General Budget Process Information
GLOBAL BUDGETING TERMS:
Budgeting is the accepted method to allocate limited resources to demanded services. The budget process focuses attention on decisions concerning the overall direction, priorities, and use of resources.
Budgeting helps School Administrative Units make better financial and program decisions, improve operations, and enhance relations with citizens and other stakeholders.
Budgeting/Budget Process - the sequence of activities involved in planning a School Administrative Unit’s educational programs, estimating the needed expenditures and revenues to implement these programs, gaining appropriate approval, and using the budget to help manage operations.
Budget Calendar - a calendar of events in the budgeting process that designates what specific things have to be done and when. The structure of the budget calendar identifies who is responsible for different activities within the budget process and what other people/groups are involved.
Budget Elements - three elements make up a budget:
- A narrative overview of the total educational program to be provided by the School Administrative Unit;
- An estimate of the expenditures needed to carry out the desired program;
- An estimate of the revenues that will be available to pay for the expenditures
Expenditures - the total amount of money that a School Administrative Unit spends within a fiscal year, i.e.: the cost of goods delivered or services rendered, whether paid or unpaid.
Revenues - funds expected to be available during the budget year to pay for the expenditures within the budget, i.e.: the income received by a school district. Within a School Administrative Unit, revenues come from a variety of sources. Revenues should be greater than or equal to the expenditures in the budget.
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Essential Programs and Services/EPS Formula - the programs and resources that are essential for students to have an equitable opportunity to achieve Maine's Learning Results. The EPS formula determines both the state and local share of funding needed for each School Administrative Unit to have Essential Programs and Services. The funding formula is designed to support student needs, and is based on years of research and information sourced from high performing cost effective school units.
Funding Formula - a calculation of the share of the costs of PreK-12 education between State and Local funds. In Maine, the determined Essential Programs and Services (EPS) for the School Administrative Unit (minus) the required Local Share of those costs (equals) the State Share.
EPS - Local Share = State Share
Mill Rate - the amount of tax payable per dollar of the assessed value of a property. The mill rate is based on "mills." It is a figure that represents the amount per $1,000 of the assessed value of the property, which is used to calculate the amount of local property tax.
Maximum Mill Rate Expectation - the maximum State and local spending target for a School Administrative Unit. This expectation is defined by the Commissioner of Education using a specific calculation that includes operating costs, other subsidizable costs, and debt service allocations. The maximum mill rate expectation is calculated annually.
Operating Costs - all School Administrative Unit expenditures except the following:
- subsidizable costs that are defined as program costs (see definition) and debt service costs (see ‘other subsidizable costs’ definition);
- school construction costs not approved by the state;
- community service costs;
- expenditures from federal sources, except federal Impact Aid;
- ½ of salary and benefit costs for superintendents, associate superintendents, and assistant superintendents;
- transportation costs not associated with transporting students from home to school and back each day;
- teacher retirement costs
Other Subsidizable Costs - Cost expenditures for debt services, which include:
- principal and interest costs for state-approved school construction projects;
- state-approved leases;
- insured value factor costs
Program Costs - School Administrative Unit expenditures for specific programs that are treated separately from operating costs - these categories of programs can have unusually high costs. Program costs include:
- costs associated with transportation;
- special education;
- vocational education (applied technology);
- early childhood education.
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ACCOUNTING TERMS:
Accounting is the language of budgeting. The relationship between budgeting and accounting is extremely significant. Accounting allows School Administrative Unit employees and stakeholders to have relevant financial information in a usable format. Accounting also serves as the organizing structure around which the budget is developed.
Allocation - An authorization to set aside a specific amount of funds, for a specific purpose, within a specific period.
Assets - a resource owned by a School Administrative Unit that provides present or future value. Examples of assets are (but are not limited to): cash in bank, investments, bond insurance costs, land/land improvements, and machinery/equipment.
Bonds - a loan made by an investor to a School Administrative Unit that includes the details of the loan and its payments. Bonds are used to finance projects and operations.
Capital Budget - refers to the expenditures for land, buildings, and equipment.
Capital Improvement - the addition of a permanent structural change or the restoration of some aspect of the School Administrative Unit’s property that will either enhance its overall value, prolongs its useful life, or adapts it to new uses.
Debt - an amount owed for funds borrowed.
Debt Service Payment - funds that account for financial resources that are restricted,
committed, or assigned to expenditure for principal and interest for long-term debt incurred for the construction of a new school or a new addition to an existing school.
Liabilities - Liabilities represent financial obligations of a School Administrative Unit to transfer funds or provide services to other entities in the future as a result of past transactions or events.
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Fund Accounting - accounting for School Administrative Units that uses an approach organized around funds that are segregated for the purpose of carrying on specific activities or objectives. Types of funds and fund classifications are required and set forth by law.
General Fund - the most common fund [utilized by every school district], which is used to account for all financial resources except those required to be accounted for in another fund.
Special Revenue Funds - funds used to account for the proceeds of special revenues restricted to expenditures for specified educational purposes. An example of a special revenue fund is: revenue received by the federal government for the education of handicapped students.
Capital Project Funds - funds used to account for the financial resources involved in acquiring or constructing major capital facilities in the School Administrative Unit.
Debt Service Funds - funds used to accumulate money to repay the School Administrative Unit’s long-term debt. Long-term debt is usually in the form of bonds that have been sold to finance large-scale capital expenditures.
Enterprise Funds - funds used to account for businesslike operations of the School Administrative Unit in which direct services are provided to customers. An example of a enterprise fund is the food service program.
Fund Balances - the balance left in a School Administrative Unit’s fund accounts, less any accounts payable, at the end of the fiscal year. Balance sheets summarize fund balances of the district at any particular time.
Unfunded Mandate - a Federal or State statute or regulation that requires a School Administrative Unit to perform certain actions with no money provided for fulfilling the requirements.
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Personnel - staffing needed to operate the School Administrative Unit’s programs, which include both instructional personnel and non-instructional support personnel.
Salaries - amounts paid to both permanent and temporary employees, including those substituting for permanent positions.
Benefits - amounts paid by the School Administrative Unit on behalf of employees that are not included in the gross salary, including: group insurance, retirement contributions, health benefits, tuition reimbursement, and other benefits.
Purchased Services - services purchased by the School Administrative Unit that, by nature, can only be performed by people/companies with specialized skills/knowledge. These can include but are not limited to: engineers, auditors, consultants, repair services, and maintenance services.
Consumables - supplies that are consumed, worn out, or deteriorated through regular use.
Equipment - material items that retain their original shape or appearance with use, and are nonexpendable (the items are more feasible to repair than completely replace).
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