 Items to Consider- Other Change in Property/Liability/Work Comp Hardening market due to recent loses MUSIC continues to provide stability Supplies Are you adding or deleting programs? Technology, Technology, Technology Transportation Contract 25

26 Items to Consider- One Time Costs Architectural Fees Software Implementations Transfers to Fund 3/Fund 4 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. 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. 26

27 Salary Recommendation FY 16 Changes in Expenditures 27

28 FY16 PRELIM BUDGET- Fund Balance Description of Fund Balance Change $ Amount FY2015 Change in Fund Balance - $930,000 FY2015 Ending Fund Balance % 22.6% + Change in Revenues FY16 vs. FY15 $1,625,000 - Change in Expenditures FY16 vs. FY15 $1,501,243 - Change In Transfers Out of Operating Fund FY16 vs. FY15 $ 0 TOTAL CHANGE IN FUND BALANCE FY $806,243 FY2016 Ending Fund Balance % 21.3% 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 28

29 Revenue Assumptions Current Taxes Reassessment and Non- Reassessment Prop C Student Changes and State s Economy Basic Formula I m assuming similar 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 29

30 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 30

31 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 31

32 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 32

33 Budget Reduction: The Reconciliation The reconciliation should include: o All operating funds (all funds less Debt Service) o After each fiscal year: Calculate change in balance for the fiscal year Calculate balance as a percentage of all expenditures Restricted funds o Unless have a large amount of restricted funds, don t worry about excluding from the total o If have a large amount, then deduct them prior to calculating the percentage 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 33

34 Remember Have a plan AND Use good tools! Questions and Comments 34

35 Reminders 1. Salary Compliance will apply in Data from and are used in calculation. 3. See worksheet in packet. Salary Compliance Fund Placement is the most important factor in maintaining compliance. Statutory Requirements 75% of Basic Formula (5311) placed in Teachers Fund 75% of ½ Prop C (5113) placed in Teachers Fund Out of compliance if you don t comply Make sure you place at least these amounts in Teachers Fund. 35

36 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 36

37 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 37

38 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 38

39 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 ($6,076 -$6,095) times the district s weighted ADA for ) Satisfy current year Capital Project expenditures unless Board adopts resolution. 39

40 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 ($6,076-$6,095) 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 40

41 Additional Topics Budget Cycle: Preliminary Semi-Final Final Financial Summary 41

42 Additional Assistance MASA School Finance Service School Finance Consultants available to work one-on-one Call Roger Kurtz to arrange appointment Questions 42