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SchoolBudgets101Anylocalgovernmentoragencyincludingpublicschoolsusesitsbudgettodescribeitsprogramplansfortheupcomingyear.Thisbriefwrittentohelpexpandfamiliaritywithandunderstandingofschoolbudgetsandtheroleofvariouslevelsofgovernmentisabirdseyeviewofschoolbudgetsandanswersthefollowingquestions:

Whoisinvolvedintheschoolbudget? Whatistheroleandpurposeoftheschoolbudget? Whatarethemajorbudgetcategoriesforschooldistricts? Wheredotheresourcesforschoolbudgetscomefrom? Whenareschoolbudgetsspent? Howisthisinformationrelatedtothecurrentfederalbudgetproposalandeconomicrealitiesatthe

locallevel?Thecontentandinformationpresentedhereisageneraloverviewofschoolbudgets.Assuch,specificswillvarybetweenbothstatesanddistricts.Asyouworkthroughtherestofthiswhitepaper,keepinmindthatatanygiventime,schooldistrictsarelikelymanagingthreebudgets:finishingaudits/evaluationsandfinaldetailsofthepreviousbudget,operatingandmonitoringthecurrentbudget,andplanningforthenextbudget.Overview:Whiletheconceptofbudgetsiscommonacrossprofessionalsectorsandfields,thebudgetprocessinpublicschoolshasnoticeabledifferencesthatimpacthowdistrictsallocateandprioritizetheirfunds.Forexample,whilemostpublicandprivateorganizationsandbusinesseshave35to40percentoftheirbudgetstiedtopersonnelandbenefits,thecomparablenumberinpublicschoolsis,onaverage,morethandouble,between80and85percent.Furthercomplicatingdistrictsabilitytoaddressbudgetpriorities,theremaining15percentoftheirbudgetsisoftentimesimpactedandlimitedbystate,localandfederalmandatesrelatedtoeverythingfrombuildingcodestoclasssizerequirements.Theschoolbudgetinvolvesmanydifferentindividualsandentitiesacrossseverallevelsofgovernment.Thebudgetandaccompanyingprocessprovidesschooldistrictsandtheirleaderswithanopportunitytojustifythecollectionandexpenditureofpublicfunds.Schoolbudgetresourcescomefromacombinationoflocal,stateandfederalcontributions.The200607schoolyearisthemostrecentyearforwhichwehaveafulltabulationoftheeducationfundingcontributionssplitbetweenlocalgovernment(43.9percent),stategovernment(47.6percent)andfederalgovernment(8.5percent).Schoolbudgetsarespentcontinuouslythroughouttheyear.Federaldollarsinschoolbudgetsarealsospentthroughouttheschoolyear,withtheruleoffirstin,firstout.Thatis,moneyisspentintheorderthatitisreceived:AschooldistrictcannotspendanyofitsTitleIfundsforthe201112schoolyearuntilitexhaustsits201011schoolyear.

PreparedbyNoelleEllerson,PolicyAnalyst,AmericanAssociationofSchoolAdministrators,nellerson@aasa.org

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AASAapplaudstheObamaAdministrationscontinuedsupportforandinvestmentineducationwithinPresidentObamas2011budgetproposal.Theemphasisonimprovingteachingandstrengtheningteachersandschoolleadersisanimportantsteptowardlongtermpositivechangeinourschools.AASAalsoapplaudsthesignificantincreaseinfundingforESEA.Thatsaid,AASAisconcernedwiththelevelfundingofbothTitleIandIDEAforFY11,alongwithasignificantincreaseintheproportionofdiscretionaryeducationdollarsdeemedcompetitive.Whoisinvolvedintheschoolbudget?Theschoolbudgetinvolvesmanydifferentindividualsandentitiesacrossseverallevelsofgovernment.Atthelocal/districtlevel,budgetdiscussionsandworkwillinvolveschooladministrators,schoolboards,schoolemployeesandcommunitymembers.Atthestatelevel,thegovernor,statelegislatorsandstateeducationagencyareinvolvedfortheirroleinsettingandmanagingstatefundingandstatepolicy,includingstateequalizationformulas.Atthenationallevel,thefederaleducationdepartmentandmembersofCongressareinvolvedfortheirworkaroundeducationfundingandfederalpolicy,suchasTitleIorIDEA.Whatistheroleandpurposeoftheschoolbudget?Theschoolbudgetandaccompanyingprocessprovidesschooldistrictsandtheirleaderswithanopportunitytojustifythecollectionandexpenditureofpublicfunds.Initsmostsimpledefinition,aschoolbudgetdescribesadistrictsplanfortheupcomingyearasrelatedtoanticipatedrevenuesandexpenditures.Schoolbudgetsallowdistrictstotranslatesometimesintangiblemissions,operationsandobjectivesintorealitybyoutliningandprovidingspecificprogramsandfunding/financialterms.Aschoolbudgethelpsbridgethegapthatcanexistbetweenadistrictsstatedgoalsandresourceallocation.Thebudgetprocessforcesthediscussionthatwillinformchoicesamongvariousprogramscompetingforthelimitedavailableresources.AsWilliamHartmanwrites,keystepsoftheschoolbudgetprocessinclude,establishingthedistrictsobjectivesandpriorities;allocatingresources;involvingthepublicthroughbudgethearings,schoolboarddecisionsandothermeansofrepresentativedemocracy;and,insomestates,conductingbudgetelections.(Hartman,1999).Whatarethemajorbudgetcategoriesforschooldistricts?Whilespecificbudgetlinesanditemsvarydistricttodistrictandstatetostate,therearebroadgeneralcategoriesthatapplytomostschools.Thesecategoriesinclude,butarenotlimitedto:

Transportationbusesanddriverstotransportstudents Facilitiestoensurestudentsattendschoolsthatarecleanandwellmaintained Energytheschoolislitduringtheday,heatedinthewinterandcooledinthesummer HealthandSafetytheschoolnursecaresfortheillstudent,andsecuritymeasureskeepstaffand

studentssafe Instructionstudentshaveaqualifiedteacher,teachershaveinstructionalaides,andclassroomshave

supplies CurriculumandStaffDevelopmentcurriculum,trainingandinstructionalsupporttoensureteachersare

abletoprovidestudentswithnecessaryknowledgeandskills FoodServicesnutritious,affordablebreakfastandlunch LibraryServicesthelibraryandlibrarian/staffprovideresearchassistanceandresources CounselingServicescounselorsfortestingprep,collegeprep,drug/alcoholabuseprograms,and

supportingfamilyneedsinseekingoutsidecounseling SchoolLeadershipandSupportprincipal,assistantprincipalsandadministrativesupportstaff

(Source:RoundRockISD)

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Graphs9and10inAppendixAillustratethepercentagedistributionforcurrentexpendituresforpublicelementaryandsecondaryeducation,byfunction,forthe200607schoolyear.Graph9showsthat61percentofbudgetaryexpensesarerelatedtoinstruction,followedby35percentforsupportservices,4percentforfoodservices,andlessthan1percentforenterpriseoperations.Tryingtoinfersalariesfromgraph9istricky,becausesalariesandbenefitswillbereflectedacrossthecategories,appearingininstruction,supportservicesandenterpriseoperations.Generallyspeaking,aschooldistrictspendsbetween80and85percentofitsentirebudgetonsalariesandbenefits,meaningonly15to20percentremainstoaddressalloftherestofthebudgetsprioritiesandneeds.Graph10examinesthebreakdownofinstructionandinstructionrelatedexpenditures.Salariesaccountfor67percentofthebudget,followedby22percentforemployeebenefits,meaningthatschooldistrictshavespentcloseto90percentoftheirinstructionalbudgetonstaffandbenefits.Instructionalsuppliesandpurchasedserviceseachconsume5percentofinstructionrelatedexpenses,followedbytuitiontooutofstateandprivateschools(justover1percent)andother(lessthan1percent).Wheredotheresourcesforschoolbudgetscomefrom?Schoolbudgetresourcescomefromacombinationoflocal,stateandfederalcontributions.The200607schoolyearisthemostrecentyearforwhichwehaveafulltabulationoftheeducationfundingcontributionssplitbetweenlocalstateandfederalgovernment.Chart4inAppendixAillustratesthatlocalandintermediategovernmentsmakeasignificantcontribution(43.9percent),slightlyoutpacedbystategovernment(47.6percent)andwellabovethefederalcontribution(8.5percent).Whenitcomestoprocessingthevarioussources,districtsusuallykeeptheirstateandlocalfundsseparatefromfederalfunds.Federalfunds(especiallygrants,competitivedollars,andthosedollarsoutsideoflongtermfundingcommitments)representbudgetuncertainty.Sincethemajorityofschooldistrictshavetopassabalancedbudgeteveryyear,schooldistrictshesitatetoassumeorrelyonfederaldollarsthatmayormaynotcomeintofruition.Threefederalfundingstreamsareanexceptiontothisruleandrepresentfederalfundingprogramsaroundwhichschooldistrictsdofeelcomfortableplanninglongterm.TheseprogramsareTitleI,IDEAandPerkins.Thesethreeprogramshaveextensivefundingcommitmentsandexpendituresatthelocallevel,especiallyrelatedtopersonnel,programsandequipment.Changestothereliabilityoftheseprogramswoulddisruptschoolbudgetinginveryprofoundways,withjobsandcriticalequipmentatstake.Anotherreasondistrictsseparatefederalfundsfromstateandlocalfundsisthatfederalfundsoftencomewithadditionalreportingandaccountabilityrequirements.Assuch,schooldistrictstreatfederalfundsseparately,foreaseofmonitoringandtrackingfederaldollarswithincomplexdistrictbudgets.Whenareschoolbudgetsspent?Schoolbudgetsarespentcontinuouslythroughouttheyear.Schooldistrictshavemuchdiscretionoverstateandlocaldollars,andwilldrawdownonthoseaccountbalancesasneededandinaccordancewithstate/localregulations.Federaldollarsinschoolbudgetsarealsospentthroughouttheschoolyear,withtheruleoffirstin,firstout.Thatis,moneyisspentintheorderthatitisreceived:AschooldistrictcannotspendanyofitsTitleIfundsforthe201112schoolyearuntilitexhaustsits201011schoolyear.Justasimportantaswhenschoolbudgetsarespentishowtheyarespent.Statesanddistrictshave27monthsknownastheTydingsperiodtospenddowntheirfederaldollars.Thatis,mostfederalprogramsappropriatedbyCongressincludeacarryoverperiodprovision.TheTydingsAmendment(Section421(b)oftheGeneralEducationProvisionsAct(GEPA))statesthatanyfundsthatarenotobligatedorexpandedattheendoftheperiodforwhichtheywereappropriatedremainavailableforthefull27monthperiodofobligation.(Source:TexasEducationAgency)

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Anotherpointtoconsiderishowthespendingofformuladollarsdiffersfromthatofcompetitivegrantdollars.Formulagrants,representingamorereliablestreamoffunding,arespentinaconsistent,regularmanner,withanunderstanding/expectationthatthedollarswillbethereyearin,yearout.Thesamecannotbesaidforcompetitivegrants,whichbytheirverynaturerepresentbudgetuncertaintyastonotonlywhatgrantdollarswillbecomingin,butalsowhentheywillbecomeavailableandhowmanytherewillbe.Formuladollarscanbewhatwecallforwardfunded.Forwardfundingisaprovisionofbudgetauthoritythatbecomesavailableforobligationinthelastquarterofthefiscalyearandremainsavailableduringthefollowingfiscalyear.Thatis,ifadistricthasyettoexpendthefullamountofitsTitleIdollarsinthelastquarterofthefiscalyear,thatbalanceiscarriedovernoterasedandremainsavailableforthenextfiscal(andschool)year.Thisiswherethefirstin,firstoutrulewouldapply.Forwardfundingistypicallynotavailableforcompetitivegrantprograms.Assuch,schooldistrictstreatandspendthesedollarsdifferently.Grantprogramsarefundedonafederalfiscalyear.BecausethegrantdollarsaretypicallyneitherforwardedfundednorsubjecttotheTydingsperiod,schooldistrictswillspendconservativelyoverthefirstsixmonthssoastoensuretheyarenotleftwithoutfundsinthesecondhalfofthegrantyear.Asaresult,schooldistrictsoftenfindasurplusofgrantmoniestheyneedtodumpattheendoftheyear,sincethemoneycannotbecarriedover.Thisisneithereffectivenorefficientspending.Funnelingthesesamedollarsthroughmorebudgetreliableformulas(suchasTitleI)wouldallowmoreresponsible,effectivespendingandinvestment.Howisthisinformationrelatedtothecurrentfederalbudgetproposalandeconomicrealitiesatthelocallevel?Thisbudgetprimer,alongwithAASAsongoingsurveyseriesontheimpactoftheeconomicdownturnonpublicschools,providesarich,informativecontextinwhichCongressandtheadministrationcanworktomakeappropriationandauthorizationpolicydecisionsthatprovideschoolswiththebudgetarystabilitytheyneedtocarryoutthelongterminnovationandreformthatCongressandtheadministrationarestrivingforandschooladministratorsworkhardtoprovide.AASAapplaudstheadministrationscontinuedsupportforandinvestmentineducationwithinPresidentObamas2011budgetproposal.Theemphasisonimprovingteachingandstrengtheningteachersandschoolleadersisanimportantsteptowardlongtermpositivechangeinourschools.AASAalsoapplaudsthesignificantincreaseinfundingforESEA.Competitivevs.Formula:Thepresidentsbudgetproposalincludesa65percentincreaseintheproportionofdiscretionaryeducationdollarsdistributedthroughcompetitionprograms,asignificantpolicydecisiontoshiftdollarsawayfromlongtimeformulagrantprograms.Whileunderstandingtheadministrationscommitmenttorewardingandreplicatingsuccessfulprogramsandpractices,AASAurgesCongresstomaintainformulagrantstoprovideamorereliablestreamoffundingtolocalschooldistricts.Suchastrongemphasisoncompetitionimpliesthatcompetitionaloneproducesinnovationandstudentachievement.Schooldistrictsandsystemsneedacertainleveloffinancialstabilitytoundertaketheambitiousinnovationandreformproposedbythepresidentsbudget,alevelofreliabilityandconsistencythatcannotbeachievedthroughcompetitivefunding.Formuladrivenfundingrepresentsthededicatedfundingstreamthatallowsschooldistrictstoappropriatelyplanforandinvestininnovationandreform.AASAisconcernedthatcompetitivegrantswouldhaveadisproportionatenegativeimpactonruralandsmalldistricts.

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Withlimitedlocalresources,schooldistrictsdonothavethetimeorthecapacitytodevelopextensivecompetitivegrantapplicationsinordertobecompetitive.Thiswillleadfederaldollarsawayfromstudentsinpovertyandtodistrictsthathavetheresourcesforgrantwritingteams.EconomicHardship:AASAwouldberemissifwedidnotaddresstheverytryingeconomicenvironmentschooldistrictsarelivingwith.TheconfluenceoftheendofARRAfundingandthedelayedeconomicrecovery(state/localrecoverylagsfederalrecoveryby18to24months)representaveryrealobstacletoschoolsastheytrytobalanceincreasedemphasisoninnovationwitheverslimmeroperatingbudgets.AASAstronglyencouragesbothCongressandtheadministrationtorecognizeandbepreparedtoreacttothepossibilitythatthesizeableincreaseinfederaleducationfundingmaynottranslateintofundingincreasesatthelocallevel.AsdemonstratedwithARRAdollars,shortofotherrevenuesourcesorleftwithnootheroption,someSEAs/LEAsmayreplacewhathadbeenprogramsfundedbyARRAwiththesenewfederaldollars.Inthosecaseswherefederaldollarssimplyfillbudgetholes,itisverydifficulttoinnovateandreform.IDEA:Thefederalgovernmentlevelfundsitsinvestmentinspecialeducation,holdingsteadyatitscommitmentto17percent,lessthanhalfofthepromised40percentofthenationalaverageperpupilexpenditure.CongressionalsupportforIDEAcontinuestohoverbelowitshighpointof18.6percentinFY2005.TheFY11proposalof$11.6billion,whileaslightnominalincrease,representslevelfundingwhencalculatedasthefederalcontribution,stayingat17percentandeffectivelyreducingthefederalcommitmentatatimeofincreasingneed.Theburdenforpayingforspecialeducationwillcontinuetobeshiftedtolocaldistricts,forcingschooldistrictstoraiselocaltaxesorcutgeneraleducationprograms.Inthesedifficulteconomictimes,thisremainsanevenbiggerchallenge.Congressmustfulfillitscommitmenttoschoolsandstudentsthroughoutthecountry.AASAstronglysupportsCongressreachingthe40percentlevelthroughmandatoryfundingofspecialeducation.MandatoryfundingIDEAwouldensureschooldistrictsreceivedthefullfederalcommitmentinjustsevenyears.WhiletheIDEAinvestmentincludedinARRAwassignificant,theimpactofthosedollarswaslimited.Asonetimefunding,districtshaddifficultyspendingARRAIDEAdollarstoexpandservicestostudentswithdisabilitieswithoutknowingifthefederalfundingatthatlevel(atemporaryjumpto25percentofthenationalaverageperpupilexpenditure)wouldcontinue.Thepresidentsbudgetdoesnotmakethiscommitment.TitleI:Astheeconomicrecessionpushesmorestudentsintopoverty,thepresidentsproposallevelfundsTitleI,despitetheincreasedneed.Theproposedbudgetincludes$14.5billionfortheCollegeandCareerReadyStudentsprogram(formerlyTitleIGrantstoLEAs).ThisislevelfundingfrombothFY09andFY10levels,andrepresentsacut,whenadjustedforinflationandincreasingdemand.WhileARRATitleIdollarsrepresentedasignificantincreaseinTitleIfundingforschoolsinthe200809and200910schoolyears,theARRATitleIdollarswhichplayedavitalroleinsupportingeducationbudgetsinstatesanddistrictsthathaveyettoshowsignsofeconomicrecoverywillnolongerbeavailablein201112,afundingcutthatwillbecompoundedbytheproposaltolevelfundtheFY11levels.Thecontentandinformationpresentedhereisageneraloverviewofschoolbudgets.Assuch,specificswillvarybetweenbothstatesanddistricts.Ifyouhavefurtherquestionsaboutschoolbudgets,theschoolbudgetprocessorwouldliketocontactaschooladministratorinyourlegislativedistrict,pleasefeelfreetocontacttheAmericanAssociationofSchoolAdministrators.AASAwouldbehappytoprovideanyavailableinformationandputyouintouchwiththeleaderofyourlocalschools.

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Contact:NoelleEllerson,PolicyAnalyst,AmericanAssociationofSchoolAdministrators,nellerson@aasa.org

RESOURCES:EducationFinanceStatisticsCenterbyU.S.DepartmentofEducation

SchoolDistrictBudgetingbyWilliamHartman(1999)

TheSchoolDistrictBudgetProcessbyEdScource(2006)

TexasEducationAgency

UnderstandingSchoolDistrictBudgetsbyEdSource(2005)

WhereDoestheEducationDollarGo?RoundRockISD(2008)

AppendixA:GraphsinEducationFinanceAllchartsinthissectionarefromtheEducationFinanceStatisticsCenter(http://nces.ed.gov/edfin)anditsRevenueandExpendituresbyPublicSchoolDistricts:SchoolYear200607(FiscalYear2007)report.Graph 1. Current per-pupil expenditures for public elementary and secondary education in the

United States: 200607

1 U.S. estimates are for the 50 states and the District of Columbia.

Graph 2. Current per-pupil expenditures for elementary and secondary education in the United States: 200607

Graph 3. Percentage distribution of total current expenditures for public elementary and secondary education in the United States, by function: 200607

1 Include current expenditures for classroom instruction (including teachers and teaching assistants), libraries, in-service teacher training, curriculum development, student assessment, and instruction technology. 2 Include attendance and social work, guidance, health, psychological services, speech pathology, audiology, and other student support services.

Graph 4. Percentage distribution of revenues for public elementary and secondary education in the United States, by source: 200607

NOTE: Detail may not sum to totals because of rounding.

Graph 5. State revenue as a percentage of total revenues for public elementary and secondary education in the United States: 200607

NOTE: Classification is based on the unrounded amount. U.S. average: 47.6%. Median: 47.5%.

Graph 6. States ranked by percentage of public education revenues received from state sources: 200607

SOURCE: U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), "National Public Education Financial Survey (NPEFS)," fiscal year 2007, Version 1a.

Graph 7. Federal revenues as a percentage of total revenues for public elementary and secondary education in the United States: 200607

NOTE: Classification is based on the unrounded amount. SOURCE: U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), "National Public Education Financial Survey (NPEFS)," fiscal year 2007, Version 1a.

Graph 8. States ranked by percentage of public education revenues received from federal sources: 200607

SOURCE: U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), "National Public Education Financial Survey (NPEFS)," fiscal year 2007, Version 1a.

Graph 9. Percentage distribution of current expenditures for public elementary and secondary education, by function: 200607

1 An expenditure function divided into seven subfunctions: student support services, instructional staff support, general administration, school administration, operations and maintenance, student transportation, and other support services. NOTE: Current expenditures include instruction, instruction-related, support services, and other elementary/secondary current expenditures, but exclude expenditures on capital outlay, other programs, and interest on long-term debt. SOURCE: U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), "National Public Education Financial Survey (NPEFS)," fiscal year 2007, Version 1a.

Graph 10. Percent distribution of current instruction and instruction-related expenditures for public elementary and secondary education, by object: 200607

NOTE: Detail may not sum to totals because of rounding. Instruction-related expenditures include salaries and benefits for teachers, teaching assistants, librarians and library aides, in-service teacher trainers, curriculum development, student assessment, technology, and supplies and purchased services related to these activities. Values were affected by redistribution of reported values to correct for missing data items, and/or to distribute state direct support expenditures. SOURCE: U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), "National Public Education Financial Survey (NPEFS)," fiscal year 2007, Version 1a.

AppendixB:BudgetCalendarfor201112SchoolYear:Thisbudgetcalendarwasreproduced/modifiedfromUnderstandingSchoolDistrictBudgetsbyEdSource(2005).ThisflowchartassumesaschoolbudgetyearthatrunsJuly1June30.Theoverallprocessandtimingwillbeverysimilarstatetostate,andwillsimplyreflectearlierorlaterstartingtimelinesdependingoneachstatesfiscalyear.Somedistrictsarefinanciallydependent.Thatis,theirbudgetapprovalissubjecttoreviewbyanadditionallayerofgovernment.Thiscouldbethecounty(forcountywideschooldistricts)orthetownorcitycouncil,dependingonthedistrictslocallawsandgovernance.

FALL2010:SchoolDistrictsbegindiscussionofpriorities,evaluateexistingprograms,andsetparameters/goalstoguidebudgetdevelopmentprocess.

MIDWINTER/EARLYSPRING2011:Thedistrictadoptsitsbudgetcalendarandreviewsitsguidelinesforbudgetdevelopment,includinganticipatedcostsofnewdistrictinitiativesandanticipatedsavingsfromeliminatingexistingprograms.Thisdiscussionwillincludeestimatesofsalary/benefitincreasesandadjustments.Thisiswhenthepreliminarybudgetdocumentiscreated.

MIDWINTER/EARLYSPRING2011:Governorsubmitsproposedstatebudget,includingprojectionsforstateanddistricteducationfunding/revenuesfortheupcomingyear.Districtstaffusethisinformationtoevaluateandrevisethepreliminarybudget.Stateleadersbeginfinalizingthe statebudget.

LATESPRING/EARLYSUMMER2011:Finalreviewandpublichearingsprecedeadoptionofthedistrictbudget.

MIDSUMMER2011:Thestatebudgetisadoptedandsignedintolaw,andfundsbecomeavailabletodistrictsfortheupcomingschoolyear.