Some folks say school finance is complicated. I’m not so sure. Complex and confusing, yes, but with a little effort and good questions it is understandable.
School finance is a bit like oatmeal. Some people love it, others not so much. It is mushy, unpredictable, sometimes bland and sometimes sweet. There’s little, if any, uniformity and of course it is sticky!
School District 166 spends a lot of money, about six million a year. It needs to spend a lot of money; there is a lot of expense involved in keeping a school running. A family of four making $40,000 a year spends, on average, $10,000 per person. ISD 166 has 500 students and about 80 employees, figuring $10,000 per year is 5.8 million dollars. Thedistrict doesn’t buy clothes, cell phones, and other items, but it does have to pay for electricity, heat, transportation of students, classroom materials, etc.
Similar to the household budget, the district can look at past expenses and predict what expenditures will be for the following year. Expenditures for the 2008-09 school year were within 1% of the budgeted expenditures, suggesting ISD 166 has a good process in place and employees who work hard at keeping within their budgets.
Like the ingredients of oatmeal before they are mixed, expenditures are identifiable. Revenue is added to the mix and things change. Revenue, unlike expenditures, is fluid. It changes from year to year; sometimes a funding category is up, the next year it might be down. The district receives revenue from local, state and federal sources. Recently, the lines between these sources have become blurred as federal stimulus dollars were used to fill the state funding gap and replaced some of the state K-12 education funding. Funding is also tied to enrollment. If the district loses students our funding is reduced, which makes sense, except the savings in expenditures is rarely one-to-one. For example, even if a bus route is down five students, we still need to run the route for the other 40 students. We can’t just eliminate the route to save money.
Predicting revenue is much more challenging than predicting expenditures. It is like guessing how much water to add to the pile of oats without a measuring cup. You don’t want to overestimate your revenue because there is no going back, like when you add too much water to your oatmeal. The district’s revenue estimates are based on the revenue we are confident the district is going to receive. During the 2008-09 school year the district received more than anticipated, which was great. However, ISD 166 cannot rely on this happening every year.
Due to the lack of defined, predictable revenue, ISD 166 is left with the task of building a six million dollar budget on oatmeal which, needless to say, is a bit challenging. How does a district do this? ISD 166 began by passing a well-researched fund balance policy that states the district should have enough in reserve to cover 45 days of expenses. Next the district looked at enrollment projections for the next five years and predicted the funding impact based on enrollment. A balanced budget is created using the revenue projections the district is confident it will receive. Finally, the budget is reviewed as revenue projections change throughout the spring, and a revised budget is adopted in early summer.
Presently, the declining enrollment, state budget forecast and deficit budget of 2009-10 suggest the district will need to make approximately $699,000 in reductions over the next two school years to balance the books and bring the fund balance within the district’s policy range.
Another option is to look for other revenue sources. The district is investigating going to the voters for an operating referendum, philanthropic fundraising and grant opportunities. Increased revenue would decrease the need to reduce expenditures.
I like oatmeal! Maybe that’s why I like being involved in school finance. Right now, things are a bit sticky, but with the right adjustments, some patience and creativity, the district will emerge fiscally stable and in a position to enhance programming. Sweet! Just like a good bowl of oatmeal.
Beth A. Schwarz began as
School District 166 superintendent
July 1, 2009. She will periodically
share ISD166 news
with News-Herald readers.
Leave a Reply