Budget Development Process

  • Developing an operational budget for an organization with nearly 100 programs, schools and departments is a complex process.  This paper will provide an overview of the processes that determine total revenue, school-level budgets, supplemental funds like Title I, community engagement and accountability within the budget development process.  These topics are often asked about at Board of Education meetings, in teacher lounges, and when families choose a school.

     

    The budget process starts with a projection, or best guess, of how many students will enroll in SPPS next fall.  Complex formulas take into account census data like birth rates and historical trends to make a best guess.  Historically, SPPS has been close at these projections; only off by a percent or two each year.  These projections include details such as numbers of students in each of several broad categories, including general education, special education, multi-language learners, grade level and demographic information.

     

    Based on the projection of each type of student, an estimate of total revenue is developed:

    • General Education Funds from the MN Department of Education are based on average daily membership (ADM) or, simply stated, the total number of students in school on any given day.
    • Referendum Funds - the voters of St. Paul allowed extra taxes to support specific programs based on a local property tax levy. Ramsey County provides an annual calculation of this for both the district and the individual taxpayers.
    • Integration Funds - the State of Minnesota provides extra funding to racially isolated schools based on an application submitted to MDE by the district’s Chief Operations Officer.
    • Compensatory Education Funds - provided through MDE based on a formula calculated on the prior school year’s Free and Reduced Price Lunch count.

    These combine with funds for community education, food service, facility maintenance, and investment revenue to create a close estimate of the total revenue available to the district for the coming year. SPPS’ Board of Education policy requires a Fund Balance of at least 5% of the district’s general fund to protect the district from financial risk.[1]

     

    To estimate total expenses, the same enrollment projections are used.

    • Enrollment at each school is projected based on past patterns in enrollment from neighborhoods, from “feeder schools,” birth and census information, state and county demographic projections, and any other data available to finely tune the calculations.
    • Each school is assigned a number of administrators, support staff, teachers, and specialists to provide basic school services that will be purchased with general education funds:
      • Class sizes, negotiated with the teachers union, determine the number of teachers
      • Grade level, school configuration (e.g. K-5, K-8, dual campus) and student needs (IEPs, 504 plans, mobility, etc.) determine the number of administrators, clerks, and other learning supports like librarians and health aides
      • Additional funds for each school are provided for supplies, additional staff, extracurricular activities or anything else discretionary
      • See Allocation Criteria for details

     

    To pay for these expenses, funds are allocated to all schools based on average salaries for the required positions. To ensure each school has equal access to higher-paid staff, and all students are treated equally, staffing is monitored by total positions filled, not dollar amount spent.  This means that no school is forced to hire lower-paid staff to meet budget limitations.

    • Each school receives additional funds based on eligibility criteria:
      • All schools receive some referendum funds depending on programs offered
      • Some schools receive integration funds based on the state-approved plan
      • Some schools receive compensatory aid based on the formula for allocation
        • 10% of the total of compensatory aid is distributed at the discretion of the Superintendent and CFO to minimize dramatic swings of this fund from year to year.
      • Some positions are paid for by a combination of general fund revenue, Special Education, Integration, etc.
      • School maintenance and other operational costs are not included in the school budget. These are allocated at the department/program level.  For example, the school custodian is not paid from the school budget, but from the district-wide custodial budget.
        • School construction, maintenance and remodeling are supported by funds completely separate from education funds. Construction funds cannot legally be used to educate students, and education funds cannot legally be used for facilities.

     

    Community Engagement:

    The CFO leads a Citizens Budget and Finance Advisory Committee, a group of 20 stakeholders including parents, residents, business leaders and one representative each from among district elementary principals, secondary school principals, teachers and support staff.  The committee meets for approximately 20 hours during the budget season (winter and spring) to discuss:

    • how funding comes into the district
    • the rules that govern spending
    • budget processes and best practices
    • information to be transparent with the community
    • input from the community on all financial matters

     

    Supplemental Funding:

    After all basic education needs have been provided for across all schools, additional grant funds are allocated to schools based on the requirements of individual grant programs.  Title I - Part A (Improving Basic Programs Operated by Local Educational Agencies), Title II (Preparing, Training, and Recruiting High Quality Teachers and Principals), Indian Education, English Learners, and other formula and competitive grants are allocated to supplement the district’s basic services to special populations.

     

    Title I follows a federally-approved process to create a list of schools that will receive additional supporting funds to improve academic outcomes through supplemental instruction, parent and family engagement, and building the capacity of staff.

    • Process is overseen by the Director of Title I
    • Currently, schools with 40% or more students eligible for Free or Reduced Price Lunch are eligible to receive Title I funds.
    • Several set-aside funds are required by the federal government before funds are divided among schools
    • Most schools receive school-wide support, others start receiving aid as targeted assistance and then move to school-wide
    • Title I funding also supports other programs for students in St. Paul, but not SPPS students (home school, private school), early learners, homeless students, adjudicated youth, students in foster care, and other at-risk youth. These are all required by the federal rules of Title I and other grants.

     

    Schools who use Title I and other federal funds must adhere to specific procedures as set out in CFR Part 200, Uniform Grant Guidance.  See the Title I handbook for additional information.

     

    Putting it all together:

    No later than Spring Break, school principals receive a worksheet with their fixed costs/FTEs and all the options available to them to pay for those costs.  (See presentation, FY2017-18 Budget Update, Principals’ Meeting 3/18/17.) Principals meet with their leadership teams, assistant superintendents, parent and community groups, and other stakeholders to determine priorities for the coming year and then allocate their budget as best meets their needs and supports the goals for the school’s continuous improvement. 

     

    The CFO presents these school budgets, along with department and program budgets to the school board no later than June 30 for official adoption.  The budget can change periodically during the budget year to allow for re-distribution of unspent funds from the previous year, changes in enrollment, and other situations the CFO determines.  To support administrators, accountants prepare budget projections twice during the year to give an update on how actual expenses compare to budgeted expenses.

     

    Accountability:

    To ensure funds are spent and accounting is done appropriately, SPPS follows Government Accounting Standards and The Uniform Financial Accounting and Reporting System (UFARS) required of Minnesota school districts.  The district also hires an auditing firm each summer to review the previous year’s expenses and compliance with procedures, laws and policies.  The Superintendent and Chief Financial Officer present the results of the audit to the Board of Education, report to the Minnesota Department of Education, and also to the general public on the district’s website.  Every three years, the district seeks bids from qualified auditors to ensure impartiality.

     

    [1]             Fund balance is required to be reported in two components—reserved and unreserved. When fund balance is reserved, it either means that the resources are in a form that cannot be appropriated and spent (such as inventory) or that the resources are legally limited to being used for a particular purpose… Governments may report designations of their unreserved fund balance.... A designation is not legally binding but does convey a government’s plans for using its available resources.

    From GASB Article, “Fund Balance: It may not be what you think it is.” in The User’s Perspective, May 2006.