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Incremental Budgets

Incremental Budgets. Are they on Target for the Future ?. Londa Cross School Finance and Ethics. How School Budgets Differ from Other Budgets?.

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Incremental Budgets

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  1. Incremental Budgets Are they on Target for the Future ? Londa Cross School Finance and Ethics

  2. How School Budgets Differ from Other Budgets? • While most public and private organizations and businesses have 35 to 40 percent of their budgets tied to personnel and benefits, the comparable number in public schools is, on average, more than double, between 80 and 85 percent. • Further complicating districts’ ability to address budget priorities, the remaining 15 percent of their budgets is oftentimes impacted and limited by state, local and federal mandates related to everything from building codes to class size requirements.

  3. Is Incremental Budgeting the Answer?

  4. The Traditional Approach to Budgeting • Funds are allocated to departments or organizational units. The managers of these units then allocate funds to activities as they see fit. • An incremental budget develops out of the previous budget. Each period's budget begins by using the last period as a reference point or baseline.

  5. Types of Incremental Budgets • Incremental/Fixed- The budget is based on the previous budget cycle: once the percentage change has been established, the budget is set at that level for the next budget cycle. • Incremental/Variable- The budget is based on the previous budget cycle; the percentage allocation will vary depending on the justification of the extra expense.

  6. Advantages of Incremental Budgets • Allows Gradual ChangeIf you value gradual change instead of trying to change everything quickly, this type of budget is ideal. • Simple to ImplementIf you are looking for a budget that is very simple to implement, incremental budgeting might be for you. • Values EqualityAll of your departments to feel like equals. With this budget, everyone gets a minimal increase in budget which eliminates rivalries.

  7. Disadvantages of Incremental Budgets • No incentive for developing new ideas. • No incentive to reduce costs. • Encourages spending up to the budget so that the budget is maintained next year. • The priority for resources may have changed since the budgets were originally set. • There may be budgetary slack built into the budget, which is never reviewed.

  8. Acknowledgement of economic climate at the national, state and local level

  9. A Cliff Hanger: How America’s Public Schools Continue to Feel the Impact of the Economic Downturn” • More than two‐thirds (68 percent) of respondents cut positions in 2009‐10, and 90 percent anticipate having to do so in 2010‐11. • Regardless of the much needed ARRA dollars, which were used to save an average of 20 positions per school, school districts report eliminating, on average, 29 positions over the 2009‐10 and 2010‐11 school years. • One‐third (34 percent) of respondents are considering personnel furloughs in 2010‐11. • The percentage of respondents reducing benefits packages has skyrocketed: 46 percent of respondents will reduce health‐care benefits in 2010‐11. • Twenty percent of respondents will reduce pension contributions in 2010‐11.

  10. A Cliff Hanger: How America’s Public Schools Continue to Feel the Impact of the Economic Downturn” • Increased class size more than doubled to 62 percent for 2010‐11. • The percentage of schools considering reducing operations to a four‐day school week (during the school year) mushroomed to 13 percent in 2010‐11. • (34 percent) of respondents are considering eliminating summer school • More than half (52 percent) of respondents will cut extracurricular activities in 2010‐11 • Strengthening the identification and screening of non‐resident students.

  11. References • American Association of School Administrators, Cliff Hanger: How America’s Public Schools Continue to Feel Document • American Association of School Administrators, School Budgets 101 • Worth a View: Bill Gates (February 2011) Video

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