Fundamentals of School Finance

WSSDA WebinarMay 14, 2014

Barbara Posthumus, Director of Business ServicesLake Washington School Districtbposthumus@lwsd.org

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Budgeting for Capital Levies Budgeting for Bonds Debt Service Limitations Front-Funding Monitoring and Reporting

Agenda

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For levies passed in 2014, collection begins in 2015

Typically collect 53% in Spring and 47% in Fall

For newly passed levies, your 2014-15 budget will only include the spring collection.

The 2nd year, 2015-16 will include 100% of annual levy

Capital Levies

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Example:$5.0 Million levy over 4 years = $20Million$5.0 x 53% = $2,650,000 = 2014-15 revenue

$5.0 x 53% = $2,650,000 plus$5.0 x 47% = $2,350,000

Total = $5,000,000 = 2015-16 revenue

Capital Levies

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Technology Levies have special rules Beginning in 2008, OSPI required that

expenditures on staff training and software related to technology systems must be spent in the General Fund

Capital Technology Levy revenue then must be transferred from the Capital Projects Fund to the General Fund to cover the costs

You will see this in the presented budget as a transfer out of capital and a revenue in GF

Technology Levies

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100% of Revenue and Expenditures are in Capital Projects Fund

Facility Levies

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Great news – you passed a bond!! Determination of when to sell bonds Must be able to spend 85% of proceeds

within 3 years Business Office will work with underwriter

and advisor to sell bonds Board will need to pass resolution Superintendent/Business Office will conduct

call with rating agencies to rate the bonds

Budgeting for Bonds

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Bonds impact two funds: Revenue from bond sale and construction

expenses go in Capital Projects Fund Principal and Interest Payments on Bonds

are paid out of debt service fund. The presented budget will reflect estimated

amounts if prior to actual sale Will need to levy an amount sufficient to

pay principal and interest

Budgeting for Bonds

Voted Debt Limitation

The total indebtedness of a district can not exceed 5% of the value of taxable property within a school district. This includes all non voted debt and all voted debt (bonds).

Voter approved bond capacity may exceed 5% of the district’s assessed valuation but the principal amount of the bond sale is limited to the available debt capacity.

Small school districts may have to structure bond issues and repayments differently than large districts due to the debt limitations.

Debt Limit Example Griffin School District AV=$1,300,000,000 5% debt limitation = $65 million Current outstanding voted debt $13 million Current outstanding non voted debt $300K Cost of a new high school $100 million◦ To construct a high school – would likely need to

qualify for state matching funds and would need to ensure funding availability before moving forward. Maximum bond issuance would be about $52 million.

◦ In this scenario, a district could issue ½ and then issue the other ½ in the subsequent year. This would increase the cost of issuance but would likely result in more available capacity (if AV increases and additional existing debt is paid down).

Debt Limitations LGOs, lines of credit, capital leases, LOCAL

program obligations, conditional sales contracts, and qualified zone academy bonds are all examples of non-voted debt subject to different rules for use of funds.

All non voted debt above is limited to .00375 (3/8th of 1 percent) of the value of taxable property within the school district

Example of a use of non-voted debt Utilizing the State Treasurer’s LOCAL

program, one local district was able to purchase school buses over a 13 year term. They are making payments utilizing state funds from the depreciation schedule.

This funding allowed them to fund buses without utilizing a transportation levy or cutting educational programs.

Property Tax Levy RateRegular and Excess Levy Rates(Rate Per $1,000 of Assessed Value)

2014 2015 2016 2017 2018 2015 2016 2017$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

2.2

3

2.2

2

2.1

0

1.9

3

1.9

8

1.4

7

1.4

0

2.0

0

3.6

2

3.4

4

3.2

5

3.1

6

2.9

8

2.7

8

2.5

0 2.1

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Bond Levy

Front-funding Can you spend dollars from voted levies or

bonds prior to collection? Maybe……. Need to have other reserves Need to clearly track new expenditures

separately Need a clear cash flow plan

Front-funding Why you may not want to

◦If use other reserves to front-fund, then those reserves will not be available for emergencies

◦May show negative fund balance line item on your budget – requires additional explanations

Depends on your level of reserves and need to use those reserves immediately for other things

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For best transparency, sources of funds should be clearly identified.

Bonds vs. levies Multiple Levies crossing over years

Budgeting Capital Projects

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Monthly board financial reports provided by district

If conducting multi-year construction project, outstanding encumbrances in Capital Projects Fund may exceed budget

District staff have reporting requirements to OSPI if receiving State Assistance on construction projects

Monitoring and Reporting

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Additional Resources Organization and Financing of Washington

Public Schoolshttp://

www.k12.wa.us/safs/PUB/ORG/13/Final%20Edition%202013.pdf

Funding Resources for School Facilitieshttp://www.k12.wa.us/SchFacilities/default.aspx

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Questions