Changing Revenue Forecasts Complicate School District Budgeting

School districts plan their budgets in an environment of extreme uncertainty.

The best-known example of this is due to the nature of the political process. The school districts’ fiscal year requires them to proceed with budget planning before the Legislature has made all its decisions. With state revenue accounting for about two-thirds of ’ budget, it’s no surprise that legislation can have a big impact.

But a lesser-known challenge is the role that funding calculations play. Complicated formulas govern how much state money Hopkins and other school districts receive. Not only are these formulas tied to lawmakers’ votes, they are tied to student enrollment in Hopkins and how that enrollment compares to other districts across Minnesota. So state officials must frequently revise calculations about how much money school districts receive.

Over the past several weeks, Hopkins officials about the best way to educate local students. And every time they’ve met, the calculation for one or more sources of state revenue has been tweaked at least somewhat.

Sometimes these changes are small, especially in the scheme of an $81 million budget. But fluctuations can grow to tens of thousands of dollars—complicating already difficult policy questions and making it harder to put money directly into instruction. In one particularly vivid example, a general education aid reduction coincidentally came out to be about the same amount as the cost of a School Board director’s suggestion to reduce kindergarten class sizes.

In order to illustrate these challenges, Hopkins Patch asked John Toop—the district’s director of business services—to keep a diary of all the revenue adjustments he had to factor in.

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Approximately Jan. 24:  The projected final FY10-11 General Education Aid run is posted. Our final student numbers were coming out just slightly lower than when we booked the year-end receivable for the audit report. So I knew that we would be looking at a small negative adjustment for FY10-11 that would be posted against FY11-12 revenue. The final number is about a $128,000 negative adjustment against FY11-12 General Education Aid. I factor that in when I project revised FY11-12 revenue.

[General education aid is the primary source of operating revenue for school districts. — Ed.]

Jan. 24: The projected Compensatory revenue for FY12-13 is posted. There have been about three runs before this but Fall Enrollment numbers are pretty finalized, along with the numbers reported for Free and Reduced students. This is probably going to be the best number before I have to place a number in for FY12-13 Compensatory revenue. Good news is that our Compensatory revenue will increase slightly by about $55,000 from FY11-12. This revenue component has been increasing each year for Hopkins for the last several years. Once the economy starts improving, this number may start going down for Hopkins, so we need to watch this revenue component closely.

[Compensatory revenue gives districts extra money based on the number of students receiving free or reduced lunches. — Ed.]

Feb. 3: The first run of projected final revenue for Special Ed Aid for FY10-11 and a revised revenue number is posted for FY11-12. This is after Board materials are posted for the Feb. 9th Board workshop. Since I know that our Special Ed transportation costs we reported for FY10-11 were much lower than what MDE was continuing to report thru October for FY10-11, (I did factor these reduced expenses in when computing the FY10-11 Special Ed Aid receivable for audit purposes) I knew we are likely going to have a fairly large negative adjustment in this revenue component for FY11-12. I have my own spreadsheet that I have put together that replicates the MDE aid computations for Special Education Aid. I run these numbers through for FY11-12. It looks like we need to make about a $576,000 negative adjustment in the Revised FY11-12 revenue budget for this revenue component. This negative adjustment will then carry through to FY12-13 and forward. This will have to be discussed and gone over at the Board workshop on Feb. 9th.

Good news on the FY10-11 Special Education Aid: The revenue that we booked looks like it will come in pretty close to what we booked for audit purposes, probably slightly positive adjustment.

Feb. 6: Another projected final FY10-11 Gen Ed Aid run is posted. Same numbers for Hopkins. No additional impact positive or negative.

Feb. 14: Another revised run is done for FY10-11 Special Education Aid. The numbers appear to have decreased revenue slightly but still a small positive adjustment.

Feb. 14: The final projected Non-Public Pupil Transportation Aid report is posted for FY10-11. The numbers appear to coincide closely with the total revenue that we booked for FY10-11. The adjustment positive or negative (impacting FY11-12) will be small.

[Nonpublic pupil transportation aid gives schools money to bus students to charter schools within district boundaries. School districts are required to do this if charter students live at least the same distance from their school as public school students who are bused to school. — Ed.]

Feb. 14: The final projected Non-Public Pupil Aid is posted for FY10-11. The numbers also appear to be quite close to what was projected as revenue for FY10-11, so again no large adjustment up or down impacting FY11-12.

Feb. 14:  The final projected Desegregation Transportation Aid for FY10-11 is posted.  Good news here. We posted revenue for FY10-11 of about $633,500 and our revenue will be around $680,500, a positive adjustment impacting FY11-12 of $47,000. This is the transportation reimbursement we receive for transporting Minneapolis Choice Is Yours (CIY) students.

Feb. 22: Meeting with Tom Watson, District Transportation consultant and Derrick Agate, District Transportation Supervisor. Mr. Watson noted the need to discuss a change in statute due to the passage of the Omnibus Education bill. The past few years school districts have been able to choose their method of allocating transportation expenses on a per mile, per route, or per hour basis. The Education bill struck language for per route and per hour computations, and added per student as an additional basis for allocating expenses. It is effective for the current fiscal year of 11-12. How will this change affect Hopkins Public Schools, specifically for the two major reimbursable transportation areas of Special Ed and Desegregation transportation? Will it result in a decrease in reimbursement for these two areas, and if so, how much? Or will it increase reimbursement? We decided to get miles to date for 11-12 and extrapolate those into an annualized number to determine the answer and will meet again once this information is available. Direct charging of these costs by transportation area as it relates to a contractor operation (which we are) was also discussed. It appears that MDE [Minnesota Department of Education] won’t allow this, but we need some further clarification on this issue.