Revenue CASBO Training

Revenue vs. Expenditure Which do you prefer? Which do you need to manage the closest? Should you be conservative or liberal in how you budget? Budget revenue low, expenditures high.

FUNDS A fund is “a sum of money or other resources whose principal or interest is set apart for a specific objective.” The districts in the State of Arkansas use what is called the “fund method” of accounting. These funds have revenue and expenditures.

FUNDS 1000 – Teacher Salary Fund 2000 – Operating Fund 3000 – Building Fund 4000 – Debt Service Fund 5000 – Capital Outlay Fund 6000 – Federal Funds 7000 – Activity Funds 8000 – Food Service Fund 9000 – Fixed Assets

Revenue In business, revenue is the amount of money that a company actually receives from its activities, mostly from sales of products and/or services to customers Schools do not generally create income Most of our revenue comes from taxes.

REVENUE Four major categories of revenue: State Local Property Taxes Federal Grants Other There are specific codes we must use for accounting for revenue that we receive. They are found in the Handbook 2R 2.

Types of Revenue Taxes, income, fiduciary money, bond money Taxes – tax collection and state aid Income – sale of goods or services Activity accounts Cafeteria Fiduciary funds – money held in trust for a specific purpose Grants Bond money – the proceeds from the sale of bonds for the financing of a construction project, etc.

Types of Taxes Progressive a tax that charges a higher percentage of income as income rises Proportional a tax that charges the same percentage of income, regardless of the size of income Regressive a tax such as a sales tax that applies equally to every purchaser but which results in taking a larger percentage of income from a low-income person than from a high-income person

Property Tax History Property taxes have been around for centuries Established as a way to tax the wealthy property owners Taxes based on ownership of property were used in ancient times. The modern tax has roots in feudal obligations owed to British and European kings or landlords.

Property Tax Millage Appraised value vs. Assessed value Appraised value is the fair market value of your property as assigned by the County Assessor’s Office Appraised value x 20% = Assessed value Assessed value x millage rate = taxes due and payable All of this is calculated by the County Assessor If a tax payer disagrees with the value assigned to their property by the assessor’s office, they may contest the assessor’s decision with the County Board of Equalization

Calculating Property Taxes Assume a house with an appraised value of $100,000 in a school district with a millage rate of 30 mills. The assessed value is $20,000 (20%) $20,000 x.030 =$600 due in property taxes Does not include additional property taxes assessed by the city or county.

Calculating Property Taxes (con’t) All homeowners may apply for a homestead tax credit equaling $350 – only applies one time per household Those homeowners who are over 65 may have their property taxes on their homestead frozen and are not affected by future assessments. They would be affected by future millage increases and any improvements they might have made on the property (pool, additional garage).

Personal Property Vehicles, motorcycles, four wheelers Boats, ski boats Farm equipment Mobile homes, trailers

Utilities Taxes are assessed on utility company assets such as: Nuclear reactor Coal fire generating plants Telephone poles Length of cables Cell phone towers Assessment is set by the PSC – “Public Service Commission”

Property Tax URT – Uniform Rate of Tax Maintenance & Operation – 25 mills Amendment 74 Additional M&O Mills may be assessed by the district if voted on and approved by the patrons Additional Mills Debt Service Mills Excess Debt Mills Dedicated Mills Capital Outlay Mills

Property Tax (con’t) Fiscal year vs. Calendar year Fiscal year for state entities is July 1 – June 30 Property taxes are collected in a calendar year Tax collector’s books are opened on March 1 Taxes are paid annually – due and payable on October 10 of each year Paid one year in arrears in 2013, you will pay taxes that are due for the 2012 calendar year

Property Tax (con’t) Abstract of Assessment Real Property Personal Property Utilities Total Assessed value City, County, Library, Fire, voluntary, etc. Property Taxes

Calculating Revenue from District Property Taxes Total Assessed Value = $100,000,000 Millage = 35 mills (25 URT + 10 debt) $100,000,000 x.035 = $3,500,000 A district never collects 100% of what is due and payable during the year it is due.

What happens if you don’t pay? 2012 – taxes are assessed 2013 – taxes are due and payable by 10/ – unpaid taxes are considered delinquent. If not paid by July 1, the delinquent taxes are transmitted to the Land Commissioner for the sale of the property 2015 – Land Commissioner will attempt to collect delinquent taxes 2016 – Land Commissioner will continue to attempt to collect delinquent taxes 2017 – Land Commissioner will sell property by bids for the purpose of payment of taxes.

Property Tax Current Property Tax Property Tax Relief/Sales Tax 40% Pullback***** ????? Delinquent Property Taxes Excess Commission Land Redemption

Commission A portion of the proceeds from property taxes is withheld by the Treasurer and is divided as follows: 3% to Assessor’s Office 2% to Collector’s Office ¼% to Treasurer’s Office

Collection Process at the County Level The Assessor assesses and then hands off the final numbers to the Collector The Collector turns in a report to the County Clerk, collects the tax, and then gives the money to the County Treasurer The County Clerk certifies the numbers and submits a report to the Treasurer The County Treasurer cuts a check to the taxing entity.

Budgeting Property Taxes Abstract of Assessment is not finalized until November. A school’s budget is due no later than September 15. How do you know how much to budget in property taxes? Review collection rate for last several years NEVER assume 100% collection “98% Revenue”.

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 or other contracts

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.

Miscellaneous Funds Defined 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

State Taxes Where does the revenue produced at the state level come from? Income Tax Sales Tax Corporate Tax Fees & Permits

State Budget What amount of the state budget is dedicated to

State Aid – FY14 & FY15 Foundation Funding ($6,393/$6,521) {$6,267} Based on previous year’s 3 qtr. ADM Student Growth Funding (same as Foundation Funding) Isolated Funding (varies) Bonded Debt Assistance (varies) General Facilities Funding (varies)

State Aid – FY14 & FY15 Categorical Funds (Adequacy) Professional Development ($53/$54) {$52} Alternative Learning Funding ($4,305/$4,383) {$4,228} English Language Learner ($311/$317) {$305) National School Lunch Act <70%($517/??) 70-89% ($1,033/$??) 90%+ ($1,549/$??)

Calculating State Aid Printout

$128,879,798 (total assessed value) x.025 (URT) x 98% + 5 Yr. ave. Miscellaneous ($5,118) ÷ 1, (PY 3 qtr. ADM) = $2, Local Revenue per student $6,267 - $2, = Foundation Funding amount of $3, Calculating State Aid – Dewitt ( )

Categorical Funds ( ) Professional Development: PY 3 qtr. ADM x $43.39 = $56,148 ALE Funding: $4228 x qualifying ADM of students enrolled in a qualifying ALE program the previous year (10.68). ELL Funding: $305 x qualifying number of students enrolled on October 1 of current year NSLA Funding: $517/$1,033/$1,549 x number of students reported as free/reduced in Cycle 2 of the previous year.

Categorical Funds Must be included in the district’s ACSIP Plan Must be placed in special funds so that revenue and expenditure may be tracked more accurately Must be used for its intended purpose May be transferred between categories

Funds Restricted vs. Non-Restricted

Bond Proceeds Used for Capital Projects Funds are borrowed through fiscal agencies and then returned with interest to the holder of the bonds Supported through millage Taxable vs. Non-Taxable

Bond Proceeds Like your personal banker, you can only borrow what the bond holder believes you can pay back Bond holders will base their projections on numbers other than your actual budget You will be able to borrow more money than you can actually afford to pay back.

Bond Proceeds How does the local property wealth of a district affect your ability to borrow? What about proceeds from a district with Low millage, low property value? Low millage, high property value? High millage, low property value? High millage, high property value?

Bond Proceeds Used For: Construction Renovation Equipping Architectural Fees Land Other legal purchases.

? Should you issue bonds for the purchase of computers?

Federal Programs Title I – Improving Achievement of Disadvantaged Children Title II IIA – Improving Teacher Quality Title III LEP Migrant Title VI VIB – Special Ed

Federal Programs Block Grants distributed from the Federal level to the SEA and then by the ADE to the LEA Federal Programs Coordinator is key Must be a part of the ACSIP Plan May transfer between funds on a limited basis

Federal Programs How is your district using these funds? Title I – Improving Achievement of Disadvantaged Children Title II IIA – Improving Teacher Quality Title III Title VIB

Federal Programs Title I – Improving Achievement of Disadvantaged Children Meeting the educational needs of low-achieving children in high poverty schools, LEP, Migrant, disabled, Indian, neglected or delinquent, those in need of reading assistance Teachers Instructional Assistants Professional Development Parental Involvement

Federal Programs Title II IIA – Improving Teacher Quality Class size reduction Recruiting/retaining highly qualified teachers Increased opportunities to teach for minorities, those with disability, and other under-represented categories Mentoring teachers Training on disaggregation of data

Federal Programs  Title III LEP Migrant Salaries for ESL-skilled instructional services ESL course work Release time Materials Counseling services Assessment activities

Federal Programs Title VI REAP Rural Educational Agency Program VIB – Special Ed Special Education Services Supplies Adaptive equipment School Bus used for transporting students with special needs

Federal Programs Maintenance of Effort Supplanting Fully Funding VIB Fully Funding ESEA/NCLB

Activity Funds Revenue from?

Fiduciary Funds Scholarships Foundations 501(c)3 ???

Grants You may only use the proceeds from a grant for the purpose for which it was granted. Be aggressive about seeking grants – every little bit helps.

Food Service - Revenue Sales NSLA (free/reduced program) * Don’t confuse this with the state’s Categorical Funds!

Food Service - Expenses Food commodities Equipment Personnel Professional Development

Food Service How to qualify for Free/Reduced Meals Income Eligibility Guidelines What income must a family of four receive in order to qualify for free meals? Reduced meals?

Income Eligibility Guidelines Below are the Department's annual adjustments to the Income Eligibility Guidelines, to be used in determining eligibility for free and reduced price meals or free milk. These guidelines are used by schools, institutions, and facilities participating in the National School Lunch Program (and Commodity School Program), School Breakfast Program, Special Milk Program for Children, Child and Adult Care Food Program and Summer Food Service Program. The annual adjustments are required by section 9 of the National School Lunch Act. The guidelines are intended to direct benefits to those children most in need and are revised annually to account for changes in the Consumer Price Index. They are effective from July 1 through June 30 every year.