1. 2016 NEW CLERKS BUDGET WORKSHOP Denise Williams, Executive Director MT Association of School Business Officials (MASBO) 406-461-3659 or dwilliams@masbo.comdwilliams@masbo.com March 14 (Helena) and March 15 (Lewistown)

2. NEW CLERKS BUDGET WORKSHOP Terminology and Key Concepts General Fund Overview Other Budgeted Funds (chart) Non-budgeted funds (chart) Practice with examples Budget Timeline

3. Terminology and Concepts Why do we use separate funds? to account separately for resources affected by different types of spending restrictions because financial reporting standards require it Fund accounting Each fund has a self-balancing set of accounts (debits = credits) to keep the cash flow, revenues, expenditures and equity segregated from the other funds. It is desirable to have as few funds as legal and sound administrative requirements make possible.

4. Terminology and Concepts 20-9-201, MCA Fund Definitions BUDGETED FUNDS Trustees must adopt a budget to spend money Local property tax levies are a common revenue source NON-BUDGETED FUNDS No budget is needed to spend money Expenditures are limited to cash available in the fund (20-9-210, MCA) No tax revenues Voted Levy – hold an election to obtain voter approval “Permissive” (non-voted) Levy - voter approval not required

5. BUDDGETED FUNDS FUND #FUND NAMEPermissive or Voted Levy? 01GeneralPermissive and voted 02TransportationPermissive 11Bus DepreciationPermissive 13TuitionPermissive 14RetirementPermissive (countywide levy) 17Adult EducationPermissive 19Non-OperatingPermissive 28TechnologyVoted 29FlexibilityVoted, but tied to state funding 50Debt ServiceVoted 61Building ReserveVoted

6. NON-BUDDGETED FUNDS FUND #FUND NAME 12Food Service 15Miscellaneous Programs 18Traffic Education 20Lease Rental Agreement 21Compensated Absences 24Metal Mines Tax Reserve 25State Mining Impact 26Impact Aid 27Litigation Reserve 45Permanent Endowment 60Building 70-72Enterprise 73-79Internal Service 82Interlocal Cooperative 81-85Other Trust Funds

7. Terminology and Concepts “Budget Authority” vs. “Cash” BUDGET AUTHORITY Budget amounts are estimates of what you intend to receive in revenue and what you intend to spend to operate the school for the year. 20-9-133, MCA: Trustees must formally approve (adopt) an expenditure budget in order to spend money during the fiscal year (July 1 – June 30). Total expenditures made (or liabilities incurred) during the year must be within the approved budget. CASH The actual amount of money you have on hand to spend! Consider this: “Not everyone pays their tax bill on time.” (revenue doesn’t come in when you expect it to) “Stuff happens!” (unanticipated events = unanticipated expenditures

8. Terminology and Concepts “Budget Authority” vs. “Cash” - Example BUDGET AUTHORITY Budgeted Revenues State payments$750,000 Facilities use 15,000 Property Taxes 185,000 Total$950,000 Budgeted Expenditures Salaries/Benefits$800,000 Textbooks/supplies 40,000 Facilities maintenance70,000 Insurance 20,000 Field trips/athletics20,000 Total$950,000 CASH Actual Revenues Received State payments$750,000 Facilities use 10,000 Property Taxes 155,000 Total$915,000 Actual Expenditures Salaries/Benefits$750,000 Textbooks/supplies60,000 Facilities maintenance85,000 Insurance20,000 Field trips/athletics15,000 Total$930,000 Cash Balance($15,000)

9. Terminology and Concepts Fund Balance Fund Balance (cash + receivables – payables) Beginning Fund Balance (July 1) + Current Year Receipts - Current Year Expenditures Ending Fund Balance (June 30)

10. Terminology and Concepts Fund Balance - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance (July 1)$ 50,000 + Current Year Receipts$915,000 - Current Year Expenditures$930,000 Ending Fund Balance (June 30)$ 35,000

11. Terminology and Concepts Fund Balance – Budget vs. Actual BUDGETEDACTUAL Beginning Fund Balance$ 50,000 + Revenues950,000915,000 - Expenditures950,000930,000 Ending Fund Balance$ 50,000$ 35,000

12. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” Fund Balance (cash + receivables – payables) Beginning Fund Balance + Current Year Receipts - Current Year Expenditures Ending Fund Balance Return to state (General Fund only) Reappropriate (reduces revenue requirement in next year’s budget) Reserves (keep for cash flow purposes)

13. FundOperating Reserve Limit General (01) Greater of $10,000 or 10% of ensuing year budget (20-9-104, MCA) Transportation (10)20% of ensuing year budget (20-10-144, MCA) Retirement (14)20% of ensuing year budget (20-9-501, MCA) Adult Ed (17)35% of ensuing year budget (20-7-713, MCA) Debt Service (50) Approximate amount of payments due between July 1 and November 30 of second ensuing year (20-9-438, MCA) Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” Reserves - year-end cash balances kept for cash flow

14. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Assume next year’s adopted budget is $1,200,000 Reserves @ 10% = $120,000 (General Fund)

15. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Return to state (General Fund only) Reappropriate (reduces revenue requirement in next year’s budget) $120,000 Reserves (keep for cash flow purposes)

16. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” Fund Balance Reappropriated Ending Fund Balance -Reserves =Fund Balance Reappropriated Used in place of new revenue to fund the ensuing year’s expenditure budget Reappropriation is mandatory after reserves are maximized General Fund reappropriation is limited to 15% of the maximum budget (excess is remitted to the state)

17. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance Reappropriated Ending Fund Balance$150,000 -Reserves 120,000 =Fund Balance Reappropriated $ 30,000

18. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Return to state (General Fund only) $30,000 Reappropriate (reduces revenue requirement in next year’s budget) $120,000 Reserves (keep for cash flow purposes)

19. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Assume next year’s adopted budget is $1,600,000 Reserves @ 10% = $160,000 (General Fund)

20. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Return to state (General Fund only) Reappropriate (reduces revenue requirement in next year’s budget) $150,000 Reserves (keep for cash flow purposes)

21. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance Reappropriated Ending Fund Balance$150,000 -Reserves 150,000 =Fund Balance Reappropriated $ -0-

22. Terminology and Concepts “Fund Balance”, “Reserves” and “Reappropriation” - Example Fund Balance (cash + receivables – payables) Beginning Fund Balance$ 100,000 + Current Year Receipts 1,050,000 - Current Year Expenditures 1,000,000 Ending Fund Balance$ 150,000 Return to state (General Fund only) $ -0- Reappropriate (reduces revenue requirement in next year’s budget) $150,000 Reserves (keep for cash flow purposes)

23. Terminology and Concepts “Fund Balance Reappropriated”

24. Fund balance reappropriated = $ district already has after setting aside reserves, limited to 15% of budget (GF)

25. Terminology and Concepts “Fund Balance Reappropriated” New revenue needed

26. Terminology and Concepts “Fund Balance Reappropriated”

27. GENERAL FUND OVERVIEW General Fund – Expenditure Budget Limits – Funding Sources

28. General Fund - Budget Elements Basic Entitlement Per-ANB Entitlement Special Education Allowable Cost Payment Quality Educator Payment At-Risk Student Payment Indian Education for All Payment American Indian Achievement Gap Pmt Data for Achievement Payment

29. Basic Entitlement Rates EntitlementsFY2015 FY2016 (HB27) FY2017 (HB27) Elementary Basic $ 40,000$ 50,000$50,895 For every 25 Elem ANB over 250 $ 2,000$ 2,500$ 2,545 Middle School Basic $ 80,000$100,000$101,790 For every 45 MS ANB over 450 $ 4,000$ 5,000$ 5,090 High School Basic $290,000$300,000$305,370 For every 80 HS ANB over 800 $ 12,000$ 15,000$ 15,269 *HB27 retained the increase in the basic entitlement rates for FY2016 as provided in SB175 (2013 session) and increased FY2017 by inflation of 1.79%

30. General Fund - ANB FALL ENROLLMENT (1 ST Monday in October) Part-time Students = ¼, ½, or ¾ SPRING ENROLLMENT (1 st Monday in February) Part-time Students = ¼, ½, or ¾ Total of 2 counts divided by 2 180 + PIR Days* 180 = ANB *PIR Days are “pupil instruction related” days for teacher in-service training and recordkeeping AVERAGE NUMBER BELONGING (ANB) X Example: Oct count = 150 Feb count = 166 (150 + 166) 2 = 158 187 180 = 165 ANB X

31. General Fund - ANB Use the ANB that generates the greatest maximum general fund budget : – Current Year ANB (CY ANB) ANB for the budget unit for the ensuing school year (FY2017 ANB is based on FY2016 enrollment counts) – 3-Year Average ANB Add current year ANB to the current ANB for the previous two school fiscal years and divide by 3 (FY2017 ANB is the average of FY2017, FY2016 and FY2015)

32. MY K-12 School – FY2017 FY2015 ANB FY2016 ANB FY2017 ANB 3-Year Avg ANB Elementary156174169167 Middle School 32 29 31 High School 53 55 53 54 The Basic and per-ANB entitlements, Indian Education for All and Data for Achievement components are all calculated using ANB. Using Current Year ANB Using 3-Year Average ANB Elementary/Middle School1,248,744.301,238,211.10 High School656,790.70663,522.60 (CY ANB)

33. Per-ANB Entitlement Rates EntitlementsFY2015 FY2016 (HB27) FY2017 (HB27) *Elementary per-ANB$ 5,226$5,348$ 5,444 *High School per-ANB$ 6,691$ 6,847$ 6,970 *HB27 increased per-ANB entitlements by 2.33% in FY2016 and 1.79% in FY2017, in accordance with SB175 (2013 session) The elementary per-ANB rate is reduced by $.20 for each ANB up to 1,000 ANB ($5,244.20 /ANB over 1,000). The high school per-ANB rate is reduced by $.50 for each ANB up to 800 ANB ($6,570.50/ANB over 800).

34. Special Education Allowable Costs FY2013FY2014**FY2015 HB 2 Appropriation$ 41.6 million $ 42.018 million $ 42.892 million % increase1%2% **HB2 funded FY2016 and FY2017 appropriations at FY2015 level Special Education Allocation 20-9-321(4)(a), MCA: 52.5% through instructional block grants (ISB) 17.5% through related services block grants (RSBG) 25% to reimbursement of local districts (disproportionate costs) 5% to special education cooperatives and joint boards for admin and travel

35. Funding Components Quality Educator (QEC) – OPI pays to school districts and special education cooperatives – Paid for each full-time equivalent (FTE) licensed educator and for other licensed professionals employed by the district or cooperative At-Risk Student (ARC) – Annual appropriation is distributed school districts based on Title I allocations

36. Funding Components (continued) Indian Education for All (IEA) – Paid per ANB ($100 minimum) – For providing curriculum for the recognition of American Indian cultural heritage American Indian Student Achievement Gap (SAG) – Paid per each American Indian student enrolled as reported on the October enrollment count – For closing the educational achievement gap that exists between American Indian students and non-Indian students Data for Achievement (D4A) – Paid per ANB – For access fees or other costs for statewide data system, including data entry and staff training

37. Funding Components FY2015FY2016 (HB27) FY2017 (HB27) Quality Educator$3,042$3,113$3,169 At-Risk Student$5,149,426$5,269,408$5,363,730 Indian Education for All (per ANB) $20.40 ($100 min.) $20.88 ($100 min.) $21.25 ($100 min.) Am Indian Student Achievement Gap $200$205$209 Data for Achievement (per ANB) $15$20$20.36 *HB27 increased these payments by 2.33% in FY2016 and 1.79% in FY2017, in accordance with SB175 (2013 session)

38. General Fund Budget Limits BASE BudgetMaximum Budget Basic Entitlement80%100% Per-ANB Entitlement80%100% Special Ed Allowable Cost Payment140%175 – 200% Quality Educator Payment100% At-Risk Student Payment100% Indian Education for All Payment100% Amer. Indian Achievement Gap Pymnt100% Data For Achievement Payment100%

39. BASE Budget ~80% General Fund Budget Limits Trustees must adopt a budget that is at least equal to the BASE Budget. Item 9b on your budget data sheet from OPI Minimum Budget Allowed

40. BASE Budget ~80% General Fund Budget Limits Highest Budget Allowed Districts may adopt a budget that is the higher of:  Current Year Maximum, -OR-  Prior Year adopted budget plus any increases in the Basic and per-ANB entitlements and any increases in the Quality Educator, At-Risk, Indian Education for All, Student Achievement Gap and Data for Achievement payments Item 9e on budget data sheet from OPI “Highest Budget with a Vote” Highest Budget Allowed Over-BASE Budget (funded w/ local property taxes)

41. BASE Budget ~80% General Fund Budget Limits Without seeking additional voter approval, trustees may adopt a General Fund budget that equals their current year BASE budget plus highest over-BASE levy approved by voters or levied in past five years. Item 9d on data sheet from OPI “Highest Budget Without a Vote” Highest Budget Allowed Permissive Over-BASE Budget Highest Budget allowed without having to ask voters to approve an additional local levy Voted levy

42. Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components Guaranteed Tax Base Aid (GTB) Guaranteed Tax Base Aid (GTB) BASE Levy BASE Levy Revenues from State Local Revenues Adopted Budget BASE Budget GTB Budget Area Funding the BASE Budget

43. State funding for: – Direct State Aid 44.7% of the Basic Entitlement 44.7% of the per-ANB Entitlement – Special Education Allowable Costs (140%) – Funding Components (100%) Quality Educator At-Risk Student Indian Education for All American Indian Achievement Gap Data for Achievement Payment schedule: 10% in Aug–Oct and Dec–Apr; 20% in June

44. Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components Guaranteed Tax Base Aid (GTB) Guaranteed Tax Base Aid (GTB) BASE Levy BASE Levy Adopted Budget BASE Budget Funding the BASE Budget Direct State Aid (DSA) (44.7% Basic & per-ANB) 100% QEC100% ARC 100% IEA100% SAG 100% D4A140% SPED

45. Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components Guaranteed Tax Base Aid (GTB) Guaranteed Tax Base Aid (GTB) BASE Levy BASE Levy Adopted Budget BASE Budget GTB Budget Area: 35.3% Basic Entitlement + 35.3% Per-ANB Entitlement + 40% SPED Payment Funded with local permissive (non-voted) levy, other non- levy revenue and state GTB aid, if a district is eligible Funding the BASE Budget

46. Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components GTB BASE Levy BASE Levy Adopted Budget BASE Budget Funding the BASE Budget Revenue that reduces BASE levy requirement FB Reappropriated Oil and gas revenue School Block Grant Local revenue required to be anticipated Other non-levy revenue K-12 Funding Payment ($8.1 million distributed based on DSA) FB Reappropriated Oil and gas revenue School Block Grant Local revenue required to be anticipated Other non-levy revenue K-12 Funding Payment ($8.1 million distributed based on DSA) FY2015

47. Funding the BASE Budget State Guaranteed Tax Base Aid (GTB) State subsidy for BASE mills Eligibility is based on the ratio between the district’s taxable value and the district’s GTB Budget Area as compared to the statewide taxable value X 193% and the GTB Budget Areas of all districts statewide. Districts with a ratio lower than the statewide ratio qualify for GTB aid OPI pays General Fund GTB to districts in November and May

48. Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components GTB BASE Levy BASE Levy Adopted Budget BASE Budget Funding the BASE Budget Revenue that reduces BASE levy requirement Guaranteed Tax Base Aid (GTB) Subsidizes the BASE Levy Requirement

49. Funded with voter approved levies and non-levy revenue Over-BASE Levy DSA/SPED/ 5 Funding Components DSA/SPED/ 5 Funding Components Guaranteed Tax Base Aid (GTB) Guaranteed Tax Base Aid (GTB) BASE Levy BASE Levy Revenues from State Local Revenues Adopted Budget BASE Budget Funding the over-BASE Budget

50. Example #1 – Building Project funded with bond proceeds A school district holds a bond election seeking voter approval for the issuance and sale of bonds to build a new school. The voters approve the ballot. Identify the fund(s) used in the following transactions: 1.Bonds are sold and district receives proceeds. 2.Construction of building begins; first in-progress bill is received and the district pays it. 3.District adopts a budget for annual repayment of bond principal and interest and levies mills. Property taxes are assessed and the 1 st half tax payments are received in November. 4.District receives another in-progress bill and pays it. 5.First principal and interest payment on bonds is due and paid.

51. Example #2 – General operating expenses A district uses both General Fund and Impact Aid Fund money to pay expenditures related to the general operations of the district that are not accounted for in a special fund. The district uses the General Fund for staff salaries and benefits and the Impact Aid Fund for all other general operating expenditures. Identify the fund(s) used in the following transactions: 1.District receives 1 st half property tax payments resulting from tax levies assessed for its General Fund. 2.District receives 85% of its Impact Aid payment from the federal government. 3.District receives and pays its monthly utility bill. 4.District issues December paychecks to its employees. 5.District files its TRS report and pays the amount owed for December TRS contributions: TRS contributions withheld from employee paychecks Employer’s share of TRS contributions

52. School Finance and Budgeting Essential element in school operations Complex in nature Driven by laws, regulations, policies Requires special knowledge, skills and abilities Affects everyone SCHOOL BUDGET TIMELINE

53. Joint Leadership – Define, understand and agree on the various roles Effective Roles - Board of Trustees - Superintendent - Business Manager - Community SCHOOL BUDGET TIMELINE

54. Montana Code Annotated – 20-3-324 Powers and duties (government of the school) – 20-9-213 Duties (financial administration) Effective Roles – Knowledge – Policies – Communication – Employ effective leaders Board of Trustees

55. Montana Code Annotated – 20-4-402 (district superintendent) – 20-3-205 (county superintendent) Effective Roles – Knowledge – Implement and administer policies – Supervision and evaluation – Communication Superintendent

56. Montana Code Annotated – 20-3-325 (clerk of the district) – Title 20, chapter 9 (finance) and chapter 20 (school elections) – Portions of Title 2 (state employees), Title 13 (elections) and Title 15 (taxation) Effective Roles – Knowledge – Implement and administer – Financial reports – Communication Clerk/Business Manager

57. Montana Code Annotated Effective Roles – Knowledge – Communication – Elect effective trustees – Financial support Community

58. County Superintendent County Treasurer State Agencies – Office of Public Instruction (OPI) – Department of Revenue county level state level Other Key Roles

59. QUESTIONS? Contact information: Denise Williams Montana Association of School Business Officials (MASBO) 900 North Montana Avenue, Suite A5 Helena, MT 59601 (406) 461-3659 dwilliams@masbo.com