Q: Why do we need to “right size the budget?”
A: In spite of prudent stewardship of district assets, there are several factors contributing to a structural deficit (expenses outpacing revenue) and eroding the district’s fund balance. The district’s reserves have been spent down by nearly $10.7 million over the past three budget cycles, and administration expects to reduce the fund balance by another $400,000 for the 2016-17 school year. In order to comply with school board policy, the district must maintain a fund balance of five percent of its general fund budget. The current fund balance cannot sustain projected deficits and still meet the reserve policy, thus the need to reduce spending.
Q: What is a fund balance?
A: A fund balance is a “rainy day fund” that is intended to bridge the gap when expenses are greater than revenue, known as a structural deficit. District administration was purposeful in building a fund balance to ensure it could sustain investments made to enhance and improve student learning through staffing and programming.
Q: Why is a fund balance so important to the school district? If we have money, shouldn’t we spend it in the classroom where it’s needed?
A: The fund balance serves three main purposes:
- Cash flow for payments to employees and vendors;
- Allows districts to manage changes in payment from the state; and
- Serves as a “rainy day fund” for unforeseen enrollment or negative changes to expected revenues or expenditures.
Q: Why are we still right sizing the budget when we were told the first round was due to enrollment, and our enrollment is slightly up this year?
A: There were actually three primary factors leading to the district’s structural deficit that necessitated a multi-year effort to “right size the budget.” These were: 1) Enrollment (stable or fewer students mean no additional or less state funding); 2) State Funding (annual increases were approximately one percent annually, which as noted previously, is insufficient to cover inflationary costs); and 3) Increase in District Spending (since 90 percent of the General Fund is spent on salaries and benefits, a majority of the increase in spending targeted staff.
State funding is largely based on student enrollment. Thus, the funding increases are tied to the per student allocation, and is based on projected enrollments over the next two years. While Bloomington’s current enrollment is up slightly, the additional revenue of approximately $1.26 million is offset by $1.20 million in less state aid when the loss of 200 students in 2014-15 is factored into the funding allocation. Thus, the overall increase in revenue from the state is $600,000.
Q: Why are we not seeing more options of cuts at the district level vs. the threat of losing teachers?
A: Over the years, millions of dollars in budget reductions have been made at the district and administrative level. During this same period of time, schools have been largely spared from cuts. The Board and administration values smaller class sizes, we also value compensating our teachers well. This is one of our values because we want to recruit and retain the best and brightest teachers so they can inspire our students to be the best they can be. Balancing a budget that values paying well and having small class sizes is a formidable challenge. With our declining enrollment, the Board and administration is faced with values challenging choices.
The reality is, just like most districts, almost 90 percent of our annual spending goes to staffing costs. The other reality is that the majority of the remaining 10 percent of district spending are for essentials (utilities, insurance, student transportation, etc.). Therefore, although reductions are being done in other areas a major share of the reductions must include staff positions.
Q: We received a 2% increase from the state for this school year and again in ’16-17. The district has budgeted for a 1% increase. Where does the district plan to use the additional funding?
A: We’ve built the district budget to include the 2% increase in formula revenue. While appreciated, the current (and past) increase does not keep pace with inflationary costs. On the expenditure side of the budget, the district has fixed annual increases, including the salary schedule, annual employee step and lane movements, utilities and fuel to name a few. These inflationary increases and additional spending have all contributed to the district’s current structural imbalance (i.e. expenses exceeding revenue).
Q: When money is budgeted and not spent, what considerations go into the decision to spend or save the money?
A: First, we are entrusted to be prudent stewards of district assets and to maintain financial stability while balancing the needs of student instruction, intervention and achievement. We have been committed to driving resources to the classroom and programs that directly impact students. Second, school board policy requires the district to maintain a fund balance of five percent of its general fund budget. A fund balance affects us in both the short and long term. It allows the district to meet day-to-day obligations and to adjust to sudden decreases in revenue or unexpected expenses without having to make abrupt changes in programming or services.
The following questions pertain specifically to the district budget and budgeting process:
Q: District Budget: Under the “Unreserved”/“Committed Fund Balance” category ($10,851,829), what programs, departments and/or services are we committing these funds to?
A: The answer is best reflected in the following chart:
|Operating Referendum||General Operations||$4,279,405|
|Transportation Bus Purchase||Bus Purchases||$1,000,000|
|Transportation Building||Bus Garage Building improvements||$1,000,000|
|Staff Development||Teacher and Principal Carryover||$262,769|
|Medical Assistance||Special Ed and Nursing||$182,030|
|Uniform and Instruments||Music Program Funds for future purchases||$89,633|
|Wellness||Wellness Committee unused funds||$66,055|
Q: District Budget: Under the “Unreserved”/”Assigned” category ($696,908), why is this money being set aside when it hasn’t been in the past?A: These are funds that sites collect (e.g. fees and donations) in which they use for department purchases. These funds have been recorded in the past as deferred revenue. However, since the number has grown to a significant amount, our external auditor required the district to record these as fund balance.
Q: District Budget: In “Total Expenditures”/”Elementary & Secondary Regular Instruction,” we’ve overspent the budgeted amount in each of the last three years by more than a million dollars. Is this normal practice?A: Yes. While we budget as accurately as possible, it is not unusual for expenditures to not always align with a specific budget category. At the end of the fiscal year, the importance is making sure departments and sites have not over-spent their overall budget for that year.
Q: Why is this the case, when we don’t seem willing or able to overspend in other categories?A: Since classroom instruction falls in this area, we focus additional spending on classroom-related costs. As noted above, there are times when what is budgeted isn’t where it is actually spent.
Q: Why did property tax revenue go down by $13.8 million?A: The state repaid the tax shift by decreasing property taxes and increased state funds. This is not new money just an accounting entry.
Q: Why were the monies budgeted from the Federal Government so far off in 2013?A: Revenue and Expenditures from the federal government were over-budgeted in the 2012-13 revised budget, but were inline with the original adopted budget.
Q: Why are funds budgeted for expenditures in FY 2015 $10 million over the budgeted revenues? A: There were three primary factors for this, all occurring after the budget was adopted: Construction and staffing costs for all-day kindergarten, and an increase in the capital projects levy.
Q: In FY 2014, expenditures went up 3.27%. In FY 2015, expenditures went up 7.25%. Who makes those decisions? And, what led to such an extreme difference?A: The School Board approves the annual budget. The increase in expenditures was the result of the three primary factors noted in the previous response.
Q: In FY 2014, approximately $59 million was spent on “Elementary and Regular Instruction”. In FY 2015 approximately $65 million was spent. This equals roughly 70 FTEs (if 1FTE = $100,000). What led to the additional expenses? What does our budget predict for this year’s expenditures in that category?A: The answer is best reflected in the following chart:
|Settlements and Inflation||$1.9|
Q: When budgeting, where do district initiatives like the Welcome Center and the Bloomington Career and College Academy (BCCA) fit?A: They are included as part of the overall budget. Please note the Welcome Center is no longer operational and therefore no longer part of the budget. BCCA is currently funded through various grants.
Q: The latest audit showed the district ended the 2014-15 fiscal year $2 million better than projected. Why do we still have to right size the budget?A: A combination of factors contributed to the General Fund finishing the fiscal year $1.3 million better than projected. These included targeted efforts to hold the line on department and program budget spending, the initial $4 million in cuts and spending shifts, and the $2.7 million spend down of district reserves. As noted last year, the process of Right Sizing the Budget is a multi-year effort. However, the positive financial condition as a result of the factors noted, coupled with a slight increase in the current enrollment, will reduce the projected 2016-17 budget adjustment from $4.1 million to $2.5 million.
Q: Why is super conservative budgeting good for Bloomington Public Schools? A: “Super conservative budgeting” is a matter of opinion. Managing public money is a matter of public trust. A responsibility we take very seriously. Our stable financial environment is the result of conservative, innovative and creative business practices so we can focus on doing what’s best for students. We have a AA+ credit rating, among the highest for school districts, and are praised by financial auditors for our budgeting process and financial stability. In addition, community surveys consistently show taxpayers give us high marks for spending tax dollars wisely.
Q: Why does the district always budget for 1% increases, but it appears to get more than one percent in revenue? Is there any consideration that the district budget for 2% increases?A: The district budgets the formula revenue based on what is allowable under state statutes, as reflected in the following chart:
|2014-15||$5,831||2.0% (change in student weighting)|