Today's landscape of budgetary constrained growth requires comprehensive planning, review and regular oversight of all accounts and funds to ensure end of year balances are projected and met for future budgets and tax levy stability.
The Summit School District, like many
surrounding districts in the Tri-County area continues to provide a
comprehensive educational program amidst the continuous budgetary constraints
from the State of New Jersey with regard to State Aid and the 2% CAP structure. The FY 2011 was marked by the elimination of
State aid for “high wealth[1]”
district’s such as Summit. This resulted
in a loss of revenue of ($2,587,433). This action had a significant impact on
development of the 2010-11 school budget requiring budgetary cuts and further
reductions in order to meet the CAP now at 2% on budgetary tax levy. Although there was a return of State Aid in
the fiscal year 2012 totaling $1,121,353 (after deductions of $57,272 for State
facilities – Special Ed.), it represents only 43% of the original state aid
received by the district in FY 2010. The
total adjusted aid for the 2014-15 budget received 2/25/14 was $1,607,073 or 46.7%
of the FY2011 mark. Regardless the
district retained its competitive offering of programs through strategic
initiatives designed to maximize operational efficiency and retain quality
staff.
While the outcomes reveal a beneficial result, the underlying set of budgetary concepts underscore the need for a multi-disciplined approach in budgeting today that incorporates Zero Based Budgeting (ZBB) with Site Based Budgeting as part of the successful planning tools.
"Budget processes can be plotted on a continuum ranging from a centralized set of processes that rely little upon strategic planning and evaluation as the basis for budget development." - Guthrie, James W. Modern School Business Administration A Planning Approach Boston, New York: Pearson, 2008.
In order to maintain effective budgets and balances today - we must live at the other end of the spectrum that requires continuous planning and evaluation to continue to meet the needs of the district and deliver a 21st Century Quality Based Education. Pepe, Louis. Budgeting Concepts, Graduate Program in Education. Montclair State University. Montclair, NJ. 12 November 2011. Lecture.These are the basic concepts that I have taught and applied in a focused effort to maintain program and personnel while keeping an eye on the fiscal charge of the tax levy CAP of 2%. The basic premise starts with real planning in the development of the budget (ZBB) in concert with the actual needs of the respective buildings (SBB). Much like a household budget, if you don't need it... don't buy it! If you need it ... then budget for it or wait until the appropriate time to purchase such as end of year, depending on cash flow availability.
Major purchases of equipment or projects (Fund 12) should be held until later in the school year (April - June) to ensure ample funds to meet unforeseen expenditures that arise within the budgetary year. It's a little difficult to attempt to return a large purchase like a vehicle or furniture and impossible to undo spending on a small project when you need funds for a Special Ed. move in.
Validating encumbrances throughout the year needs to become a basic tenant of the budget cycle. Another equally important measure is the concept of 'purchase over lease'. While in many cases leasing provides an opportunity to make large purchases over time, it can become a deadly budgetary trap if continually added year over year with payments building until you have now created a huge annual payment that forces the district to pony up each year, not to mention interest. This 'opportunity cost' takes money from other possible expenditures that are either required or sought.
This starts with a clear understanding and control over your personnel sections of the budget as they account for roughly 80% of the total budget. Validating your encumbrances ensure you know where you are in terms of plus or minus at any given time in the budgetary year. Waiting too long to find this position can be problematic. When referring to our cash position and budgetary strategies, I always say, "We are here by design... not accident!" If your not planning, reviewing and working with your administrators in developing and monitoring your budgets, it will lead to a crash.
[1] The DOE use of DFG data to analyze the relationship between student
achievement and the socioeconomic status of the communities in which they
reside.
