KEY

ISSUES IN SCHOOL BUDGETING 1

Key Issues in School Budgeting

Penn Manor School District

Matthew J. Monahan

Millersville University

March 8, 2017
KEY ISSUES IN SCHOOL BUDGETING 2

Introduction:

My public school teaching career began in upstate New York in the fall of
2007, a year prior to the beginning of what some have called The Great Recession.
While excited to be teaching, I was perpetually aware that I was last hired and that
staffing cuts could result in the elimination of my position. As the economy receded
and affected more people in our community I became aware of two things: taxpayers
were frustrated by school districts that increased taxes when their families were
struggling financially, and those who were losing money were angry that teachers
continued to be paid on-step as per their labor agreement. Needless to say, my
introduction to school budgeting as a teacher was in the context of conflict.
Eventually my position was eliminated due to budget considerations.
As a potential building leader I could be closer to the budgeting process than I
have as a teacher. For the purpose of this project I am basing my information on the
Penn Manor School District in Lancaster County, Pennsylvania. Our class had
access to Chris Johnston, the Business Manager at Penn Manor. He provided a detailed
and engaging overview of the budget process in his district. Information about the Penn
Manor budget process, including several percentages given for budget allocation at Penn
Manor, come from this presentation.

Key Issues:

1) What is the current status of Pennsylvanias State Budget?

A significant portion of funding for the Penn Manor School District comes in the
form of State Revenues (31%). Therefore changes in state funding have the potential to
greatly impact local school districts. The budget section of the Pennsylvania state website
indicates that The goal of this commonwealth program is to provide a system of learning
experiences and opportunities that will permit each individual to achieve his or her full
potential intellectual development through high-quality basic education and special
education programs, and through high-quality career and technical education and higher
education. (http://www.budget.pa.gov). The General Fund and Special Funds category
shows an increase in funding for Pre K- 12 Education. In the 2015-2016 fiscal year this
number was $10,740,507, and it increased to $11,404,951 in the 2016-2017 fiscal year.
This budget proposes in increase to $11,860,685 in the fiscal year of 2017-2018.
(http://www.budget.pa.gov). A review of the Line Item Appropriations section of the
Governors Executive Government Budget Proposal reflects a 3.9% increase, however the
increase to Basic Education Funding (BEF) is only 1.7%. (http://www.budget.pa.gov).

2) How is the budget for this district allocated?

In the Penn Manor School District the bulk of the school budget (65%) is allocated
to Salaries and Benefits. This is consistent with what I have learned as a teacher
through annual budget presentations by business managers in two public schools over the
KEY ISSUES IN SCHOOL BUDGETING 3

past decade. Since taxpayer money funds school districts, employee compensation can be
a point of contention among taxpayers. This may be especially true in times of economic
uncertainty, or when faculty associations and school boards are in the process of
negotiating a contract. Debt and Fees make up the next largest category at Penn Manor
(11%). Next are the somewhat cryptically named Other Services (9%), and
Professional Services (7%). Property Services (3%), Transfers (3%), and Supplies
and Equipment (2%) round out the budget allocation at Penn Manor. Spending on
athletic programs, which account for a very small percentage of the overall school district
budget, falls into multiple categories.

3) How does the budgeting process function in this district?

When it comes to school district budgeting there is no concept of in season and

offseason. This is a year-round process, which begins each year in July in the Penn
Manor School District. The three separate steps in the budget adoption process are a
proposed preliminary budget, proposed final budget and final budget. For the 2016-2017
fiscal year the district proposed its preliminary budget in January 2016, proposed its final
budget in May 2016 and adopted the final budget in June 2016. The first step in the
process is estimating and projecting. Projecting is a process by which the business
manager can work with fixed numbers to predict how much an aspect of the budget will
cost. Estimating occurs when the cost of an item is not accurately predictable. One
option that school districts have in adopting budgets is to adopt a budget that raises taxes
equal to or less than its index, which is the average of the percentage increase in the
statewide average weekly wage and employment cost index. (PBSA, 2012, p.124).
Another option that school districts may choose is to submit a preliminary budget to the
Pennsylvania Department of Education 90 days prior to its adoption. Proposed budgets
must be submitted 30 days prior to adoption.

4) Who are the participants in the decision making process for the district, and what are
their roles?

Several stakeholders participate in the process of decision making for school

districts with regards to budgeting. An elected board of education (school board) has final
say on all financial matters within the district. The role of school board members is to
represent taxpayers within the district by ensuring that students have the best possible
education at the most reasonable possible cost. Ultimately taxpayers may be called upon
to vote for or against a school budget. As part of the central office at Penn Manor, the
business manager draws up a budget for the district. A certain amount of funding is
allocated by the business manager for each building in the district. As building leaders,
principals manage the budget for their respective buildings. It is the responsibility of the
building leader to allocate building money in ways that best serve the needs of students
and others in the building community. Teachers request funds for classroom supplies,
materials, field trips, and other learning opportunities from the principal.
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5) Provide a summary of approximate budget revenue and expenditures for the district
including personnel salaries, physical plant (buildings/grounds/utilities/maintenance),
student materials/supplies (books, laptops etc.), and other.

According to the Penn Manor School District homepage the Estimated Fund
Balance, Revenues, and Other Financing Sources Available for Appropriation was
$94,505,595 in the 2016-2017 fiscal year. Revenue from local sources made up the
majority of that funding ($56,534,580), followed by Revenue from State Sources
($23,570,990) and Revenue from Federal Sources ($986,992)
(http://www.pennmanor.net). Budgets consist of revenues, expenses, and shortfalls. A
positive shortfall constitutes a deficit. A fund balance may offset deficits. At Penn Manor
the Committed Fund Balance was $10,630,530 and the Unassigned Fund Balance was
$2,782,503 in the 2016-2017 fiscal year. Districts may keep 8% of the budget in the fund
balance. The 8% does not include any items that are earmarked, such as 1:1 technology
initiatives, building projects, and book purchases. Expenditures in the Penn Manor School
district for the 2016-2017 fiscal year totaled $81,092,562. This included $49,366,217 for
Instruction and $21,417,306 for Support Services. Salaries accounted for
approximately 65% of the total budget. District contributions to the Public School
Employees Retirement System (PSERS) are significant, and rising. Operation and
Maintainence Plant Services was an expenditure of $5,973,329. Chris Johnston explains
that the district contribution rose in one decade from $1,160,761 in 2005-2006 to
$7,960,063 in 2015-2016. The districts contribution was $9,467,227 in 2016-2017.

6) What is the tax situation in the district? How is the district funded and what is the state
of that funding?

Typical of public schools in Pennsylvania, the Penn Manor School district receives
most of its funding through local sources. Wage taxes in the 2016-2017 fiscal year
totaled approximately $4.9 million. The bulk of local tax revenue, however, comes from
real estate taxes. The amount of each tax bill is arrived at by multiplying the assessed
value of the property by the tax rate (or millage) (PSBA, 2012, p.111). PSBA (2012)
explains that the millage rate is based on a tax duplicate provided by the county, which
reflects the latest adjusted assessed value of all taxable real estate within the district. (pp.
111-112). School districts must adopt new millage rates each year. The millage rate for
taxpayers in the Penn Manor School District was 18.0100, and the district website
discloses that Current Real Estate Taxes totaled $47,391,411
(http://www.pennmanor.net).

7) What state subsidies are received by the district?

In the 2015-2016 fiscal year the Penn Manor School District received
approximately $24 million in state subsidies. The largest percentage of state subsidy was
allocated for Basic Education Funding (BEF) ($11,422,844). After BEF, Retirement
KEY ISSUES IN SCHOOL BUDGETING 5

received the largest allocation ($4.7 million). The cost of educator retirement in the State
of Pennsylvania is a topic of passionate discussion among stakeholders. The Public
School Employees Retirement System (PSERS) is one of the most financially attractive
aspects of public education for teachers, but the cost to the state and to school districts
constitutes a large financial commitment. The state allocated $2.7 million to the Penn
Manor School District for Special Education Funding (SEF). Transportation and
Planning and Construction (PLANCON) each received $1.3 million, and the district
received $1.2 million for Social Security. The PLANCON allocation constitutes
funding that the district gets back from debt service. Penn Manor received $620,860 for
Ready to Learn (RTL), a state initiative.

8) What impact has funding/reduction in funding has had on the district? How is it likely
to effect the district in the future?

From the late 1980s to the mid 1990s, tax increases in the Penn Manor School
District varied significantly from year to year. The data that Chris Johnston shared
indicates that between 1987-1988 and 1994-1995 there were just two instances in which
the district increased or decreased school taxes in consecutive years, and both were
increases. Taxpayers in the district enjoyed steady reductions in school taxes from 1995-
1996 to 2001-2002. Recently, since 2011-2012, the district had steadily increased taxes
each year between 1% and 2%. Due to a substantial building project revolving around
construction at Penn Manor High School, the district is increasing school taxes 7% for two
consecutive years in 2015-2016 and 2016-2017. This will be followed by a projected
increase of 4.5% in 2018-2019 and 3% in 2019-2020. As of 2013 school districts are
legally required to use a competitive bidding process for goods and services that will
exceed $18,500 in cost (PSBA, 2012, pp. 142-143). Having completed that process the
school district must accept the lowest responsible bidder. If the district deems a bidder
irresponsible it should offer a hearing to that bidder in order to preserve due process of
law. To pay for high cost projects, like building construction or renovation, districts may
issue bonds to the general public. Bonds are independently rated and issued by districts
with maturity dates. In general, districts issue bonds when in need of substantial funds in
the short term. Since banks would be unlikely to loan the amounts of money necessary for
school building projects, bonds allow districts to collect money from bonds sold presently
and pay bondholders back, with interest, when the bond matures.

9) What other sources of funding does the district receive (grants, donors, district
foundations etc.)?

A review of the Penn Manor School District Preliminary General Fund Budget
yielded little information regarding funds received from grants, donors, or district
foundations. Under the subheading Estimated Revenues And Other Financing Sources,
item 9000 Other Financing Sources is left blank (http://www.pennmanor.net). From the
state, Penn Manor received $620,860 from the Ready to Learn Block Grant. Other
significant donors and/or district foundations do not seem to be listed in this budget.
KEY ISSUES IN SCHOOL BUDGETING 6

10) What other information is pertinent to a discussion of this districts budget?

Chris Johnston and Ann Gaudino, Ed.D, offer insightful recommendations for new
principals regarding budgeting. They suggest that new principals meet with the district
business manager or accountant for the purposes of discussing general ideas and concepts
as they relate to the district and building. It is important for principals to familiarize
themselves with budget codes, to understand how much money they can spend, and the
sources of those funds. Funding will likely differ between elementary and secondary
schools. At the elementary level allocating an equal fixed amount to each teacher may be
appropriate. At the secondary level different subjects may require different amounts of
money to function appropriately. Principals must understand a bit of history about how
much money has been spent in the past, and on what it has been spent. School boards
vote on District Budget Paid Bills monthly, which may be available online. If not posted
online, those records are available via the Freedom of Information Act.

Commendations and Recommendations:

Strengths
The Penn Manor School District displays openness and transparency in its
budgeting process.
The business manager, Chris Johnston, is able to effectively explain all aspects of
the budget and the process associated with creating it.
Materials available for review effectively explain the necessity of a tax increase
based on a building project
The business manager and school board have an effective working relationship and
are able to have meaningful dialogue about the budget

Recommendations
The Penn Manor School District should continue to be transparent, providing
opportunities for the public to view all aspects of the budget and budgeting
process.
The district should pursue additional funds from donors and district foundations.
Funds received from donors and district foundations should be showcased in a
more visible manner.
The budget process should involve stakeholders in all aspects of education,
including taxpayers, students, parents, the school board, superintendent, business
manager, building leaders, and teachers.
The business manager should continue to be available to stakeholders to explain
budget concepts and answer questions.
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Conclusion:

Up to this point my impressions of the school budgeting process have been

informed by my career as a classroom teacher. My introduction to this process was in a
contentious atmosphere during what some have named The Great Recession. Although
I tend to dislike that moniker, that recession had a direct impact on my position being
eliminated. Other than that experience, budget conversations tend to occur each spring at
budget time and during contract negotiations.
I feel fortunate to have had the opportunity to study Penn Manor School Districts
budget for this assignment. This endeavor has shown me that the concept of budget
time is not accurate, as the budget process spans the entire year. I also feel more
confident in my ability to decipher a school budget, understanding with more clarity the
sources of revenue and expenditures.
This assignment has reinforced my belief that if I become a building leader I will
need to seek guidance from those with more financial experience than me. A strong
business leader, with a gift of clear explanation, will be an invaluable resource for me.
This would be especially true in my first years as a principal with authority over a
building budget.
Stakeholders invest in education in various ways. Paying school taxes is one of
the most obvious ways in which community members participate in the education of
students. A building leader has great responsibility to be sure that these funds are used as
responsibly and efficiently as possible. The building leader also has great opportunity to
use those funds to assure quality learning experiences for students and fulfill his or her
vision and the mission of the school district.
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REFERENCES

Pennsylvania School Boards Association. (2012). Pennsylvania School Law Handbook.

Mechanicsburg, PA: Pennsylvania School Boards Association.

Commonwealth of Pennsylvania, 2017-2018 Governors Executive Budget,

budget.pa.gov, March 5, 2017

http://www.budget.pa.gov/PublicationsAndReports/CommonwealthBudget/Docu
ments/2017-18%20Proposed%20Budget/2017-18%20Budget%20Document%20-
%20Web.pdf

Commonwealth of Pennsylvania, 2017-2018 Line-Item Appropriations, budget.pa.gov,

March 5, 2017

http://www.budget.pa.gov/PublicationsAndReports/CommonwealthBudget/Docu
ments/2017-18%20Proposed%20Budget/2017-
18%20Web%20Tracking%20Run.pdf

Penn Manor School District Homepage, 2017-2018 Preliminary General Fund Budget

PDE 2028, pennmanor.net, March 5, 2017

http://www.pennmanor.net/business/2017-2018-preliminary-general-fund-budget-
pde-2028/