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FY 22 Budget Update

We have been working on next year’s budget for many months now and we are getting close to a final version. We’d like to provide an update so any of our interested stakeholders can better understand where we are with this budget and how we arrived at this version.

 

Our Budgeting Process

 

Recent Changes

 

Over the last several years we have changed our approach to budgeting in several meaningful ways. First, we developed a staffing and allocation model that takes into account a variety of factors, including how many students attend a school, what special programs those students are in, the socioeconomic status of those students, what grade levels are served, etc. By inputting these data along with the amount of funding we can allocate for staffing and school budgets, the model calculates a number of “points” available to a given school. (Points are used to allocate positions, with a teacher being set at 1.0 points and other positions, such as counselors or assistance principals, having different point values based on the average costs for such positions.) The principal then works with the SLT and other building leaders to determine how best to allocate their points. This approach has allowed a much more objective basis for determining staffing and results in an equitable allocation of resources to schools.

 

Second, budgets used to be planned extremely conservatively. While it’s good to be cautious with budgeting, it can also result in building up too much “savings,” which we call “unspent balance” (sometimes others call it “reserves”). It’s good to have unspent balance up to a point, but such a balance cannot exceed 15% because money that is collected in taxes is intended to be used, not saved, other than a small balance for contingencies. In the past, we would assume lower tax revenues than we would reasonably expect, lower state funding than would be likely, and higher expenses than we would actually anticipate. This resulted in high unspent balances that were then reduced each year by incorporating them as a revenue source in the following year. This cycle worked decently, but it was not optimal. For the last several years we have been transitioning to a much more transparent, accurate, and optimal budgeting process. We have moved the budget process earlier in the year so many financial decisions can be made prior to sending out contracts to existing employees or hiring new employees for the coming year. We have begun projecting revenue and expenses several years into the future so we can better anticipate long term consequences of any given budgetary decision. Our estimates for revenues and expenses are still conservative (i.e., budgeting revenues to be slightly lower than what is likely and expenses to be slightly higher than what is likely) but not nearly as hyper-conservative as before. This process has proven extremely successful and we continue to refine our approach each budgeting season.

 

Third, we used to assume a fixed millage rate and then force all of the district’s needs to fit into the budget that allocation allowed. This isn’t a bad approach, but it doesn’t fit well with a district that would prefer to invest in our students if doing so means meeting their many varied needs. For the last several years we have developed our budget first, staying as reasonable as possible while still meeting needs, then looked at what millage rate would be needed to generate the revenue needed to meet those needs. Sometimes that millage rate is not reasonable, like in a draft budget earlier this year, and planned expenses are reduced to bring the rate down.

 

Timeline

 

The administrative team begins budget planning in the fall for the following fiscal year (which begins the following July 1). We look at how current initiatives are going, which may be able to be sunset, and what new ones may be needed in the next fiscal year. We discuss staffing and salaries and look at expenses and potential savings. Over the course of several months we put together an initial budget that meets what we see as the needs of the district. We often have to be quite conservative with revenue estimates because many of our sources of revenue are not yet known at that point. Over the course of several months we create new iterations of the budget as additional details on future revenues are learned and as we receive input from the Board on past budget drafts. 

 

Opportunities for Input

 

Each iteration of the budget is discussed in the Board’s regular monthly meetings and work sessions. The regular meetings have public comment periods during which interested stakeholders are encouraged to share their thoughts on the budgets under consideration. Many stakeholders also email the Board or discuss in person with individual Board members. The Executive Director of Finance has a form available at https://forms.gle/AxCnya37VznWP2DS8 where anyone can share their budgetary feedback. The Board holds three budget hearings and three millage rate hearings prior to setting both the final budget and the associated millage rate for the coming fiscal year.

 

The FY22 budget we are working on now has been discussed at the following Board meetings as of the writing of this information:



Impact of the Pandemic

 

Unexpected impacts on expenses

 

It is no surprise that there were significant unexpected impacts on expenses due to the COVID-19 pandemic. Over the course of this year, we had to spend over $4,000,000 in COVID related expenses. In October 2020 (http://bit.ly/CSD-BOE-Oct-13-COVID), an initial budget adjustment used unspent balance to cover COVID related expenses such as learning pods ($75,000), school nutrition program loses ($634,702), early childhood program loses ($290,348), reduced earnings on investments ($78,118), and COVID-related supplies and equipment ($1,288,000). In January 2021 (http://bit.ly/CSD-BOE-Jan-12-COVID), a second budget adjustment used unspent balance to cover additional COVID related expenses, including budgeting for 16 additional teachers ($620,639), learning pods ($108,000), and overtime costs for nurses ($19,800). A third budget adjustment in February 2021 (http://bit.ly/CSD-BOE-Feb-9-COVID) accounted for learning pods ($322,950), additional school health aides ($66,024), and COVID testing ($50,000). 

 

Unexpected impacts on revenue

 

After the current year’s budget was set, the state had to reduce the revenue they had promised to school districts. This is referred to as austerity cuts. The state reduced our revenue mid-year by $3,252,312. While preparing the final draft of the tentative FY22 budget we were again surprised by an unexpected cut to revenue when we received notification that the funding we anticipated from the state for next year is going to be $437,877 lower than what we were expecting.

 

Not all unexpected impacts on revenue were bad, however. The federal government passed several stimulus packages which resulted in additional funding in the amounts of $366,132, $1,089,171, and $2,446,124 over the course of the last year.

 

Impacts into the future

 

The effects of the pandemic will continue to impact district finances in the coming years. The budget currently being discussed includes extensive remediation efforts as well as the addition of a Decatur Virtual Academy. The remediation efforts include the addition of 12 additional school based intervention teachers, 3 additional special education teachers, and one district remediation specialist. The additional programs will include more targeted interventions during the school day, a K-12 summer program, an additional high school summer session in July, additional extended school day, and intensive sessions during breaks. Altogether, the additional staffing and programming are expected to cost an additional $1,536,620 next year. The DVA will be open to all students at all grade levels and is expected to cost approximately $636,000 next year.

 

Costs outside the classroom

 

As a school district, we focus the vast majority of our expenses on things that directly impact students and classrooms. In the next fiscal year we anticipate spending over $77,000,000 on such expenses, which equates to over 90% of our budgeted expenditures. However, there are other necessary expenses that may not directly impact students but are nonetheless essential. Many of these expenses are referred to as “central office” expenses. We encourage interested stakeholders to read our information about such expenses at https://www.csdecatur.net/domain/136.