Budget Development

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Budget Development Cash Management

• Bruce Baker
• The University of Kansas

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The Budget Process
Working Draft
Final Draft
Month 11
Month 10
Budget Revisions
Budget Hearings
Budget Year Begins
Prioritize
Month 1
Quarterly Revision
Budget Draft
Month 7
Enrollment Staff Needs Adjust Program Facilities
Needs
Budget Revisions
Preliminary Requests
Month 4
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Purposes of Budgeting Process and Document

• Resource allocation Budget is a spending plan,
  and is principal mechanism for deciding
  priorities between programs.
• Examine percent distribution and trends in budget
  share by program.
• Financial control One of the principal
  mechanisms for assuring resources are spent as
  decided by school board.
• Compare actual spending to budget by object of
  expenditure, and organizational unit.

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
4
Purposes of Budgeting Process and Document

• Management control Use budget to help improve
  efficiency and effectiveness.
• Compare trends in enrollment, productivity
  ratios, and student performance.
• Planning tool Budget can be connected to the
  strategic plan.
• Provide long-range forecasts of revenues,
  spending, enrollment, and student performance.
• The budget can be thought of as the continuous
  improvement plan translated into a performance
  plan. Keuren (2002)

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
5
Purposes of Budgeting Process and Document

• Communications device Budget can be used to
  communicate goals and objectives of an
  organization, and how resources are allocated to
  meet this objectives.
• Post the budget on-line
• Prepare a popular budget
• Create forums for citizen participation beyond
  the traditional budget hearing.

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
6
What Makes Public Budgeting Different?

• Open process public manager serves many masters
  (school board, mayor, parents/other citizens,
  state education department).
• Objectives of public agencies are complexseldom
  is there one bottom line like profit.
• Many constraints on decision making (state and
  federal mandates, court orders, financial
  regulations, timing of state aid, etc.)
• Limited control of clientele public agencies
  have to serve all qualified residents (cant
  choose student body).

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
7
Budget Process

• Budget guidance (top down part of process)
• Priorities and changes Superintendents sets out
  new programs, and major changes to curriculum,
  staffing, and facilities.
• Forecasts of enrollment, staff turnover.
• Constraints on size and distribution of budget
• Revenue forecastsceiling on expenditure growth
  or total budget (ks)
• Legal constraints, mandates, categorical aid
  requirements.
• Mandatory spendingdebt service, contractual
  obligations (teacher salaries).

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
8
Budget Process

• Budget guidance (top down part of process)
• Preparation guidelines
• Forms
• Budget calendar (timetable)
• Inflation rates, salaries.
• Special procedures for estimating costs.
• Instructions on how to categorize
  spendingbaseline vs. improvements, operating vs.
  capital, etc.

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
9
Figure 5-3 Budget Development Timeline Salt Lake
City Schools (FY 2002-03 Budget)

• December/January
• Begin review of capital projects
• Current enrollment projections ready
• Budget development schedule sent to program
  managers
• Determine general budget policy plans directions

• May
• Begin printing budget
• Board study session, presentation and discussion
  of executive budget (prior to June 1)

• July
• Advertise to hold hearings on budget tax rate
  that exceeds certified tax rate (if necessary)

• March
• Textbook, supply library budgets set up
• BG review of capital projects

• February
• Begin review of special programs
• Meet with program managers dept heads to review
  revise special programs

• April
• Budget tied together, reviewed, and budget book
  prepared egin review of capital projects

• June
• Publish newspaper notice of public hearings to
  revise current adopt new year budget tax
  rates.
• Board meeting public hearings to revise current
  budget and adopt new year budget tax rates.

• August
• Final budget tax rate adoption public
  hearings (if it is necessary to exceed the
  certified tax rate)

For full SLC budget go to http//www.slc.k12.ut.u
s/budget/03/03budget.pdf
Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
10
Advantages of a Carefully Constructed Budget
Calendar

• It improves planning and budget preparation by
  providing advance notice of when particular
  information is required. Facilitates analysis of
  how budget relates to educational plan.
• It facilitates gathering opinions/data from key
  staff, board members, etc. by providing clear
  timeline on when decisions have to be made.
• Helps to assure that legal dates/requirements of
  the budget process are met.
• Facilitates informing the public about the
  process, and how and when citizens can comment.
• Source Budgeting Handbook 3. Full list is on
  the website
• http//www.emsc.nysed.gov/mgtserv/budget-02.htmP
  240_19485

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
11
Missouri Budget Calendar

• February - Preliminary budget estimates of
  revenues and expenditures should be prepared and
  distributed to members of the board of education.
• March - Preliminary budget hearing should be held
  by the board. Revisions of preliminary budget,
  based upon recommendations of the board of
  education, should be made following the February
  meeting.
• April - Revisions of the preliminary budget
  should be approved by the board of education. The
  tentative tax levy for the next school year
  should be determined. (However, in light of the
  significant legislation in 1995 and anticipated
  future legislation regarding changes in assessed
  valuation of property as a result of reassessment
  and the implications for tax levies, the board of
  education should cautiously and carefully
  approach staff salary and personnel increases at
  this time of the year. Significant changes
  through May of any legislative session may alter
  funding available to school districts. The board
  of education would not want to extend itself
  beyond what it is capable of funding from local
  and state sources.)
• May and June - The June Core Data Collection
  Cycle and end-of-year reports should be prepared.
  If at all possible, budget approval should occur
  prior to the beginning of the subsequent fiscal
  year.
• June - Final balances should be determined and
  the budget may be adjusted accordingly. The board
  of education should approve the levy. The
  tentative budget should formally be adopted by
  the board of education.
• July - The statutory and constitutional
  compliance checks for the district's tax rate
  ceiling for operations and the establishment of
  the debt service levy need to be completed and
  filed with the County Clerk(s) and State
  Auditor's Office. The Proposition C rollback
  should be calculated from the tax rate ceiling
  after any voluntary rollback to determine the
  adjusted tax rate to submit to the County
  Clerk(s).
• August - The Board should authorize the
  preparation of Estimate of Required Local Taxes
  (Form No. 3-660-160). When completed, this form
  should be forwarded to the County Clerk(s) NO
  LATER THAN SEPTEMBER 1. The August Core Data
  Collection Cycle should be filed with the
  Department of Elementary and Secondary Education.
  The Annual Secretary of the Board Report should
  by filed by August 15 with the School Finance
  Section.

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Budget Process

• Budget preparation (bottom up part of process)
• Units within district prepare operating and
  capital budgets, estimate staffing requirements,
  and prepare justification for expansions of
  budget.
• Key issue is how decentralized this process is.
  Is budget prepared only by central
  administration, or are schools involved in
  developing and allocating budget (school based
  budgeting)?
• If school-level budgeting exists, what do they
  have control over (enrollment forecasts,
  personnel, facilities, other operating spending)?

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
13
Budget Process

• Budget review and approval
• Unit budgets are reviewed by SBO and
  superintendentunits usually required to make
  modifications. The more decentralized, the more
  time consuming this process is.
• Final budget is presented to school board, which
  can usually modify before budget vote.
• Public hearings are often held in conjunction
  with board review of the budget.
• Other states
• After board vote, may be public vote on budget
  (3rd Tuesday in May in NY). District gets
  several chances to pass budget.
• In New York, if budget doesnt pass, then
  district uses a contingency budget.
• SBO plays key role in preparing and presenting
  final budget.

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
14
Budget Process

• Budget execution and audit
• Budget execution is managing the budget as it is
  implemented
• Checking for variance of actuals and budget.
• Adjusting budget targets as actual tax and aid
  figures become available.
• Modifying budget to meet unanticipated
  circumstances (transferring funds across
  accounts).
• At least once a month, a budget status report
  should be prepared The report should include
  estimated revenues, revenues received to date,
  and estimated revenues yet to be received
  original appropriations, adjustments and
  transfers, revised appropriations, expenditures,
  encumbrances, and unencumbered balances
• Budgeting Handbook 3, http//www.emsc.nysed.gov/
  mgtserv/budget-04.htmP530_45112

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
15
Budget Process

• Budget execution and audit
• Budget audit is the use of internal and external
  (independent) auditors to verify financial
  statements, and identify irregularities, control
  system problems, and pending financial problems
  facing the district.
• The annual independent audit should serve as a
  valuable tool in the budgeting processsince the
  audit is prepared at the close of the year by an
  outside independent certified public accountant
  or public accountant, it represents an unbiased
  look at the major categories of expenditures and
  revenues. The audit can serve to point out areas
  for improvement in the budget development
  process, as well as to serve as a review of the
  district's compliance with laws, regulations and
  accounting practices.
• Budgeting Handbook 3, http//www.emsc.nysed.gov/
  mgtserv/budget-07.htmP686_57665
• Missouri Statute (Section 165.121, RSMo) states
  that the school board of each six-director
  district shall cause an audit examination to be
  made at least biennially of all financial,
  transportation and attendance records of the
  districts.... Included in this statutory
  provision is authorization for the State Board of
  Education, with approval of the State Auditor, to
  prescribe minimum regulations and report form for
  the biennial audit. Cost of the audit report
  shall be paid for out of the General (Incidental)
  Fund of the district.

Special thanks to Bill Duncombe, Maxwell School
of Public Policy, Syracuse University
16
Budget Cost Analysis
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Steps in Traditional Cost Accounting

• 1) Define the major missions and mission
  centers.
• 2) Identify the major activities/outputs of each
  mission center.
• 3) Identify direct vs. indirect costs.
• 4) Identify variable vs. fixed costs.
• 5) Calculate rates for direct costs. How do
  costs vary with output.
• 6) Allocate indirect costs to mission centers.
• 7) Calculate unit costs for each mission center.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Define Mission Centers Outputs/Outcomes

• What are the mission centers for your agency?
• Mission centers (which are not necessarily
  organization units) should be organized around
  the major services provided public.
• What are the major activities (outputs) and
  outcomes of each mission center?
• Service centers should reflect the major internal
  services provided to support the direct services
  provided the public.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Examples for School Districts

• Mission centers
• Could be organized by school.
• Could be organized by major programs (regular
  education, special education, dropout prevention
  program, etc.)
• Activities/outcomes
• Activities Number of students served, number of
  courses offered.
• Outcomes Dropout rate, percent passing certain
  exams, percent of student going to college, etc.
• Service centers
• Transportation, maintenance,
• Data processing, printing,
• Financial services, personnel, purchasing.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Cost Definitions--Direct vs. Indirect

• Direct costs are costs that can be related
  directly to the mission center. Typically
  include personnel, materials, supplies,
  facilities, etc. used by center.
• Indirect costs are costs that cannot presently
  be tied directly to mission center. May include
  many costs of service centers, and central
  administration of the agency.
• Goal is to eventually turn most indirect costs
  into direct costs.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
21
ExampleHeartland School District

• Profile of district
• Small district only 2 schools, less than 1300
  students
• Enrollment has been declining for last decade.
• Moderate levels of poverty, special needs.
• Mission centers Two schools
• Jane Doe Elementary School (K6)
• John Smith Academy (7-12)
• Activity measure Enrollment by type

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Direct vs. Indirect CostsHeartland School
District

• Look at detailed budget (Figure 7-2)
• Possible direct costs
• Instructional expenditures
• Operating maintenance expenditures
• Transportation
• Special student services.
• Probably indirect costs
• Central administration
• Director, support staff for transportation,
  maintenance, special student services.
• Other undistributed expenditures.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
24
Allocation of Indirect Costs

• Need to assign all indirect costs to mission
  centers (e.g., schools).
• Traditional cost analysis has used several
  different methods for indirect cost assignment
  (allocation factors, step down method, job order
  costing)
• Ultimately, most methods make assumptions about
  allocation factors. (See Figure 7-3 for examples
  of allocation factors.
• Determine what operational information you have
  for each mission center (e.g., enrollment by
  type, teachers, floor space, direct personnel).
  These can be used as allocation factors.
• Calculate of total for each allocation factor
  by mission center.
• Assign each indirect cost an allocation factor.
• Multiply total indirect cost by category by the
  appropriate allocation percent for each mission
  center. You have now assigned indirect costs to
  each mission center.
• Key goal of Activity Based Costing is to improve
  the accuracy of the indirect cost assignment.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
25
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
26
Cost Definitions--Fixed vs. Variable

• Key aspect of cost analysis is to determine how
  costs vary with output (activities) provided.
  See Figure 7-4.
• Variable costs vary directly with output. Can
  develop a cost rate per unit (e.g., cost per
  student).
• Step costs vary in lumps with unit of output.
  Best example is fulltime personnel, which can
  provide a range of service (e.g., teachers).
  Need to determine productivity rate (output per
  person), and cost per step (annual salaries).
• Semi-variable costs some costs have a fixed and
  variable component (e.g., utility charges or
  lease agreements). Need to determine fixed
  charge and charge per unit.
• Fixed costs do not vary at all with output. In
  the long-run very few costs are fixed.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
27
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
28
Possible Cost Definitions Heartland School
District

• Variable costs
• Materials supplies
• Substitute teachers
• Some types of equipment (e.g., desks, books)
• Transportation (per student taking bus)
• Step costs
• Fulltime personnel
• Instructional equipment and facilities
• Semi-variable costs
• Equipment leases.
• Fixed Costs
• Central administration, other central office
  staff
• Insurance, legal expenditures, debt service,
  misc. operating expend.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
29
Parameters and Assumptions

• If a budget on a spreadsheet is going to be
  flexible, the calculations should be based on
  cell references, not hard numbers.
• The only hard numbers in the budget should be in
  parameter sheets. These sheets highlight what
  factors drive the budget, and changes to the
  budget involve simply changing parameters.
• Any assumptions made in developing the budget
  (e.g., no staff turnover), should be listed as
  well.
• Figures 7-6, 8, 9, 11, 13 are all parameter
  sheets for calculating the personnel budget.
  (You should look carefully at the lecture 7.xls
  to see how these work.)

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
30
Budget Development

• Technical Issues

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Integrated Planning Model
Core Operational Expenses
Staffing
Aid Allocations
General Fund Budget
Enrollment Number Type
Local Revenue
Facilities
Bond/Cap Budgets
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Policy Levers

• Average Class Size
• What does lowering the average class size do to
  short and long run costs?
• Hiring Practices (new vs. experienced)
• How does hiring predominantly new teachers affect
  short and long run costs?
• Teacher Salaries (negotiable)
• Local Tax Rates (negotiable)

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Exogenous Factors

• Population changes
• Not entirely exogenous because perceived quality
  of district (as assessed by things like P/T
  ratios) affects where people choose to live
  (which in local control states affects property
  values, hence local revenues.
• Teacher Attrition Rates
• Obviously, teaching environment affects
  attrition. Changes in P/T ratios or class size
  might have significant effects on attrition.
• State Aid (Foundation) Levels
• Administrators can affect aid levels through
  active lobbying.

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Demographic Planning Analysis

• Data Driven
• Spreadsheet analyses of matrices of student
  enrollment data
• Typically involves cohort survival method
• Useful for projecting enrollments from year to
  year
• Spatial
• Maps enrollment and housing data to geographic
  zones using Geographic Information System (GIS)
  software.
• Useful for optimizing busing routes (traveling
  salesman problem) and for setting within district
  school boundaries
• Model Driven (Integrated)
• Involves constructing simulation models that link
  enrollment data to other system features for
  integrated financial planning

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Steps in Estimating Direct Personnel Costs in
Schools

• Develop enrollment forecast for both schools.
  Figure 7-5 is based on cohort method discussed in
  Lecture 6.
• Estimate the required teachers in each grade.
• Teachers are usually fulltime, and are examples
  of step costs.
• Step costs are usually defined by a productivity
  rate (maximum output a person can provide). For
  teachers, the productivity rate is the class size
  (students/teacher).While states may define a
  maximum class size, there usually is a range of
  acceptable class sizes if the district sets it
  target less than the maximum set by the state.
  For example, assume Heartland school district has
  set its target class size by grade less than the
  state average (Figure 7-6).
• In this case, teachers are what might be called a
  soft step cost because there is some
  flexibility around the target class size. To
  capture this flexibility, it is possible to
  include an acceptable range around the target (as
  long as it is below the maximum). See Figure
  7-6.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
36
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
37
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
38
Steps in Estimating Direct Personnel Costs in
Schools

• To calculate the number of personnel by grade
• Divide enrollment by grade by the target class
  size, and round up. See Figure 7-7 (rows labeled
  with class size target).
• Divide the enrollment by grade by the maximum
  class size, and round up. See Figure 7-7 (rows
  labeled with class size maximum).
• To calculate staffing within target
• Divide enrollment by teachers in row with class
  size target to get actual class size with this
  number of teachers.
• Divide enrollment by teachers in row with class
  size maximum to get actual class size with this
  number of teachers.
• If the class size in a) is less than acceptable
  lower bound, but not greater than the acceptable
  upper bound, then use staffing in b). Otherwise
  use staffing in a).
• See row within variation in Figure 7-7.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
39
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
40
Steps in Estimating Direct Personnel Costs in
Schools

• Given the staffing levels selected, you need to
  determine the education and experience level of
  the staff. While it would be preferable to
  automate this part of the process, there are to
  many factors that could vary (new education
  level, and turnover, in particular). Instead, it
  probably makes sense to put the staff chart as a
  parameter sheet, where the numbers can be
  changed directly. Figure 7-8 is another example
  of a parameter sheet. Also included on this
  sheet are factors to calculate the FTE and cost
  of substitute teachers, and other teacher
  compensation (extra assignments).
• Multiply these staffing levels by the teacher
  salary schedule (Figure 7-9) to get teacher
  salary budget (Figure 7-10). Figure 7-9 could be
  viewed as another parameter sheet.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
41
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
42
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
43
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
44
Steps in Estimating Direct Personnel Costs in
Schools

• 9. Set up a parameter sheet with experience level
  for the other staff for both schools. You can
  fill this in based on last years staffing
  schedule, and any turnover, layoffs, or
  additional staff this year. See Figure 7-11.
• 10. Multiply these staffing schedule by the staff
  salaries in Figure 7-9 to calculate salary budget
  for other staff (Figure 7-12).
• Set up parameter sheet with the factors used to
  determine fringe benefits (Figure 7-13).
• Calculate the fringe benefits for all school
  staff, and add to salaries to get the full
  personnel budget for each school, and the school
  district (Figure 7-14).
• This budget has been set up to be flexible. If
  you change any of the numbers on the parameter
  sheets, the personnel budget sheet will change
  automatically.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
46
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
47
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
48
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
49
Steps for Estimating Other Direct Costs

• Collect information on other expenditures from
  past budgets at the school level (Figure 7-15)
• Use this information, as well as information on
  leases and contract rates, to estimate cost rates
  (Figure 7-16). This is another parameter sheet.
• For variable costs, calculate cost per student.
  For instructional materials supplies (Jane Doe
  ES) divide 35,910 by 630 57/student.
• For cost related to teachers, calculate cost per
  teacher. For AV equipment, divide 16,625 by 35
  teachers 475 per teacher (Jane Doe ES)
• For leases (contracts) determine rate/student (or
  teacher) For example, Heartland SD contracts
  with a regional service center for classes for
  limited English proficiency and special needs
  students. Also computers are leased at a rate of
  1,000 per computer.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
50
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
51
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
52
Steps for Estimating In-House Service Center
Costs by School (Transportation)

• Collect operating information on bus service
  (Figure 7-17)
• Students riding bus to school, average length of
  trip,
• students/bus, bus miles per driver per day, fuel
  efficiency of bus.
• Calculate cost rates (Figure 7-17)
• Bus lease, fuel price, maintenance cost/mile ,
  equipment cost/bus,
• salaries.
• For administration costs (director, staff), and
  for direct bus related costs allocate across
  schools. (Buses are not assigned to one school.)
• Allocation factor Percent of total students
  taking bus to school in each school.
• Calculate the total transportation cost (Figure
  7-18).

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
53
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
54
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
55
Calculate Total Per Pupil Costs by School
(School-level Budget)

• Calculate the direct costs for each school using
  the personnel budget, and cost rates developed
  previously. Determine the total direct cost and
  direct cost per student (Figure 7-19).
• Calculate the indirect costs for each school,
  making assumptions about allocation factors. Use
  the allocation factors identified earlier (Figure
  7-3). Calculate total indirect cost for each
  school, and overall cost for each school (and per
  student cost). See Figure 7-19 (cont.).
• This is an example of a flexible school level
  budget!

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
57
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Cost AnalysisWhat is it and Why Do It?

• Cost analysis is the use of cost accounting data
  to improve decision making.
• Cost analysis can be used for
• Can be used to build flexible budgets.
• Can be used to identify what services to provide
  in-house vs. contract out.
• Can be used to reform management practices to
  improve efficiency -- Important component of
  performance management reforms.

Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
59
Building Flexible Budgets

• The key to building flexible budgets is to
  carefully define costs, and link costs to
  activities (students), or staff (teachers).
• Figure 7-19 is a flexible school-level budget.
  If one of the parameter changes, the budget
  changes automatically.
• For example, assume that a charter school has
  been added to the district, and that enrollment
  in K6 is expected to drop by 15 in each grade.
  We could calculate what would happen to the
  budget
• Change the enrollment by grade in Figure 7-6
• Look at the new staffing levels. The new
  calculated staff for Jane Doe ES is 29, a
  reduction of 5 teachers compared to original
  estimate.
• Manually remove 5 teachers from the staffing
  schedule in Figure 7-8. I have assumed that the
  least experience, and least educated staff are
  laid off first.
• Make a change in the non-teacher staff. I will
  assume that one asst. principal, social worker,
  secretary, and custodial are laid off. Again I
  assume layoffs are by seniority.

Thanks again to Bill Duncombe for the majority of
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Example of Using Flexible Budget (Effect of
Charter School)

• Figure 7-20 shows the new school-level budget
  with the lower enrollment levels due to charter
  school.
• While direct costs have gone down in total, the
  per pupil levels have not changed much because
  most direct cost categories adjust with
  enrollment and staffing changes.
• Indirect costs have not gone down at all
  (assuming for simplicity they are all fixed).
  Per pupil indirect costs have increase by 8
  (1426/1316), because they are spread over fewer
  students.
• Total costs have dropped by 6.4
  (9,096,980/9,714,487), while total enrollment
  dropped by 7.5. Per pupil costs have gone up
  1.5. Costs will not drop as fast as enrollment
  due to fixed costs!

Thanks again to Bill Duncombe for the majority of
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Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides
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Thanks again to Bill Duncombe for the majority of
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Deciding Whether to Contract Out Service

• Presently Heartland SD provides its own bus
  transportation. Another alternative is to
  contract the whole service with a private bus
  company.
• On average, it costs 1,954 per student taking
  bus (enrollment of 1,216).
• The XYZ bus company has offered to provide the
  service for 1,700 per student. Should the
  district contract this service?

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Deciding Whether to Contract Out Transportation

• Key is determining what costs can be avoided by
  contracting out
• District can avoid fuel cost, and material
  supplies.
• Can you lay off all bus drivers and maintenance
  staff?
• Can district sell off equipment and not renew
  lease on bus?
• Can district layoff transportation director and
  staff?
• Contracting out does not usually mean eliminating
  all costs. Probably will need to have
  transportation director, and possible clerical
  staff to monitor contract, and arrange for
  transportation services.

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Deciding Whether to Contract Out Transportation

• Assume that the transportation director and staff
  are not eliminated, but all other costs are
  eliminated.
• Costs for lease
• 1,700/student x 472 students 802,400
• Costs for director and staff 121,030
• Total cost with new lease 923,430.
• Cost provided in-house 922,148
• No cost savings to contracting out.

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School-Based Management and School-Based Budgeting

• One of the management reforms of the last decade
  has been school-based management (SBM). In
  addition, school-based budgeting (SBB) has been
  attempted by several large city districts.
• They can be linked together, but not necessarily.
• The rise of school accountability systems implies
  providing more authority to the school to manage
  operation, including allocate budget.
• School districts have traditionally provided very
  limited budgetary authority to building
  principals.

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Key Issues in SBM and SBB

• Who should authority be decentralized to
• Principal
• Teachers
• Community/parents
• What should be decentralized
• Planning
• Curriculum
• Non-personnel budget
• Personnel decisions
• In reality very few SBM reforms have resulted in
  full SBB system.

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Key Steps in Developing SBB System

• Determine which expenditure categories should be
  controlled at school level (including personnel
  decisions).
• Develop cost accounting system to determine what
  costs are at school level.
• Use results of cost analysis to develop
  allocation factors between schools.
• Implement system, and readjust cost allocation
  factors as more information on costs becomes
  available.

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Example Edmonton, Alberta

• Edmonton has been using school-based budgeting
  system for 25 years. 80 of budget is controlled
  by schools.
• Money is distributed to schools using pupil
  weights as allocation factors
• Regular (K8) 1.0
• High school 1.03
• LEP students 1.24
• Mild disabilities 1.26
• Moderate disabilities 1.95 to 2.17
• Severe special needs 3.71 to 5.18
• See following school budget for Edmonton. See
  the website for more details http//www.epsb.edmo
  nton.ab.ca/budget/index.shtml

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Example for Rochester, NY
Thanks again to Bill Duncombe for the majority of
the content of this set of lecture slides