Whether this is your first budget or your 27th, each budget season is unique.
Read on for suggestions, tips, and reassurance on surviving the upcoming budget season.
When should budgeting for the next fiscal year begin?
Some business officials begin to prepare for the next fiscal year as early as September of the current year. Some business officials start near the end of the calendar year when half of the current year has passed, but a district board’s finance committee may have a timeline for budget planning.
The best guidance for beginning the budgeting process is to look back at how budget preparation was accomplished in the past. Ask colleagues and board members whether planning allowed for collaboration and research. Did the process seem rushed or closed off? Did the administrative team members believe that the final budget met all of the district’s fiscal and educational goals?
This review need not be a specific event; it can begin at a weekly administration or board meeting as a first step to the upcoming process. The answer to this question may be that sometimes, changing the process may result in better communication and a better budget.
Where do I begin — revenues or expenditures?
Before budget tax levy caps, budget planning began with expenditures and then progressed to revenues. If the expenditures exceeded the revenues, the difference was added to the tax levy, and the budget was balanced. School districts that have tax levy caps now must first create the revenue side of the budget and then balance expenditures. This is why school budgeting can be difficult.
For example, with a cap of 4%, if insurance costs are increased by 12%, another account line will be cut, or budgeters must hope that fewer monies are needed in other account lines to offset the increase in insurance. Most revenue sources are taxes and state aid; however, some other sources might include fund balance, facility rentals, and tuition income — all variables and not consistent across years.
Once the revenue number is set, the second half of the puzzle gets the attention. An easy way to organize expenditures is to start broad and then narrow to fine details. Start with the largest portion of a school budget, which is salaries and benefits. Today’s accounting software programs have built-in budget planning functions that can take the current year’s information and copy it over into the next year’s proposed budget.
After capturing personnel, match the personnel to their benefits. Continuing, build additional salary information such as supplemental pay (coaches, advisors), overtime, class coverage, substitutes, tuition reimbursement, merit pay, and any other contractual item that is required as part of a bargaining unit.
There is a 100% guarantee that the approved and completed budget will have multiple changes, even before the beginning of the fiscal year.
There is a 100% guarantee that the approved and completed budget will have multiple changes, even before the beginning of the fiscal year.
Usually, the next largest portion of the budget is student expenditures: tuition, transportation, and professional services. Consider each entity separately. Special education estimates for tuition and related services can be obtained from that office along with provisions for new students enrolling or leaving district programs.
Contingencies should be budgeted. The reality of this statement is that sometimes there isn’t enough budget room for them. Since this is one of the hardest areas to accurately plan, be prepared if, two weeks into your approved budget, a large unexpected (and unbudgeted) tuition contract arrives.
Transportation for regular, special education, and other school programs, whether the fleet is in-house or contracted, can also turn into a fiscal nightmare. The recent nationwide shortage of drivers and vehicles has sent prices for routes and vehicles upwards of 30% or more. It is a challenge to budget such inflated increases when the boundary, for example, is a 2% overall budget increase. As with student expenditures in general, contingency planning can be a best practice, but it may not be feasible.
The last area of the major expenditures are all mandatory “fixed costs” that make up the business end of the budget, including insurance, payroll employer costs, software, fees, and utilities. Here’s some guidance:
Revenues = Expenditures: Using a worksheet like Excel, create a summary page that links all the budget account lines. The summary page will be an alert if revenues do not equal expenditures and show what difference remains short of a balanced budget.
Double Check: Double-check your lines. Double-check every aspect of the budget. Then, put the budget away. Don’t look at it for two or three days.
Fresh Eyes: Look at the budget again. Go through a checklist in your mind:
- Can you offset any expenditures with grant monies?
- Are there retirements or resignations that do not need to be filled?
- Did you capture all income sources?
- Can you consolidate bus routes?
- Is there a shared service that can help offset expenditures?
- Are there current-year monies that will not be expended that can go to the fund balance to carry over into the upcoming budget
- Can you change insurance providers and other services for budget savings?
If there is still a budget gap, reductions may be necessary. Keep a list of the reductions for “just in case” (as in just in case something changes and reinstatements can be made).
Plan: When the budget is completed, and somewhere between the end and the beginning of the year, put time aside to create a 3–5-year budget planning document. Look into the future; use estimates of growth and inflation to predict where the district is headed. A budget planner is an excellent way to open the door to the future opened while still tackling today.
Budget vs. Actual: About four months into the new year, create a budget vs. actual worksheet to see where you are going financially. Giving yourself eight months’ lead time to begin planning for the upcoming year or finding funds to cover a large, unexpected expenditure can alleviate stress. The result of this exercise may be that the budget is financially sound, and you, as the business official, can move on to other items on your to-do list.
Final Note
A budget is a living, breathing document that needs to be flexible enough to withstand constant changes during the year. There is a 100% guarantee that the approved and completed budget will have multiple changes, even before the beginning of the fiscal year.
As a business official, you must stay involved in what comprises your budget, along with planning ahead to achieve educational goals for the faculty, staff, students, and parents. We are all in this together. Reach out to your fellow business officials for assistance or to brainstorm how to resolve your issue. That is what ASBO International and our state organizations are all about: teamwork.