FY 15 Budgeting Process

March 15th, 2014

The Fiscal Year 2015 certified budgeting process began with a preliminary discussions scheduled during the March Board meeting.  This is my annual article to try and help patrons of the district to understand how the Board of Education establishes its’ tax rate and overall budget.

School districts must certify their budgets by April 15th of each year.  The total certified budget for the district will be approximately $17 million.  By law, the Board cannot spend more than their total budget authority and is limited by Iowa Code as to how revenues are expended.

The general fund is covered in Iowa Code, Chapter 257, which outlines the State Foundation Formula for funding schools.  Some history regarding the State Foundation Formula – In 1971, the first State Foundation Program was created by the Iowa Legislature to fund schools to:

  •  provide a quality education for all students
  •  equalize educational opportunity for all students
  •  provide property tax relief
  •  provide reasonable control of school costs.

It would be appropriate to note that the State Foundation Formula has been changed in every legislative session in some way or another.  This is why some of you may find school finance confusing and the reason for my attempt to bring some clarity to the process.

The State Foundation Formula applies only to the district’s general fund budget (approximately $14.0 million) and sets a ceiling for each district’s total spending authority and the funding mechanism for the total spending authority.  It is “pupil driven” in that the funds are generated by the enrollment of the district multiplied by the cost per pupil as established by the Iowa Legislature.

As was mentioned above, a growing enrollment helps to grow the budget while a declining enrollment negatively influences the annual revenues.  For the 2015 budget, our revenues will rise due to an increase in enrollment of 34 students.

The general fund budget is made up of a combination of state aid, local property tax, and miscellaneous income.  The amount of state aid and local property tax needed to fund the combined district costs are determined by the enrollment, cost per pupil, and the assessed valuation of the district.

During the March meeting the Board we reviewed the levies currently in place and discussed other levies available to build the 2014-2015 budget.  The levies as revenue sources that are described below are restricted by the language indicated as to what they can be used for.  For example, revenues received from the local option sales tax cannot be used for general fund purposes:  Following is a summary of those levies and their current rates and their purposes:

  • Board-approved physical plant and equipment levy ($.33 per $1,000 of assessed valuation).  Uses of this levy are for facility maintenance, transportation, and equipment purchases of over $500.
  • Voter-approved physical plant and equipment levy.  Uses of this levy are for facility maintenance, construction, transportation, and equipment.  This levy has expired.
  • Debt service levy – is used to pay down bonded indebtedness. The Floyd Valley and MOC indebtedness from previous bond issues has expired.  There is no debt service levy.
  • Management levy ($.52 per $1,000) is used to pay for the district’s liability insurance, tort liability, unemployment insurance, and early retirement.
  • The general fund is supplemented by three levies, the cash reserve levy , the general fund operating levy,) and the instructional support levy (a combination of property tax and income surtax).  Uses of this levy are for salaries, supplies, equipment, plant operation and maintenance, and student transportation
  • The local option sales tax was voted on in June of 2003 and may be used for renovation or construction of a school house, gym, stadium, school bus garage, or improving an athletic field, but cannot be used for general fund or instructional purposes.

The total tax levy is comprised from the levies listed above to finance the operations of the MOC-Floyd Valley Community School District.  A 13 year comparison is provided below.  The state average total tax levy for fiscal year 2014 was approximately $13.99 per $1,000.  We are proposing a total tax levy for 2014-2015 of $10.44 per $1,000 of assessed valuation.

Our cash balance at the end of fiscal year 2013 was $2,654,207.  This amount would seem to be adequate but the district’s auditor recommends approximately $3,000,000 as a goal.  This would allow for the district to pay for 100 days of bills if state dollars were ever slow or cut coming to us.

As you can see, there are many financial constraints that will influence the decisions that need to be made before a certified budget is approved.  If you have questions or concerns regarding the budget please feel free to address the Board during this time, or, contact one of the Directors or me prior to the April Board meeting and your input will be shared with the entire Board.

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