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

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

3. 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. 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. 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. 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. 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.txtftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt

8. 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/replacemnt1 0.htm http://www.revenue.state.il.us/LocalGovernment/replacemnt1 0.htm Interest on Investments  Knowledge of investment practices  Estimates of anticipated cash surpluses and interest rates TOOL: http://www.federalreserve.gov/releases/h15/current/http://www.federalreserve.gov/releases/h15/current/

9. 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.htmhttp://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. 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.htmhttp://www.isbe.state.il.us/funding/html/gsa.htm

11. 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. 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.pdfhttp://www.isbe.net/funding/pdf/sped_appro_pro.pdf

13. 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. 14 American Recovery & Reinvestment Act (ARRA) Formula/Existing Grants Formula/Existing Grants  Rules for existing grants generally apply for ARRA funds. State Fiscal Stablization Funds (SFSF) State Fiscal Stablization Funds (SFSF)  Used for some 2009 and 2010 GSA payments. Competitive Grants Competitive Grants  Race to the Top  Title II-D (technology) Be careful with supplement vs. supplant rules. Be careful with supplement vs. supplant rules. New revenue codes are required for tracking revenues and expenditures. New revenue codes are required for tracking revenues and expenditures. TOOL: http://www.isbe.net/rules/archive/pdfs/23IAC100EmergAmnd_Code.p df http://www.isbe.net/rules/archive/pdfs/23IAC100EmergAmnd_Code.p df

15. 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. 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. 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/ExcessSalIncrC alculator.aspx http://trs.illinois.gov/subsections/employers/calculators/ExcessSalIncrC alculator.aspx

18. 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.htmhttp://trs.illinois.gov/subsections/employers/employerservices.htm TOOL: http://www.imrf.org/pubs/er_pubs/booklets/employer_rates.pdfhttp://www.imrf.org/pubs/er_pubs/booklets/employer_rates.pdf

19. 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. 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. 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. 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 http://www.isbe.net/finance/htmls/rule_changes.htm

23. 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. 24 Other Useful Links http://www.isbe.net/finance/default.htm -- ISBE School Finance Page http://www.isbe.net/finance/default.htm  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.iasaedu.org www.bls.gov Consumer price index and inflation calculator www.bls.gov http://www.tax.illinois.gov/LocalGovernment/RASEST10.pdf CPPRT http://www.tax.illinois.gov/LocalGovernment/RASEST10.pdf http://www.state.il.us/agency/idol/Facts/mw.htm Department of Labor http://www.state.il.us/agency/idol/Facts/mw.htm http://nces.ed.gov/ccd/data_tables.asp IES Education Statistics http://nces.ed.gov/ccd/data_tables.asp

25. Questions?