Iowa School Finance: Five Key Measures

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Iowa School Finance Five Key Measures
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Overview

• What are the financial measures that every board
  member should know about their district?

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Overview

• Equip board members to answer the question How
  are we doing financially?
• These measures apply to the General Fund so
  only part of the equation
• Not exhaustive but knowing these five will give a
  fair and accurate representation of the financial
  health of the General Fund of the school
  district.
• Need trend not a single data point.
• Some are retrospective while others are
  prospective (and some need to be both).

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5. Solvency Ratio

• What is it?
• Measures the fund balance (cash) position at the
  conclusion of the fiscal year.
• General Fund measure
• Unreserved/Undesignated General Fund Balance
  Divided by Total General Fund Revenues
• What isnt it?
• A measure of the limit of spending.
• Why important?
• Can impact bond rating
• Public understands

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4. Enrollment Trend

• Finance formula is per pupil so trend in
  enrollment is a huge leading indicator of
  financial health.
• Look not at just headcount enrollment but also
  enrollment served.
• What are the implications of the following two
  trends?

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3. Staff Costs as Percent of Total General Fund

• Staff costs are the single largest expense in the
  General Fund.
• School districts range from 75 to 85 of total
  General Fund expenditures are on staff.
• Important because ultimately impacts spending
  authority.
• Take out special education staff (ultimately
  doesnt impact spending authority).
• Consider the following example -

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Staff Costs

• Is this a problem?

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Staff Costs

• How about now?

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2. Balanced Spending Authority Budget

• Spending authority measure used during budget
  preparation.
• Question How much can I spend and not cause my
  Unspent Balance to decline?
• Annual measure
• Sets target for expenditure increase.
• If planning to use Unspent Balance to finance
  ongoing expenditures you need to figure out how
  you will sustain.

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1. Unspent Balance (Unspent Budget Authority)

• The single most important measure.
• Total amount of spending authority remaining at
  conclusion of fiscal year.
• Why important? SBRC will not close you down for
  a negative solvency ratio but go negative two
  years and you can be subject to Phase 2
  (Russell).
• Calculation
• Beginning Unspent Balance
• Current Year Spending Authority
• - General Fund expenditures
• Ending Unspent Balance

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Unspent Balance

• Trend is key
• Project at least three times during the fiscal
  year (adopt budget, mid year and then when
  setting budget for upcoming year).
• Project into the future 5 years minimum
• Tools on IASB website.
• Use per pupil measures to compare to other school
  districts
• Consider the following

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Unspent Balance
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Conclusion

• 5. Solvency Ratio
• 4. Enrollment Trend
• 3. Staff costs as percent of total General Fund
  Expenditures
• 2. Balanced Budget for Spending Authority
• 1. Unspent Balance

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Conclusion

• Feedback is welcomed!
• Larry Sigel, School Finance Director
• Iowa Association of School Boards
• [phone] ext. 235
• [phone] cell
• lsigel_at_ia-sb.org