Still Another Post on the (Yawn) Budgeting Process

Here’s yet another post on the school district’s budgeting process.  Spoiler alert: It’s just as boring as that description suggests.  So unless you’re one of the handful of people who’s really interested in this stuff, I suggest you might want to search out a little more lively fare in the blogosphere. 

Some suggestions: While it deals with the same dry topic, TJ’s Mertz’s latest post on our budget was provocative and quite well done and expanded my understanding.  I’ve taken to reading the illusory tenant for smart, very opinionated views on state issues with a legal slant.  And, gosh darn it, David Blaska has written some nice things about me.  So if all else fails and you need a jolt, you might want to take a look at his blog, equal parts entertaining and misguided.

Anyway, back to our budget.  We recently completed our principal budgeting exercise for the year.  I have had occasion to think about the process.  Here are some thoughts on how it might be improved.

Three Months to Think About It:  The Budget Process from March through June

We started the budget process in March.  At the end of the month, the Board received both accounting and budgeting documents.  The accounting document was an elaborate 2011-2012 Cost-to-Continue Proposed Budget.  (Most of the budget documents referred to in this post may be found here.) As the title indicates, this document set forth what the cost would be to continue to provide during 2011-2012 the same level of services as the school district provided during 2010-2011.  The various categories of expenses were broken down into the required categories as specified by the Department of Public Instruction. 

The budgeting documents the Board received built upon the cost-to-continue budget.  That budget yielded a bottom-line figure of what our expenditures would be if nothing changed.  This is invariably a higher number than the spending limit that the state imposes on the school district.  The difference between the two numbers is the measure of the cuts required in our budget. 

 With the cost-to-continue total at as his starting point, the superintendent provided a list of recommended cuts (as well as some recommended additional expenses) intended to bring the district within our spending limit.  I described the specific cuts the superintendent recommended here

After the Board received these documents in March, we were free to study the numbers, ask questions, and propose amendments to the superintendent’s recommended balanced budget.  And we had plenty of time for the tasks, since our final consideration of the budget turned out not to be scheduled until June.

 The Uncertain Status of Our Underlevy Carry-Over Authority

 One wrinkle this year was that our state-imposed spending limit was in flux.  Last year we spent about $10 million less than our spending limit.  Under current law, that “underlevy” does not affect this year’s spending limit.  However, the governor’s budget bill proposed a change that abolished this carry-over authority.  This change would reduce this year’s spending limit by the $10 million underlevy amount from last year.

 To be conservative, the balanced-budget recommendations we received from the superintendent in March were premised on the assumption that we would lose our carryover authority and so our spending limit would be $10 million less than it otherwise would be.

It turned out that the provision in the budget bill that eliminated the carryover authority had been included inadvertently.  That provision was eliminated from the bill prior to passage.  So we learned in June that we did indeed have our carryover authority and that our spending limit was actually $10 million more than the superintendent’s March recommendations had assumed.

We Get to Work in June

In June we also received another document, an accounting presentation of the superintendent’s recommended balanced budget.  This document contained no new information, but simply modified the cost-to-continue budget we received in March to reflect the superintendent’s recommendations to get us within what we thought in March would be our spending limit.

 Over the course of April, May and June, Board members submitted a handful of budget amendments.  None of them called for spending cuts.  To the extent that the amendments had budgetary impacts, all resulted in additional spending for the district. 

We ended up adopting five amendments that originated from Board members.  The first, made possible once our underlevy carryover authority was assured, increased our overall budget by a bit under $2 million, a figure calculated to bring next year’s property tax levy up to the same level as this year (but still about $8 million less than our spending limit). 

A second Board amendment rejected the superintendent’s recommendation to lay off our current staff of Certified Occupational Therapist Assistants (COTAs) and replace them with a smaller number of Occupational Therapists (OTs), a change that was projected to save us about $373,000 next year. 

With the third and fourth amendments, the Board created new administrative positions – a Family Engagement Coordinator (estimated annual cost: about $80,000) and a Director of African-American Achievement (estimated annual cost: about $136,000).  The final amendment called for the beginning of the expansion of the AVID program to our middle schools (estimated first-year cost: $144,000). 

The funds to pay for the Family Engagement Coordinator are to come from our federal Title I money.  The funds to make up for the savings foregone by not eliminating the COTA positions and for the cost of the Director of African American Achievement and the expansion of the AVID program are to come from our increased property tax levy. 

The remainder of the nearly $2 million in increased property tax revenues was earmarked for program expenses recommended by the superintendent.  The money funds: additional Talented and Gifted (TAG) staff; a pilot program of services for middle school students with mental health issues; and an expansion of our Phoenix expulsion abatement program.

 How Much State Aid?

As I have previously written, the amount of state aid we’ll receive next year may be less than we were planning on, and so it could be that, without any other changes, our property tax levy could go up by less than one percent rather than stay exactly at its current level.  This is an issue the Board can address, if necessary, sometime in the Fall.

 I don’t consider the uncertainty surrounding our final state aid figures a big deal.  Calculating the exact amount of what we’ll receive is quite complicated.  It isn’t an accounting task and hasn’t traditionally been thought of as a budgeting task.  It’s more of a legal issue, but not one that we thought we had reason to explore in detail as we set out on our budgeting exercise.    

The precise number only became relevant to our budgeting in June, when we decided to link our spending level to our property tax levy rather than to our spending limit. (As our expected state aid figure goes up or down, our projected property tax levy moves in the opposite direction.)  Prior to the release of the DPI state aid estimates on July 1, none of our staff had the clairvoyance to foresee that capping a school district’s loss of state aid at 10% of this year’s level, as the budget bill did, actually meant that Madison would take a cut in state aid equal to 13.2% of this year’s level, as DPI projected on July 1.   

Lessons Maybe Learned         

Here are a few points that I draw from this year’s budgeting exercise:

  • While some Board members say they find the accounting information we receive to be helpful, it doesn’t do anything for me.  We’re not accountants, nor were meant to be.  The opacity of the DPI-mandated budget format is what drove Lawrie Kobza and others to push for the development of a Citizen’s Budget  a few years ago, so normal people could have some hope of extracting meaning from the budget numbers.  As far as I’m concerned, we could save the time and money involved in preparing these accounting documents by simply getting rid of them as components of our budgeting process.  No Board member submitted a budget amendment that was based on the accounting information we received or made any other practical use of the information that was evident to me.  The accounting document we receive in June adds particularly little to the process as far as I’m concerned.    
  • That said, the Board consistently receives excellent work from our accounting staff, primarily Donna Williams and Angie Lee.  
  • The budget process went better this year than last year.  This was primarily due to the fact that we were able to achieve so much in cost savings by reducing the take-home pay of our teachers.  But in addition, the superintendent brought us sound recommendations which, with the exception of the COTA/OTA issue, the Board accepted fairly readily. 
  • Truth be told, the Board’s contributions to the budget we adopted were pretty minimal.  We did establish a level of spending that most of us were comfortable with. But within that overall amount, which is well in excess of $300 million, Board-initiated amendments resulted in about $750,000 of spending (or less than three-tenths of one percent of our budget) and no offsetting savings.  
  • The whole process took a lot longer than necessary.  In part, this was due to the greatly reduced number of contentious issues as compared to last year.  But we received the basic budget information we needed by the end of March and didn’t approve our budget until the end of June, with not all that much happening for long stretches in between.  It made sense to wait until after the state budget was passed to act, but, as it turned out, we didn’t need to get started as soon as we did. 
  • In fact, it might have made sense to wait longer before we adopted our budget.  If Board members feel that it is particularly important for budgeting purposes to know precisely how much state aid we’ll receive, then we should hold off on approving our budget until after DPI issues its estimates of state aid payments on July 1. 
  • We don’t have to start the budgeting process when we do.  If we have to lay employees off, we need to get the layoff notices out consistent with the requirements of our collective bargaining agreement, which means sometime before school is out.  But other than that, we are not compelled to do anything on the budget before the start of the fiscal year on July 1.  In fact, the only timing requirement imposed by law is that we must determine our property tax levy and certify that amount to the City of Madison clerk by November 6. 

 Previewing the 2012-2013 Budget

 Here, for diligent readers that have made it this far, is your first peek at our 2012-2013 budget.  My guess is that next year’s budget process will entail a level of challenge that more closely resemble this year’s than last year’s.  In other words, it may not be all that bad.  If it turns out that way, then, as with this year, we’ll have our teachers and staff to thank. 

Pursuant to the terms of the two-year collective bargaining agreement we arrived at in March, salaries are frozen for next year (2012-2013) as well as this year and we’ll also be able to realize savings next year from the elimination of the more expensive WPS health insurance option for our teachers. 

These two cost savings could reduce our spending level about $8 or $9 million below what it otherwise would be.  Every dollar in savings we achieve through these measures is a dollar of cuts in programs that we won’t have to make.  So I think we can plan for next year on the assumption that putting together our budget will once again be challenging but not horrendous. 

Summing Up

So, if it were up to me (and I am well aware that it isn’t), I’d change our budget process next year so that we start several months later, not impose upon our accounting staff to prepare the full budget accounting documents that we receive, and not adopt our budget until sometime after July 1 (taking care to deal with whatever layoff issues there might be in the spring).

I’d also want to make sure to do next year what I’ll do right now: thank superintendent Dan Nerad, assistant superintendent Erik Kass, and our budgeting and accounting staff for all their good work in ensuring that we Board members have the tools we need to arrive at a budget that reflects sound judgment and smart choices.  We may not always appreciate those tools or use them well, but that’s a different story.

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6 Responses to Still Another Post on the (Yawn) Budgeting Process

  1. Thanks again Ed.

    I like the accounting documents, but am probably in the minority. My guess is that they have to be done for internal use anyway. If they don’t, it may be worth exploring how much could be saved by providing less information, as long as the state statues concerning information provided prior to the required public hearing are satisfied.

    One thing I missed this year was the public posting of Board Member questions and administrative answers. In general I like to know what the Board is thinking. In particular this year, I’ve been told that there was some back-and-forth around around the Maintenance of Effort requirements of IDEA (see the DPI memo: http://dpi.state.wi.us/pb/pdf/budget_moe.pdf). I’m not clear how the MMSD budget documents I’ve seen fit with this and wold like to know what was asked and answered.

    Last, your readers will likely be interested in Lucy Mathiak’s post o budget matters: http://lucymathiak.blogspot.com/2011/07/about-those-property-taxes-and-mmsd.html.

    • TJ —
      I am told that the accounting documents we receive do not need to be prepared for other purposes. They are prepared because Board members in the past have said that they want them. I agree that we should explore more cost-effective ways of getting useful budget information to Board members.
      We did not have the same formal Q and A’s between Board members and administration on budget matters this year, probably because there were far fewer issues than last year. I do not recall any discussion of Maintenance of Effort.

  2. Thanks Ed.

    Two Board Members mentioned an email exchange when I asked about MoE. I’m not sure if the exchange was directly about MoE or just about Special Ed funding in general. With Federal funding at stake, I think it best to trust the administration but verify that MoE will be met.

    I realize this year has been quiet, but i hate to see a new precedent set in relation to public posting of budget Q&As.

    • TJ —

      Here’s a little more information on Special Ed funding. You had mentioned in your blog post that the approved Preliminary 2011-12 Budget appears to cut a further $3,231,626 from Education Services. If you’ll look at page 2-101 of the Education Services budget document you linked to (https://drupal.madison.k12.wi.us/files/deptdiv%20reports%20Ed%20Services%201112-4.pdf), you’ll see that the 2011-2012 budget is $3,224,266 less than the 2011-2012 cost-to-continue budget, but the personnel count only goes from 814 to 813. The explanation for this is that the cost savings come from the increased employee contributions to their retirement funds (and perhaps because the cost-to-continue budget did not assume a salary freeze). The savings are not attributable to a reduction in staff as compared to the cost-to-continue budget (except to the extent that the staff count goes down by one).

  3. Ed

    I understand that this year’s reduction is not due to cuts in the number of staff (and that past staff cuts may have not been related to dollar cuts….I just realized that this discussion in the context to the graphic at the top of my post may be confusing). My worry is that the Feds don’t count staff or programing for MoE, they count dollars. That’s what the DPI memo explains. I don’t know if MMSD cut dollars this year, but the cost-to-continue budget makes it appear likely. Any info you can dig up would be appreciated. Trust and verify.

    TJ

  4. David Blaska says:

    Thanks for the shout-out, Ed.

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