Taxes, Revenues

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Taxes, Revenues Expenditures

• A Structural Perspective
• Bruce D. Baker

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Identification Measurement

• Inputs
• Dollars - Per Pupil Spending
• Student Characteristics - Demographics
• Throughputs
• Teachers/Student
• Supplies/Student
• Hours of Teaching Time
• Outcomes
• Earnings beyond schooling
• Standardized test scores
• Performance Assessment

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A Look at InputsA Regional Look at Input Growth
(Constant 91-92 Dollars)
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Fund Structure
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Fund Structure

• Governmental Funds
• General Fund
• Special/Restricted Revenue Funds
• Capital Projects Funds
• Debt Service Fund
• Proprietary Funds
• Enterprise Funds
• Internal Service Funds

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Fund Structure

• Fiduciary Funds
• Nonexpendible Trust Funds
• Expendible Trust Funds
• Agency Funds

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Revenue Structure

• Local Sources - includes money raised by the
  district, usually from local property taxes
• Intermediate Sources - includes money from
  government units that stand between the local
  district and the state
• Federal Sources - Includes direct federal aid and
  or state flow-through money, usually in
  categorical aid
• Other Sources

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Within Fund Types

• Restricted Funds
• Unrestricted Funds

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Generating Revenues
Distribution to Education
Tax Base
Revenue Pool
Federal (Categorical)
Federal (income)
Federal General (USDE, OSEP)
State (Special)
State (Income Sales)
State General Fund
State (General)
State/Local School Prop Tax
State Dept. of Ed.
State Supplements
Local (General)
Local Option Tax
Special Local Prop. Taxes
Local (Targeted)
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Public Education Fund Structure
Revenues
Expenditures
Federal
Categorical
State (Special)
Compensatory
Special Education
State (General)
General Fund
State Supplements
Food Transport.
Local (General)
Capital Etc.
Local (Targeted)
General Rule of Public Finance Revenues -
Expenditures 0
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Kansas Fund Structure

• General Fund 3,863 per weighted pupil
  (2002-2003)
• Supplemental Fund Derived from LOB, can equal up
  to 25 addition to GFB (supplemented by state to
  75ile level)
• Special Education Fund Reimbursement of costs
  (focus on catastrophic personnel)
• Capital Fund Can be derived from 3 to 5
  additional mills of local levy (formally capped
  at 4 mills)
• Bond Derived from additional local mill levy
  (interest payment supplemented by state)
• Transportation, Food, Staff D., Activities

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Kansas Funds
General Fund
State Aid
Annual Operating Expenses
Supplemental Fund
LOB
Optional/limited transfer
Required transfer
Special Ed.
State Aid
Fed. Aid
Equipment, Improvements etc.
Capital Outlay
Capital Levy
Bond Mill Levies
New Buildings Major Renovations
Capital Outlay
Special State Aid
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Kansas Details

• Annual Cash - Basis Accounting
• Revenues - Expenditures 0
• No roll-over of funds from year to year (no
  passing savings from general fund into capital
  outlay unless imposing maximum LOB and Capital
  mills. Then, you may roll over up to 1 of GFB).

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Private (Independent) School Fund Structure
Revenues
Expenditures
Fund Structure
Gifts/ Contributions (General)
Development
Endowment
General Educational Program
Targeted Gifts
Operating
Investment Returns
Facilities Maintenance
Tuition
Plant
Food Transport
Fees
Debt/Equity
Capital Projects
Entrepreneurial
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Expenditure Structure

• Fund
• Program
• Function
• Object

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K-12 Expenditures by FunctionBenchmarks for
Where the Money Goes (Nationally)
Source NCES, 1993
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Where the Money Goes
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Where the Money Goes
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Financial Documents

• Financial Reports and Budgets

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Major Financial Documents

• District Budget Document Developed and prepared
  for the coming school year. Generally submitted
  to the state using the state budget templates.
• Annual Financial Report Intended to be a
  comprehensive review of the financial position of
  the institution. Often, this ends up simply
  being an updated version of the budget templates.
  

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Overview of Government Accounting

• Financial management requires a common language,
  so that all parts of the government can be
  compared--that language is the governmental
  accounting system. It is the set of definitions
  and rules which guide the collection,
  categorization and reporting of financial data.
• The language of accounting can differ across
  organizations, but it can be difficult without
  training to detect the difference.
• It is important to understand the different types
  of accounting systems, their objectives, how data
  is recorded, and what financial information tells
  you about the organizations finances.

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Fundamental Equation of Accounting

• Assets Liabilities Fund Balance
• Assets Liabilities Fund Balance
• Change in Assets Change in Liabilities
  Revenues Expenditures.

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Accounting--Definitions

• Assets What government owns.
• Current assets Assets that can be liquidated
  this year.
• Cash
• Short-term investments
• Accounts (and taxes and grants) receivable
• Inventories.
• Non-current assets Assets that are more
  permanent in nature.
• Capital assets not to be depreciatedland,
  facilities under construction.
• Capital assets that have depreciated facilities,
  equipment.
• Long-term financial investments.

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Accounting--Definitions

• Liabilities What government owes.
• Current liabilities will come due this year.
• Accounts payable
• Deferred revenue
• Short-term debt
• Due other funds or governments.
• Non-current liabilities
• Long-term debt
• Compensated absences
• Post-employment benefits
• Due retirement systems
• Judgments and claims payable

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Accounting--Definitions

• Fund balance (net assets) Defined as the
  difference between assets and liabilities. Can
  be divided into
• Reserves for encumbrances
• Other reserves (e.g., capital, repair, Workers
  Compensation, Unemployment Insurance, debt
  service, insurance, etc.)
• Unrestricted, unreserved fund balance, which is
  available for any purpose.

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Accounting--Definitions

• Revenues
• Property taxes
• Other taxes
• Charges for services
• State revenues
• Federal revenues.
• One-time sales

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Accounting--Definitions

• Expenditures (expenses) By function.
• General support
• Instruction
• Pupil transportation
• Community service
• Employee benefits
• Debt service
• Capital outlay (depreciation)
• Cost of Sales

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Measurement Focus

• The definition of what should be measured is
  called the measurement focus, and the issue of
  when transactions are recorded in the accounting
  system is the basis of accounting.
• Accrual (business) accounting Objective is to
  preserve equity of the investors, which
  accountants refer to as a economic resource
  measurement focus.
• Modified accrual accounting Objective is to
  assure financial control or accountability for
  general government functions, which implies a
  measurement focus on current financial resources.
  

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Basis of Accounting

• Accrual
• Assets and liabilities Under accrual accounting
  it is important to report all assets and
  liabilities on the balance sheet. This implies
  that even long-term assets, such as buildings and
  equipment, should be added when acquired and
  long-term liabilities, such as debt, pension
  obligations, etc., should be reported as they are
  incurred (see Figure 10-1)
• Receipts and expenses Receipts are recognized
  and recorded when they have been earned
  regardless of whether payment has been received.
  Accrual accounting recognizes expenses or the
  monetary value of resources used during the
  period to produce revenues when the resources
  have been used regardless of when the resources
  are paid for (Figure 10-1).

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Basis of Accounting

• Modified Accrual
• Assets and liabilities focus on those assets and
  liabilities, which tend to be short-term in
  nature. This implies that modified accrual
  accounting focuses on current assets and current
  liabilities. (Figure 10-1).
• Revenues and expenditures Revenues are recorded
  only when they are measurable and available.
  This implies for many taxes, such as the sales
  and income tax that they are recorded only when
  the cash is received. The term expenditures
  reflects commitments to pay for purchases of
  goods and services with current financial
  resources, not when resources are used.
  Therefore, the modified accrual basis is more
  conservative in its recording of revenues and
  expenditures (Figure 10-1).

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Fund Accounting

• A crucial difference between public and private
  sector accounting is in the use of multiple funds
  in the public sector. Funds are separate fiscal
  and accounting entities used to record assets,
  liabilities, revenues and expenditures/expenses
  associated with certain government functions.
• Three types of funds
• Governmental funds Used to record finances of
  general government operations.
• Proprietary funds Used to record finances of
  government business operations.
• Fiduciary funds Report assets that are held for
  others and that cannot be used to support the
  governments own programs.

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Financial Statements(Pre-GASB 34)

• Balance sheet Measures the assets and
  liabilities at a given point in time (last day of
  the fiscal year).
• For governmental funds, only current assets and
  liabilities are recorded.
• For proprietary funds (and long-term fixed asset
  account group) will include property, plant and
  equipment as assets, and long-term bonds and
  capital leases as liabilities (also in long-term
  obligations account group).

Example of pre-GASB 34 CAFR for Cincinnati City
School District http//www.cpsboe.k12.oh.us/gener
al/finances/2001CAFR.pdf
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Financial Statements(Pre-GASB 34)

• Statement of revenue, expenditures and changes in
  fund balance Records flows over the course of
  the year
• Revenues (receipts) additions to fund balance.
• Expenditures (expenses) subtractions from fund
  balance.
• Fund balance at beginning of year and end of
  year difference is the surplus or deficit in
  this fund.
• Totals (Memorandum only) indicates that the
  sum of the three different types of funds should
  be viewed with caution, because of different
  accounting standards.

Example of pre-GASB 34 CAFR for Cincinnati City
School District http//www.cpsboe.k12.oh.us/gener
al/finances/2001CAFR.pdf
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Comprehensive Annual Financial Report (CAFR)

• Principal reporting of audited financial
  information to board of education, citizens,
  federal and state governments.
• Organized into 5 sections
• Introduction Transmittal letter of auditor,
  letter from independent auditor, organization of
  government, management discussion and analysis.
• Government wide financial statements.
• Combined financial statements by fund type.
• Notes to financial statements (see below).
• Supplementary material, and statistical
  information.

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Financial Reporting in Kansas Districts
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Page 34 - Revenues
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Page 37 - Expenditures
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General Expenditures Continued
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The School Level Budget

• Pre-Lab Discussion
• Site Based Budgeting Examples

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Sample School Level Budget
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Pre-Lab

• Analyzing Budget Data

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Analyzing Budget DataPupil as Unit
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Total Spending...
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Per Pupil Spendinga different picture
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Spending over Time
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Figuring Budget Shares
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Share Analysis
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Presenting Share Analysis
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An Alternate Framework for Studying Allocation

• From Cooper Speakman
• Coopers Lybrand, 1996

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Analytical ApproachCooper Speakman (pp.
128-129, Picus Wattenbarger)
Frame 1 Aggregational Board Allocated Pension Frin
ge Benefits Debt Service
Frame 3 Functional School Site Operations/Support
Operations Support Instruction Teachers Substitut
es paraprofessional Materials
Frame 2 Structural Central/District/City Central
Operations Pass-Throughs Debt Service
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Analytical Approach Continued
Frame 4 Typological Instruction by Type All
Schools Elementary Middle High School
Frame 5 Programmatic See p. 129
Frame 6 Contractual See p. 129
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Tracing Dollars to Pupils in NYC
Inite
Source Cooper Speakman in Picus, 1996
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Dimensions of a Line Item
Microscope