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School District Revenues

School District Revenues. SF101A-School Finance - Revenues. Benny L. Gooden. ASBO. July 9, 2012. Reasons for Attendance. ASBO Certification Credit Personal Knowledge Base Revenue portion of Tier 1 initial training Tier 1 annual update or Tier 2 annual training

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School District Revenues

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  1. School District Revenues SF101A-School Finance - Revenues Benny L. Gooden ASBO July 9, 2012

  2. Reasons for Attendance • ASBO Certification Credit • Personal Knowledge Base • Revenue portion of Tier 1 initial training • Tier 1 annual update or Tier 2 annual training • Professional Interaction with Colleagues • To avoid the wrath of the State Board of Education • To add excitement to an otherwise dull life

  3. Plan for the Day • Sources of Revenue • Issues in making projections • Revenue Trends • Related Issues/Legislative Updates etc. • Issues which lead to Trouble

  4. Legal Authority for School District Revenue in Arkansas • Constitution of Arkansas (1874 as Amended) • Article 14 § 1. Free school system § 2. School fund—use –Purposes § 3. School tax—Budget—Approval of tax rate Amendments 11, 40 & 74 § 4. Supervision of schools

  5. Legal Authority…continued • Constitutional Amendments • Amendment 40—Budget publication/restricted use of school funds • Amendment 59—Tax rate rollbacks after reappraisals • Amendment 74—25 mill uniform rate of tax • Amendment 79—Property tax relief

  6. Selected Statutory Guidelines for School District Finance- • Powers & Duties of Board of Directors • Attend meetings of school board. • Determine mission and direction of district. • Adhere to state and federal laws. • Enact, enforce and obey policies. • Employ staff. • Understand and oversee school district finances. • Manage facilities. • Approve curriculum and ensure that it is taught. • Visit district schools and classrooms. • Obtain training and professional development. • Do “all other things necessary and lawful..” § 6-13-620 A.C.A. Revised 2009

  7. (6)Understand and oversee school district finances required by law to ensure alignment with the school district’s academic and facility needs and goals, including without limitation: • (A) Reviewing, adopting and publishing the school district’s budget; • (B) Overseeing and monitoring the school district finances, including: • Revenues • Expenditures • Investments • Debts • Obligations • Inventory • Real Property

  8. (6)Understand and oversee school district finances …… • (C) Borrowing money as necessary, but in no case shall the school board of directors permit the school district to end the fiscal year with a negative legal balance; • (D) Entering into contracts for goods and services necessary to operate the school district; • (E) Buying, selling, renting, and leasing real property and personal property on behalf of the school district; • (F) Receiving, reviewing, and approving each annual financial audit report and presenting it to the public.

  9. Selected Statutory Guidelines…continued • Publication of budget--Amt. 40 § 6-13-622 • Appointment of Treasurer § 6-13-701 • Deposit of School Funds § 6-20-222 • Requirements for financial reporting§ 6-20-2103 & § 6-20-2201 et.seq Records as required by ADE • District debt-current & bond § 6-20-401 § 6-20-801 et.seq. § 6-20-1201 et.seq. • Public School Funding Act § 6-20-2301 et.seq. Penalty

  10. Selected Statutory Guidelines..continued • Board disbursing officer § 6-13-618 • Best Financial Practices § 6-15-2301 • Classified School Employee Minimum Salary Act § 6-17-2203 • Teacher compensation guidelines § 6-17-2104 and § 6-17-2403 • Independent Audit deadlines § 6-20-180 • Training Requirements § 6-20-1805 • Educational Excellence Trust Funds § 6-5-307

  11. Certifications by SuperintendentTwo of many….. 6 pages 8 pages X 9 X 9

  12. State RevenueLocal Revenue Arkansas schools receive more than 90% of resources in these categories.

  13. The Big Question:

  14. Total Revenue How muchTotal Revenue will your school district receive in 2012-2013? What effect does Legislative action or changes in local economic conditions have on resources for the coming year? • ADM increased or decreased • Assessed valuation changed

  15. Guessing is not Preferred • Using systematic techniques to develop reasonable and defensible estimates of school revenue…

  16. Why are accurate projections important? • To provide a stable fiscal environment • To gain the confidence of board of education, staff and community • To verify the revenue calculations of others • To avoid fiscal distress

  17. All Categories of Revenue Must be Considered • Local • State • Federal

  18. Local Revenue

  19. Factors Determining Local Revenue • Assessed Valuation • Tax Rate (Millage) • Collection Rate • Other Local Revenue/Miscellaneous Funds

  20. Assessed Valuation • Real Property Residential Business/Industrial Agricultural/Timber Minerals • Personal Property Business Vehicles/Aircraft Livestock • Utility Property

  21. Abstract of AssessedValuationSource: County Assessor/Clerk

  22. Current Taxes/ 40% 36%Pullback From Abstract of Assessments Source: ADE Website

  23. How Does 40% Pullback work in Arkansas school finance? ASSESSMENT YEAR JAN JAN JAN JAN JAN 60% Current 40% Pullback 40% Pullback 60% Current 40% Pullback 60% Current 60% Current 40% Pullback Ending Soon !!!!! JULY JULY JULY JULY FISCAL YEAR Each FISCAL year contains: Taxes due and payable in that FY (Current Tax) Taxes due and payable in the next FY (40% Pullback)

  24. A 40% Pullback Transition Vocabulary • Revenue receipts: include local taxes actually collected from July 1-June 30 regardless of assessment year. • Deferred: revenues in excess of 40% to which district is entitled for future fiscal year. • Accrued: revenues included in the imputed 40% from the future fiscal year, but not actually received. • Phase-out: Adjustments made to accrued revenues during a period of up to ten (10) years following June 30, 2012. Know status Know status Defined by § 6-20-401

  25. Transition options to end 40% Pullback • Immediate—Absorb either accrual or deferral revenue in the current year budget. Advantage: This makes change in one year. Disadvantage: There will be an apparent increase or decrease in the legal fund balance. • Phase in—Accrual may be reduced by 10% per year, i.e. 36% in 2011-2012, 32% in 2012-2013, etc. Advantage: Effect in one year is minimized. Disadvantage: Accounting can become problematic for a number of years.

  26. Revenue Estimation after the 40% Pullback Concept is eliminated • Look at collection trends from several past years. • Determine tax revenue received as current taxes in the July 1-December 30 period. • Determine tax revenue received as current taxes in the January 1 – June 30 period. • Make estimates based on past history-TRENDS. • Consider changes in assessed valuation in estimating for future fiscal year.

  27. During the 40% Pullback Transition—Remember: • The immediate or gradual transition away from 40% pullback does not result in additional revenue—nor does it result in less revenue. • The effect is only a matter of timing for the recognition of revenues resulting from ad valorem taxes. • This point must be made clear to educators, school board members and the public.

  28. Abstract of Assessment ADE Certification Signature ADE Certification Signature

  29. Assessment Abstract Issues • Signatures by appropriate officials • Accuracy of Data • Amendments during the year If you don’t check it, who will?

  30. Establishing Trend Data • Assessed Valuation-by Category • Collection Rates Current Tax Delinquent Tax Amendment 79-Homestead Credit Excess Commissions 36% 40% Pullback—If Applicable • Interest on taxes held by Collector • Timing of Revenue Receipts • Average Daily Membership (ADM)

  31. Historical Trends in Assessed Valuation Growth in dollars and Percent 5-year averages

  32. Trends are Influenced by A variety of Factors Economy Unusual activity Appraisal Cycles Mistakes

  33. Review Trends in Context • Past History • Environmental Changes • Economic Growth or Decline • Population Changes • Reappraisal Cycles • Legislative Action

  34. Assessed Valuation/Tax Rate • Verify Assessed Valuation as Certified by County Assessor and Clerk to ADE • Verify Tax Rate as Certified by the Quorum Court in accordance with ballot language approved at Annual School Election • Verify millage allocation as approved by voters

  35. Other Property Tax Issues • Mandatory Reappraisals • 3-year vs. 5-year cycle • Limits on annual additions to individual property assessments Amendment 79 • “Frozen” assessments for those 65/over • Amendment 59 rollbacks • 10 % maximum increase from all sources

  36. Review of Assessed Valuation From A Sample District • Year 1 Real $ 94,533,310 Personal $ 36,722,125 Utility$ 6,562,305 Total $ 137,817,740 • Year 2 Real $ 83,400,923 -11,132,387 -11.77% Personal $ 48,638,552 +11,916,427 +32.45% Utility $ 7,092,685 + 530,380 +8.08% Total $ 139,132,160 Increase of $ 1,314,420 +.95%

  37. Property Taxes Include: • Current Taxes * • Amendment 79 Replacement Homestead Credit (* Included in both current taxes and 36% pullback) • 36% Pullback * • Delinquent Taxes • Excess Commissions • Interest on taxes held by Collector Ending Soon Or NOT All these comprise “Net Revenue” All used to calculate 98% factor for Foundation Aid

  38. Collection RateDetermination • Delinquent Taxes • Tax Collector/Treasurer • Excess Commissions • Assessor • Never Collected Total Tax – Deductions = Current Tax & 36% Pullback • Monitor Property Tax Rebate Payments Why is This Important? Ending Soon

  39. Estimating Collection Rate 1.48% Never Collected 3.49% Delinquent .75% Tax Collector/Treasurer 2.10% Excess Commissions 2.0 % Assessor’s Office 90.18% Current Taxes/36% Pullback Includes Homestead Rebate 100% Total NOW Ending Soon Source: Fort Smith Public Schools

  40. Tax Rate Considerations • Timeline for Budget of Expenditures and Proposed Tax Rate Publication • 60 days prior to annual school election • Multiple County Districts • Consolidation/Annexation of Districts Multiple rates in merged districts • ADE Certification of Bonded Debt Payment and Available Mills

  41. Property Tax Timelines July Jan July Jan July Publication Publication Publication Tax Pmt Deadline Tax Pmt Deadline Assessments Assessments Tax Bills Issued Tax Bills Issued School Election School Election Fiscal Year Fiscal Year Fiscal Year Year 1 Year 2

  42. Calculation of Revenue:Checking your estimate • Assessed Valuation X Millage Rate Total Property Tax Revenue X Collection Rate Allocated as: Current Taxes 36% Pullback Amdt. 79-Homestead Credit Plus: Delinquent Taxes Excess Commissions Important: Total must not exceed 100% of collection in any year! Ending Soon

  43. Millage Rates-Schools • 25 mills for maintenance and operation (Amendment 74) • Additional maintenance and operation (Approved by Voters) • Debt Service Mills to pay debt (Approved by Voters) Regular bonds/Mandatory Call bonds • Dedicated Maintenance and operation (Approved by Voters)

  44. Voted Millage vs. Actual Application- A Sample District • Voted Millage • 6.90 Debt Service • 25.00 M & O • N/A Dedicated M & O • 31.90 Total • Actual Application • 6.45 Required Debt • 25.45 M & O Avail. • 25.00 Amdt 74 • N/A Ded/M & O • .45 Excess Debt • 31.90 Total

  45. Property Tax Reminders • 36% Pullback is at 100% Collection • Delinquent tax, Excess Commissions, Fee Office Costs and taxes not collected are taken from Current Tax Estimates • M & O Tax Rate must be 25 mills or higher The BEST estimate is one supported by past collection history! Ending Soon

  46. Other Local Revenue • Payments in lieu of Taxes • Mineral leases, Severance Tax, etc. • Contributions • Interest • Private, Foundation, Corporate Grants • Rentals of district facilities • Fees for tuition, services, etc. • All Activity Funds *Maintained Separately • Vending/beverage contracts

  47. Payments in Lieu of Taxes • Act 9 of 1960 authorized issuance of exempt bonds to finance industrial development. • Cities and Counties must authorize with notification of affected taxing entities. • Payments in lieu of taxes are negotiable. • Payments made by financing recipients are distributed by the County Collector. • Revenues are included as “miscellaneous funds” for the purpose of Foundation Aid calculations.

  48. Miscellaneous FundsDefined by Act 825 of 2007 Clarified by Act 266 of 2011 • Federal forest reserves • Federal grazing rights • Federal mineral rights • Federal impact aid • Federal flood control • Wildlife refuge funds • Severance taxes • Revenue in lieu of taxes • Local sales and use taxes dedicated to Education § 6-20-2303

  49. Miscellaneous Funds included in Foundation Aid calculation • Average of previous five-years • If a district did not receive a category of miscellaneous funds in the previous year, then that category of miscellaneous funds will not be included in the calculation for the next school year. • Payments in lieu of taxes only are counted in proportion of URT to total millage rate. • Calculations are made annually.

  50. Local Revenue Issues to Cause Insomnia—or Worse • Reappraisal of residential property with a decline in value • (Re)determination of the reappraisal cycle • Litigation regarding gas well values/determination of well values • Taxpayer challenges to values • Economic impact of recession • Tax Increment Financing Districts (TIF)

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