Mid-Year Budget Mid-Year Budget IssuesIssuesand Decisionsand DecisionsPresented by Chris Straub

Evaluating Your Current Evaluating Your Current BudgetBudgetA. Always a good administrative

practice, but essential in challenging economic times unless you:

1. Believe nothing ever changes after your budget has been adopted;

Evaluating Your Current Evaluating Your Current BudgetBudgetA. Always a good administrative

practice but essential in challenging economic times unless you:

2. Have a Board of Education that loves year-end surprises; or

Evaluating Your Current Evaluating Your Current BudgetBudgetA. Always a good administrative

practice but essential in challenging economic times unless you:

3. Plan to retire at the end of the year and are a big fan of Clark Gable’s line in Gone With the Wind – “Quite frankly, Charlotte, I don’t give a damn!”

Evaluating Major Evaluating Major RevenuesRevenuesProperty Taxes

Assessed Valuation XTax Rate X

Historical Collection Rate =

Local Property Taxes

Evaluating Major Evaluating Major RevenuesRevenuesProperty Taxes

Assessed Valuation XTax Rate X

Historical Collection Rate =

Local Property Taxes

?

Has Assessed Valuation and/or Tax Rate changed since the budget was adopted?

Evaluating Major Evaluating Major RevenuesRevenuesProperty Taxes

Assessed Valuation XTax Rate X

Historical Collection Rate =

Local Property Taxes

?Historical collection rate is normally determined by looking at last three years of data.

Evaluating Major Property Evaluating Major Property TaxesTaxesProperty Taxes

Assessed Valuation XTax Rate X

Historical Collection Rate =

Local Property Taxes

?Many districts found that 2008-09 collection rate was less than previous two years – most recent year may be a better prediction in these economic times.

Evaluating Major Property Evaluating Major Property TaxesTaxesREMEMBER: Amounts retained by

counties for assessment increase this year.

(Approved by legislature in 2008)

First Class, Charter Counties

& St. Louis CityCaps on Assessment Fees

Increased From $100,000 to $150,000

Evaluating Major Property Evaluating Major Property TaxesTaxesREMEMBER: Amounts retained by

counties for assessment increase this year.

(Approved by legislature in 2008)

Other Counties1.25% increased to 1.5% Caps on assessment fees increased from $50,000 to

$75,000

Evaluating Major Property Evaluating Major Property TaxesTaxesREMEMBER: Amounts retained by

counties for assessment increase this year.

(Approved by legislature in 2008)

In larger assessed value counties, the effect on property tax collections will probably not be significant.

Changes will have a larger impact on smaller assessed valuation counties.

Evaluating Major Property Evaluating Major Property TaxesTaxesREMEMBER: Amounts retained by

counties for assessment increase this year.

(Approved by legislature in 2008)

Recommendation:Beginning in December, analyze property taxes received versus last year on a monthly basis.

Budgeting Axiom #1Budgeting Axiom #1

Property taxes levied rarely equal property

taxescollected.

Evaluating Major Evaluating Major RevenuesRevenuesProposition C

1. Last year (2008-09) the state distributed $804 per 2007-08 weighted ADA.

Evaluating Major Evaluating Major RevenuesRevenuesProposition C

2. In May, DESE estimated that the state, in 2009-10, would distribute $794 per 2008-09 weighted ADA.

Evaluating Major Evaluating Major RevenuesRevenuesProposition C

3. Through September, actual distributions were 10% lower than last year.

Evaluating Major Evaluating Major RevenuesRevenuesProposition C

4. DESE has now revised their estimate and is predicting approximately a 5% reduction to $758 per 2008-09 weighted ADA.

Evaluating Major Evaluating Major RevenuesRevenuesProposition C

Recommendation:Revise your Prop C budget according to your final 2008-09 WADA and the revised DESE distribution estimate and pay close attention to further updates from DESE.

Budgeting Axiom #2Budgeting Axiom #2

In uncertain economic times,

people tend to reducetheir spending

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts

Recommendation:Compare budget with DESE current calculation for formula, transportation, small schools grant, etc.

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts

BIG question: Will the state of Missouri be able to distribute all of the money appropriated for public schools this year (2009-10) ???

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

A. 90% of Missouri General Revenue comes from personal income and sales taxes.

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

B. The current Missouri unemployment rate is 9.8%

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

ConsiderationsC. Governor Nixon vetoed, in

June, several legislative approved expenditures based upon a projection that general revenue collections would decline by 1% from 2008-09.(2008-09 collections declined 6.9%from 2007-08.)

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

D. General revenue collections in the first quarter of this budget year (2009-10) declined 10% from the same period a year ago.

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

E. Governor Nixon will announce soon withholdings to balance this year’s state budget.

Will public schools be affected?

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

F. DESE has requested a $43 million supplemental increase for this year to keep programs funded (formula, etc.)

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

Will the Legislature and the Governor be able to find the money in the upcoming legislative session to meet DESE’s supplemental request?

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

ConsiderationsG. The 2009-10 foundation

program (formula, transportation, etc.) budget includes $105 million of increased casino taxes due to the passage of Proposition A last November. Current projections indicate that the actual receipts may be much less.

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts – Sobering

Considerations

Will the Legislature and the Governor be able to find money to replace the casino tax shortfall?

Evaluating Major Evaluating Major RevenuesRevenuesState Receipts

Recommendation:Pay attention to state budget developments the remainder of the current (2009-2010) year.

Budgeting Axiom #3Budgeting Axiom #3

Unemployed peopledo not pay much

income tax.

Evaluating ExpendituresEvaluating Expenditures

Budgeted Salaries -Compare to actual contracts.

Evaluating ExpendituresEvaluating Expenditures

Budgeted Fringe Benefits -Compare to actual

contracted amounts. (Retirement – 13.5% for PSRS; 6.5% for PEERS)

Evaluating ExpendituresEvaluating Expenditures

Budgeted Other Items-Compare to current

expenditures and projections.

Developing A Plan of Developing A Plan of ActionAction

Review Projected Fund Balances

Developing A Plan of Developing A Plan of ActionActionQuestions to Be Answered

What is the new bottom line?(Revenues minus Expenses)

Developing A Plan of Developing A Plan of ActionActionQuestions to Be Answered

Can your fund balances cover any projected short-fall?

Developing A Plan of Developing A Plan of ActionActionQuestions to Be Answered

Can some expenditures be delayed if necessary?

Developing A Plan of Developing A Plan of ActionActionQuestions to Be Answered

Which expenditures can be reduced if necessary?

Budgeting Axiom #4Budgeting Axiom #4

Only the federal government

can print money.

Developing A Plan of Developing A Plan of ActionAction

Recommendation:Involve appropriate staff members in budget reductions and keep all stake-holders informed about financial condition. (Board of Education, Staff, and Public.

Budgeting Axiom #5Budgeting Axiom #5

Only a complete idiot keeps

budgeting problemsto themselves.

Get Help If You Need It!Get Help If You Need It!

Recommendation:Take advantage of the expertise of your colleagues. Or call Roger Kurtz at MASA and arrange for a school finance consultant to provide assistance in analyzing your districts financial situation.