Budgeting Revenues & Expenditures: Tips and Tools

1. Budgeting Revenues & Expenditures: Tips and Tools May 2010 Presenters: Nikita Johnson and David Bein

2. Topics for Discussion • Purpose of a Budget • Budget Philosophies • Budget Calendar and Assumptions • Budgeting Revenue • Budgeting Expenditures • Reminders • Common Problems

3. Budget Purpose • Satisfies a minimum level of financial/program information for state, local and federal governments • Provides both expending and taxing authority • Meet requirements imposed by Illinois law • Estimate of revenues and expenditures • Provides a tool to measure fiscal performance • Plan to accomplish the financial goals of BOE

4. Budget Philosophies • Business as usual • Add a pre-determined percent increase to previous year • Be very careful • Zero Based • Start from scratch each year • A lot of work • Site Based • Gives authority and responsibility to those making decisions • Possible inequities throughout district • Combination of the above

5. Budget Calendar and Assumptions • Start with assumptions on key budget drivers • State and federal government budget projections • Tax cap, if applicable • Salary increases • CPI increase • New, changed or dropped programs (e.g., RTI) • Staffing • Non-routine expenditures (e.g., textbooks, uniforms) • Technology • Capital projects/expenditures

6. Budget Calendar and Assumptions • Work backward from your due dates to figure out when you need to have key tasks completed. • A typical plan might be: • Final budget in September • Tentative budget 30 days before in August • Near final budget in July, headcount revised • Department budgets due in May • Department budgets distributed in March • Budget plan distributed in January • And just when you think you’ve got it all set, don’t forget that if you’re doing an amended budget it is due by the end of June, with a presentation the month before!

7. Budgeting Local Revenue – 1000 Accts • Property Taxes • Usually the largest source of revenue State-wide • EAV (& new const. in capped districts) must be estimated • Talk to county and township officials for estimates • Talk to clerk regarding actual extensions • Talk to Treasurer for tax distribution dates • CPI • Determine the rate to be used for the Tax Levy • Keep record of historical rates TOOL:ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

8. Budgeting Local Revenue – 1000 Accts • CPPRT • Distribution from Illinois Dept. of Revenue • Offsets GSA for all but Flat Grant Districts • Beware of decreases for next year TOOL:http://www.revenue.state.il.us/LocalGovernment/replacemnt10.htm Interest on Investments • Knowledge of investment practices • Estimates of anticipated cash surpluses and interest rates TOOL:http://www.federalreserve.gov/releases/h15/current/

9. Budgeting Local Revenue – 1000 Accts • Food Service • Tie to enrollment changes • Be aware of any program and/or price changes • Reimbursement rates change annually TOOL: http://www.isbe.net/nutrition/htmls/data.htm • Textbook Rentals and Fees • Need to know collection rates • $1 increase usually does not mean an additional $1 • Rentals • Outside organizations • Ed or O&M fund

10. Budgeting State Revenue – 3000 Accts • General State Aid • Largest state revenue • Watch ADA • Foundation level • Download state form • Compare estimate to prior years’ for reasonableness • Obtain GSA estimator from ISBE • Pay attention to what is happening at the State level regarding reductions TOOL:http://www.isbe.state.il.us/funding/html/gsa.htm

11. Budgeting State Revenue – 3000 Accts • Special Education • Usually second largest source of state funding • Be aware of: • Enrollment • New mandates • Reimbursement levels • State budget and changes to legislation • Talk to Director of your program (in house and/or co-op)

12. Budgeting State Revenue – 3000 Accts • Pupil Transportation • Regular and Special Ed • Understand your district’s relationship between expenditures and percentage of reimbursement • Other • Categorical and Grant Programs • Have a knowledge of when claims and/or disbursements are made • Use FRIS • Be aware of past audit findings • Watch out for Appropriations & Prorations TOOL:http://www.isbe.net/funding/pdf/sped_appro_pro.pdf

13. Budgeting Federal Revenue – 4000 Accts • Difficult to forecast and budget • Review historical trends • Know the program or population being served • Federal Grants are potentially difficult to budget because of the timing of approvals • For FY11 – be mindful of ARRA carryover, if any

14. American Recovery & Reinvestment Act (ARRA) • Formula/Existing Grants • Rules for existing grants generally apply for ARRA funds. • State Fiscal Stablization Funds (SFSF) • Used for some 2009 and 2010 GSA payments. • Competitive Grants • Race to the Top • Title II-D (technology) • Be careful with supplement vs. supplant rules. • New revenue codes are required for tracking revenues and expenditures. TOOL:http://www.isbe.net/rules/archive/pdfs/23IAC100EmergAmnd_Code.pdf

15. Budgeting Expenditures – General knowledge • Review assumptions on key budget drivers, make additional assumptions and collect other expense related information, including: • Current and projected enrollment • Current and projected number of employees • Status of negotiations • Current fiscal year – year to date results • Limitations imposed by revenue projections TIP: Keep a reference list of your assumptions

16. Budgeting Expenditures - Salaries • Largest portion of expenditures • Forecast each employee group separately, knowing • Salary schedules • Employee counts / FTE • Turnover rates • Retirements • Early retirement incentives • Lane change costs

17. Budgeting Expenditures - Salaries • Drives other costs, such as • IMRF fund benefits • Life & long term disability insurance TIP: Avoid using a fixed percentage to save time—salaries are your largest expense and it’s worth the time to analyze in detail. TIP: Review TRS retirees past earnings history to determine whether you may be subject to a penalty. TOOL: http://trs.illinois.gov/subsections/employers/calculators/ExcessSalIncrCalculator.aspx

18. Budgeting Expenditures - Benefits • IMRF fund • Social Security – 6.2% • Medicare – 1.45% • Pension contribution – employer specific • TRS / THIS • .58% / .63% of certified payroll • 9.4% member contribution – how is this paid? • .84% THIS member contribution – how is this paid? TIP: If possible, try not to charge salaries to federal grants (tentative FY11 employer contribution is 25.12%); ARRA SFSF money can be used for salaries without paying the TRS contribution for federally funded salaries. TOOL: http://trs.illinois.gov/subsections/employers/employerservices.htm TOOL: http://www.imrf.org/pubs/er_pubs/booklets/employer_rates.pdf

19. Budgeting Expenditures - Benefits • Health / Dental • Usually fastest increasing portion of budget • Difficult to contain—work with your insurance committee to minimize increases • Life & long term disability • Tuition reimbursement • ERO employer contributions • TRS 6% cap penalties

20. Budgeting Expenditures – Other • Purchased Services, Supplies & Materials, Capital Outlay, Other Objects, Tuition • Variety of methods to project costs • Status quo • Flat increase • Per capita allocation/linked to enrollment • Zero-based/Building/department requests TIP: Spend grant money first

21. Reminders • Justification / Assumption / Rationale should be available to support budget when presented • Be ready to explain large increases / decreases in line items • The budget is an estimate and should not be expected to come out to the penny – but be ready to explain large variances in line items • Up to 10% of the budgeted amounts in each fund can be transferred to other line items in the same fund

22. Reminders • Expending more than the budgeted total requires the adoption of an amended budget • Use account numbers that are consistent and in line with the updated IPAM • Provision for Contingency can be very helpful as many surprises can happen during the year • Do not use this account for recording expenses • Transfer budget dollars to appropriate account TOOL: http://www.isbe.net/finance/htmls/rule_changes.htm

23. Common Problems • Cash flow vs. fund balances • Negative cash/investment balances • Implementation of budgetary controls and monitoring throughout the fiscal year • Student activity accounts

24. Other Useful Links • http://www.isbe.net/finance/default.htm -- ISBE School Finance Page • Budget Forms • Submit Budget • Mechanics of the School District Budget • Annual Financial Reports • FRIS Inquiry • GSA Inquiry • School District Financial Profile • www.iasaedu.org Illinois Association of School Administrators • www.bls.gov Consumer price index and inflation calculator • http://www.tax.illinois.gov/LocalGovernment/RASEST10.pdfCPPRT • http://www.state.il.us/agency/idol/Facts/mw.htm Department of Labor • http://nces.ed.gov/ccd/data_tables.asp IES Education Statistics

25. Questions?