Budget Planning Guide
Everyone involved in the field of school business management today realizes the importance of the budget document. The planning and development of a school budget requires a systematic approach to the identification of the ingredients of the budget document and an appropriate timeline for gathering such data. As these ingredients are identified, they must be organized in accordance with a planned schedule that provides information for review and action at the appropriate time during the school year. It is this calendar of events that this section of the handbook will address.
While it may not be necessary to identify every advantage of establishing such a document, it would appear appropriate to review some of them at this time.
- It provides a timely method to give due consideration and attention to the educational program within the district.
- It provides a planning guide for the administrative staff to develop the necessary background information and statistical data needed to develop the school budget.
- It establishes specific dates and deadlines for information gathering, thereby eliminating the frenzied period when efforts are made to quickly gather statistical information that may be incorrect or untimely.
- It eliminates, by design, haphazard guesswork with respect to the needs of the education program.
- It brings to the forefront the need to obtain opinions and gather data from staff and other organizational groups who desire input in the budget development process.
- It provides a predetermined guideline for submission of budget, section by section that the Board can realistically deal with.
- It eliminates the possible confusion and irritation that can be injected into a board meeting when budget items are placed on the agenda without appropriate notice or preparation.
- It emphasizes the necessity of meeting legal dates and other planned events.
- It serves as a guideline for the establishment of informational meetings and other procedures that are needed to publicize the public budget document.
- It eliminates snap judgments with respect to budget estimates that may lack coordination with the district's educational plan.
- It provides for a systematic approach to allow for coordinated study of budget estimates as they are provided to those responsible for preparing the budget document.
- It provides an appropriate timeline for citizen groups and others to appear before the board or administrators to comment on desired changes and provides an adequate period during which such suggestions can be given proper consideration before decisions are made.
- It eliminates the concept that budget preparation is a seasonal one-person job.
- It provides a uniform flow of budgetary material from the initial request to the final document.
- It establishes responsibility for specific budget items and demonstrates that work on the budget document is an ongoing activity.
- It helps to demonstrate that the budget is a planning activity and emphasizes that the budget is a plan designed to achieve specific educational goals.
There is no single budget calendar that will meet the administrative and staff organizational needs of every school district. The varying educational patterns from district to district make it extremely difficult to set forth a single procedure that will be acceptable to all. Another very important aspect of the budget development process is that it is an activity that is multi-faceted with many planning activities occurring at the same time. As development progresses, there will be certain sections of the budget or singular budget items that cannot be undertaken until others have been completed. The process of budget development isn't simply an annual affair. While there are twelve months over which the various phases of the work can be accomplished, budget development is an on-going activity that extends across school years, as well as into multiyear periods.
The development of a working budget calendar should be based on the consideration of three very distinct activities that occur throughout the school year with respect to budget development. These are:
- budget preparation;
- budget presentation; and
- budget adoption.
The planning activities that occur during these three periods are the ingredients of a well organized school budget calendar. One of the most critical dates in the budget development process is the annual budget hearing date (between 7 and 14 days before the third Tuesday in May) when the budget will be presented to the voters. Since this budget hearing date may vary from district to district, the budget calendar requires tailoring to meet the needs of each individual district. Because of this problem, it must be understood that the suggested school budget calendar that is provided as an appendix to this handbook is simply a guideline. Accordingly, it should be adjusted or modified by the district to meet its individual planning needs.
The complexity of the management of a school district today necessitates the development of a budget calendar that encompasses the entire work year. The old concept, that once the budget has been approved and becomes a financial spending plan for the ensuing school year, there is little to do for the following two or three months, is a misconception. The fact is, it takes time to put the new budget in operation. Setting up accounts, determining that quotation and bid requirements are complied with, issuing purchase orders, closing accounts, and preparing reports are not activities that should delay the planning of the budget development process until the following school year. As a matter of fact, the activities of planning and preparation of one budget become the basis for the planning and development for the following year's budget. As a district gets into a new school year, it may become apparent that certain planned expenditures or activities become inappropriate or unachievable in that school year. This information should be the basis for the planning and development of the budget in the ensuing school year.
The development of a suggested school budget calendar has two distinct categories of events that are occurring throughout the period of the calendar. Certain of these events are going on continually without a specific deadline date. Other activities and occurrences are tied specifically to target dates. Because these activities are occurring throughout the school year simultaneously and one becomes the basis upon which the other is developed, the exhibits for suggested budget calendars are separated into two different documents. One is identified as a Budget Development Planning Guide (see APPENDIX B) and the other is identified as a Budget Calendar and Deadline Dates (see APPENDIX A).
The two budget development guidelines are intended simply as guidelines. Though neither of the documents may be appropriate for an individual district, as presented here, they can be modified and used as a basis for developing a calendar that will fit individual administrative and budgetary needs.
Since the budget is really the financial expression of the educational objectives, which have been developed and accepted by the board of the district, it must be as carefully developed and organized as the school program. This requires a long-range view of the monetary needs, as well as the specific allocations for operating needs during the current fiscal year.
Although long-range fiscal projections are more susceptible to error than those for a single year, fairly reliable estimates can be made. These estimates, however, may be subject to revision as changes in local conditions, objectives, and law occur. Some of the important considerations to take into consideration while developing a long-term plan are as follows.
- Planning Expenditures
- The number of children to be educated and the grade level placement of students. Prior year statistical data as well as projections of future enrollment are vital.
- Salaries comprise the greatest percentage of educational expenditures. Estimates for future enrollments should be used to extrapolate staffing needs and projected costs, instructional supplies, equipment, and facility needs.
- The budgetary impact on changes in teacher-pupil ratios should be evaluated. Ideally, such planning should occur two or more years in advance so that its impact may be evaluated in terms of requirements for new personnel as well as the need for supplies, equipment, and facilities.
- District contributions to employee retirement plans can be projected through the use of historical costs.
- The district's contributions to active and retired employee health insurance premiums can be estimated through historical data and future projections of staffing patterns and retirements.
- Consideration should also be given to the recognition on the books of account of the liability for compensated absences, e.g., earned but unused vacation and vested sick leave and related fringe benefits.
- A statement of existing district indebtedness and the schedule of principal and interest payments as they become due are a necessary part of an effective budgetary process. An assessment of the current status of district facilities should be undertaken so that future reconstruction and new construction needs can be estimated. This estimate can then be used to forecast the impact of new debt service on the budget.
- Economic conditions, inflation rates and consumption statistics form the basis for projecting the costs of materials and supplies, insurance, utilities and other commodity areas.
- A planned program of building maintenance and capital replacement projects covering at least the next five years is highly desirable, both from the point of view of maintaining the educational program and of maintaining control over budget growth.
It should be noted that Section 155.1 of the Regulations of the Commissioner of Education presently requires school districts to develop and keep on file a comprehensive long-range educational facilities plan. The required plan must be re-evaluated at least annually and must include an approval of:
- present and projected pupil enrollments;
- space utilization and State-rated capacity of existing facilities;
- priority of need for maintenance, repair or modernization of existing facilities, including consideration of their obsolescence.
- Anticipating Revenue
- The principal item of revenue in most school district budgets is derived from real property taxes. Accurate forecasting of available revenue from this source is dependent upon reliable estimates of changes in the level in assessed values as well as a knowledge of the local economy. For this reason estimates of revenue for real property tax sources should be carefully reviewed at least annually to assure that the most current information is being used in making these estimates.
- Estimates of state operating aid must be projected largely on the basis of current legislation. Estimated amounts of aid for textbooks, building, transportation, and similar aids should also be determined in terms of current legislation and computational procedures. Great care must be taken in determining what to project for each state aid category. Items such as the Deduction for the Local Share of Certain Handicapped costs and adjustments to Legislative projections due to enrollment changes or utilization levels must be taken into account.
- Non-resident tuition revenue can be a difficult item to estimate, especially when there are other districts with which the sending districts may contract. Where this constitutes an appreciable revenue, the estimates should be based on the most recent information available.
- Additional revenue generated through Medicaid claim billings should be projected based upon the estimated number of eligible children receiving eligible services at expected rates of reimbursement. Care should be exercised in this projection to ensure that State excess cost aid is not overstated in revenue projections for the amount representing Medicaid payments. Additionally, the timing of claim submission is an important consideration in estimating available revenues.
- Some items of year-to-year revenue are very minor in amount and not subject to long-range budgeting. Such revenues are incorporated into an item called "miscellaneous" revenue. Where a specific item is reasonably large in and of itself in terms of the total budget, it should be independently projected.
- There are some optional non-property taxes which can be levied by, or on behalf of, certain classes of school districts (i.e., City School Districts can levy a sales tax of up to 3% on public utilities, gross receipts tax and payment in lieu of taxes). If the long-range budget based on the desired educational objectives indicates that abnormal rises in the property tax rate might occur, it would be prudent practice to study the potential yield from these other possible tax sources.
- Federal aid under the "aid to education" programs is modified annually. Care should be taken in the projection of these programs as they will undoubtedly affect more than one budget period. Furthermore, local contracts determine the salary paid to employees working within the "grants". If salary increases take place, the business official needs to determine whether or not the monetary amount of the "grants" are sufficient to cover the increased costs. If not, determination needs to be made as to whether or not the grant program needs to be modified to stay within its amount of Federal aid, or whether revenue should be raised in the General Fund budget and transferred to the Special Aid fund to offset the need for additional revenue to support the grant program.
- Investments and investment should be considered and estimates based upon prevailing rates and economic projections.
- The fund balance should be considered as a possible revenue and is discussed in further detail in section IX of this booklet.