Principles to Consider

Budget principles are broad ideas about what the budget process should look like. They set forth the ideals that a district’s decision makers will adhere to as they develop the budget, and can help counteract the tendency to induct short-term emotion into decisions that have long-term consequences.

Below are a number of principles that a district’s board and staff should consider discussing in order to determine how these concepts might fit into a district’s own budgeting principles.

• Goals for Student Achievement Should Drive the Budget Process
  Clear goals for student achievement should guide how resources are allocated.2 Tracking progress or making tough budget decisions to prioritize programs and strategies is impossible without specific goals.
• Decisions Should be Driven by Data
  Select programs and service providers based on student outcomes and adhere to evidence based-decision making.
• Base Resourcing Decisions on the Total Value Created for Students
  Prioritize strategies and programs with proven cost-effectiveness. and make student-centered decisions
• Critically Re-Examine Patterns of Spending
  GFOA research suggests that school district budget processes are typically “incremental,” where last year’s spending becomes the basis for the next year’s budget, with incremental changes made around the margin. However, past patterns of spending may no longer be affordable or even relevant given changing needs of the community and student body .
  Develop and implement a program review and sunset process.
• Ensure Equality of Opportunity for Students
  School districts must make sure every student is given an equal chance to succeed.8 As it relates to the budget process, this means promoting equality in funding among the general student population, while providing extra support for struggling students to also provide them with the opportunity to succeed
• Take a Long-Term Perspective
  Many districts will not be able to make large changes to their educational strategy and resource allocation patterns within a single year. Further, a consistent application of proven strategies over a multi-year period will deliver better results
• Be Transparent
  Effective budgeting requires valid information about the true costs of serving students and the outcomes produced for students.
  Make performance data readily available.
  Consider all costs in evaluating the cost of educating students.
  Use a consolidated budget.
  Be clear on what actions are being funded and their intended outcomes.
  

Policies to Consider

Budget policies clarify and crystalize the intent behind how a district will manage its financial resources. While districts should always comply with relevant laws and regulations promulgated by federal and state government, laws and regulations alone do not provide sufficient guidance for the board and staff to work together, optimally, towards the district’s goals.

• General Fund Reserve
  School districts should establish a formal policy on the level of unrestricted fund balance that should be maintained in the general fund as a reserve to hedge against risk
• Definition of a Balanced Budget
  While state statutes may require school districts to adopt a balanced budget, the statutes are often vague resulting in a budget that is balanced by the definition of the statute, but may not be, in fact, sustainable over time.
  While state statutes may require school districts to adopt a balanced budget, the statutes are often vague resulting in a budget that is balanced by the definition of the statute, but may not be, in fact, sustainable over time.
• Financial Emergency Policy
  School districts should adopt a policy that provides guidelines on how to respond to a financial crisis. The policy should address, at a minimum: the definition of a “financial emergency;” who initiates the policy when an emergency occurs; who manages the emergency; who provides authorization to for necessary expenditure controls; who directs staff to monitor and report on the emergency; who directs staff to analyze the reasons for the emergency and develop a recovery plan for the board; and, finally, who directs initiatives for a root cause analysis of the emergency and developing strategies to prevent a recurrence of the emergency.
• Long-Term Forecasting
  A policy should direct staff to develop long-term revenue and expenditure forecasts (typically covering five years) as part of the budget process and to consider these forecasts during budget development in order to address the district’s future financial position.
• Asset Maintenance & Replacement
  School districts should adopt policies that govern maintenance and replacement for its facilities as well as its shorter-lived assets such as buses, textbooks, and technology.
• Budgeting and Management of Categorical Funds
  A school board policy should direct that all district spending be reflected in the budget and that staff make every possible effort to realize scale and coherence in the use of discretionary and categorical funds.
• Budgeting for Staff Compensation
  Districts should adopt a policy to require budgeting the cost of positions by the full cost of the compensation for that position (salary plus benefits), rather than just salary costs.
• Program Review and Sunset, Alternative Service Delivery
  Districts should adopt a policy of regularly reviewing their programs/services with the objective of identifying programs/services that are not cost-effective and repurposing the funds
• Year-End Savings
  It is not uncommon for a school or department to spend less than its entire allocation and have funds remaining at fiscal year-end. A policy should define what happens to those funds. Often, those funds are rescinded and reallocated in the next budget. However, this can encourage a “use it or lose it” mentality among budget managers. Districts should develop policies that encourage a more strategic use of underutilized funds.
• Funding New Programs
  Districts should develop policies that describe how the district will fund and manage new programs. These policies should encourage practices that support budgeting decisions that best align resource allocation with improving student achievement, such as establishing a preference for “pilot” or “experimental” periods for new programs and estimation of cost and benefits up-front, followed by rigorous evaluation of actual results after a defined period.

• Level 1: Adopt at least a general fund reserve and a balanced budget policy in order to provide essential guidance for on-going financial sustainability. Begin developing budget principles to outline what district values and how this impacts the budget process.
• Level 2: Adopt asset management, and long-term forecasting policies. Also, adopt those policies most critical to your specific budgetary challenges (e.g., financial emergency, budgeting for staff compensation, etc.)
• Level 3: Develop and adopt budgeting principles for board and staff

•Quick Win: Executive cabinet/leadership team discuss concept of the General Fund Reserve Policy and Structurally Balanced Budget Policy

•Why important? Frames overall process for budget development and overall financially sustainability

•How does this help district control/own process? Examining factors that impact their district directly and adjusting for any specifics related to their organization