School District Organization

This article is intended to serve as an introduction to contingency budgets. Much more in-depth information regarding the budgeting process, including adoption and monitoring of a budget may be found at http://www.emsc.nysed.gov/mgtserv/budgeting.shtml. Excerpts from documents found at that website are included here.

At the end of this document is a selected list and description of sections of Education Law and Regulations of the Commissioner of Education that govern the budgeting process. It is not an all inclusive list but is intended to give the reader a starting point for legal references. In addition, we have included samples of calculating a contingency budget cap and an administrative component cap. Both are described in the paragraphs below. A chart showing how categories of school district expenses are to be divided for the purpose of the three-part budget is also included.

All school districts, except the Big Five city school districts (New York, Rochester, Buffalo, Yonkers and Syracuse), must present a budget to district voters for approval each year (in the Big Five city school districts budgets are not approved by the voters but rather are part of the city budget developed and approved by the mayor and the city council). This initial vote must be held on the third Tuesday of May. Boards of Education are required to prepare budgets in plain language and delineated into three components: Administrative, Program and Capital. Education Law and Regulations of the Commissioner of Education define the types of expenses that make up each of these three components (see chart at end). All costs needed to fund the education program must be included in each component to ensure that voters will have a clear understanding of the proposed budget (see 2/21/2006 memo regarding separate propositions from Jean C. Stevens at: Annual School District Budget). If a majority of voters approve the budget, the district may spend in accordance with its approved plan.

Should the voters defeat the budget, the district has the option of offering a revised budget to voters for a revote, or immediately adopting a contingency budget. Districts are only allowed one budget revote to be held on the third Tuesday in June. If the budget fails a second time, then the Board of Education must adopt a contingency budget before July 1st. In the case of a contingency budget, districts are constrained in two ways – determination of ordinary contingency budget appropriations and the statutory caps. Ordinary contingency expenses are defined as the expenditures absolutely necessary to operate and maintain schools (except for those items over which the statutes themselves either provide mandates for or give discretion to the board of education).

Since 1998, school districts operating under a contingency budget are subject to two caps. First, the overall increase in the total budget, with certain exclusions, is capped at the lesser of 120 percent multiplied by the average of the national consumer price indexes (CPI) determined by the U.S. Department of Labor for the 12 month period preceding January first of the current year or four percent. Second, the administrative component of the budget is capped at the lesser of (1) the percent of the administrative component to the total budget in the prior year’s budget, not including the capital component, or (2) the percent that the administrative component comprised in the last proposed defeated budget for the subsequent year, not including the capital component. (A sample calculation of the contingency budget cap and administrative component cap may be found in Appendices I and II, respectively.)

Education Law section 2023 identifies the following expenses to be excluded from the calculation of the budget cap[1]:

(ii) Expenditures resulting from a court order or judgment against the school district;

(iii) Emergency expenditures that are certified by the commissioner as necessary as a result of damage to, or destruction of, a school building or school equipment;

(iv) Capital expenditures resulting from the construction, acquisition, reconstruction, rehabilitation or improvement of school facilities, including debt service and lease expenditures, subject to the approval of the qualified voters where required by law; this also includes debt service for the purchase of school buses.

(v) Expenses relating to increases in total public school enrollment, including pre-k, from the prior year;

(vii) Expenditures for payments to charter schools pursuant to section twenty-eight hundred fifty-six of this chapter; and

2. Multiply this adjusted base budget amount for the prior year by the CPI to determine the subsequent year contingency budget amount.

3. Determine the amount of non-contingency and contingency items that would need to be removed from the contingency budget.

4. Finally, check the administrative component to ensure it stays within statutory limits.

The Office of Educational Management Services posts on its website a sample spreadsheet developed by a school business official to guide districts through the calculation of their contingency budgets (see CONTINGENT BUDGET CAP WORKSHEET and at the end of this document along with a sample administrative percent calculation). In addition, Education Law 2022 requires district residents to receive a budget notice which includes the contingency budget amount and a statement of assumptions regarding the calculation of such amount.

If the budget originally proposed to the voters is less than the contingency budget cap, how is a contingency budget then calculated?

Cuts would not have to be made to reach the contingency budget cap but would have to be made to meet the definition of contingency appropriations. The proposed budget includes all contingency and necessary expenses to operate the school district (see J. Stevens memo at: Annual School District Budget ). When the proposed budget is below the contingency budget cap, the contingency budget is calculated by removing all non-contingency appropriations from the proposed budget. Items which are statutorily considered non-contingency expenses are, for example, student supplies, community use of buildings and grounds, certain equipment purchases and certain salary increases. Therefore, the contingency budget adopted by the Board of Education would always be less than the proposed budget. In this situation, the “Contingency Budget” column of the budget notice mailed to all residents must reflect these reductions.

What does a district do if they incur an unanticipated, ordinary contingency expense, not budgeted for, while on a contingency budget?

A district may increase its contingency budget up to the cap amount for an unanticipated, ordinary contingency expense that it might encounter during the year. An example would be a high-cost student with special needs who moves into the district after the school year has started and was not anticipated. If a district is already at its contingency budget cap, there is no authority to exceed that cap amount. Therefore, budgetary adjustments would have to be made within the budgetary constraints.

What is the appropriate practice for calculating costs associated with an increase in enrollment?

In calculating exclusions to the budget cap, districts should use cost-based approaches rather than formula-driven approaches to calculate an expense for enrollment growth. Just because a district projects a two percent growth in enrollment does not mean they will necessarily have a two percent increase in expenditures. Districts should examine and calculate specific costs associated with the projected enrollment increase, i.e. new teaching staff, textbooks, etc.

Questions about district-specific budgeting issues should be addressed to your local school district. General information and more detailed analysis of the budgeting process may be found at our website - http://www.emsc.nysed.gov/mgtserv/budgeting.shtml.

[1] Legislation enacted for 2007-2008 provides that for districts receiving increased Foundation Aid in 2007-2008, such increase is to be considered a Grant-in-aid. Grants-in-aid are excluded from the calculation of the contingency budget cap, thus allowing the district to spend the increased Foundation Aid without it being subject to the cap.

-Budgeted expenditures resulting from a court order or judgment against
the district 5,000

-Budgeted expenditures certified by the Commissioner as necessary as a result
of damage to, or destruction of, a school building or school equipment 20,000

-Budgeted capital expenditures resulting from construction, acquisition,
reconstruction, rehabilitation or improvement of school facilities, including
debt service and lease expenditures, subject to the approval of the qualified
voters where required by law 150,000

- Budgeted expenditures of gifts, grants in aid or insurance proceeds(*See Note at End) 25,000

- Budgeted expenditures resulting from a court order or judgment against
the district 30,000

- Budgeted expenditures certified by the Commissioner as necessary as a
result of damage to, or destruction of, a school building or school equipment 50,000

     -Budgeted expenditures attributable to projected increases in public school
enrollment                                                                                                             125,000

    -Payments to Charter Schools                                                                                      -

     -Student supplies
     -Community use of buildings and grounds
     -Certain equipment
     -Certain salary increases

* Consumer Price Index (for purposes of preparing the school budget notice and calculating contingent budget cap for 2007-08 budgets)

Chapter 436 of the Laws of 1997 establishes a limit of a contingent budget over the district budget for the prior year. After certain expenditure categories are excluded, the overall increase cannot exceed the lesser of four percent or 120% multiplied by the average of the national consumer price indexes determined by the U.S. Department of Labor for the 12 month period preceding January first of the current year. That average for calendar year 2007 is 2.8%. The average is multiplied by 120% to calculate the 3.36% contingent budget cap for 2008-09.

The spreadsheet above was provided by Erin Thomas Brennan to calculate compliance with contingency budget cap.

NOTE: LEGISLATIVE CHANGES FOR 2007-2008 INCLUDE THE FOLLOWING THAT AFFECT THE CALCULATION OF THE CONTINGENCY BUDGET CAP –

§ 22. Subdivision 4 of section 2023 of the education law is amended by adding a new paragraph b-1 to read as follows:
b-1. Notwithstanding any other provision of this subdivision to the contrary, in the event a state grant in aid provided to the district in
the prior year is eliminated and incorporated into a non-categorical general state aid in the current school year, the amount of such grant may be included in the computation of total spending for the prior school year, provided that the commissioner has verified that the grant in aid has been incorporate into such non-categorical general state aid.

§ 13. Subdivisions 2, 2-a and 2-b of section 3602 of the education law, as added by chapter 57 of the laws of 1993, paragraph c of subdivision 2 and paragraph c of subdivision 2-a as amended by chapter 532 of the laws of 1997, are amended and four new subdivisions 3, 4, 5 and 5-a are added to read as follows:
b-1. Notwithstanding any other provision of law to the contrary, for the two thousand seven--two thousand eight through two thousand ten--two thousand eleven school years, the additional amount payable to each school district pursuant to this subdivision in the current year as total foundation aid, after deducting the total foundation aid base, shall be deemed a state grant in aid identified by the commissioner for general use for purposes of sections seventeen hundred eighteen and two thousand twenty-three of this chapter.

1. The foundation aid increase the district received in the base year is treated as part of the base budget and included in the base year adopted budget amount (line 5); and

2. The foundation aid increase the district is projected to receive for the current school year is treated as a grant in aid and budgeted in addition to the current year contingency budget (line 27).

2007-08 Administrative Component =
2007-08 Administrative Component + 2007-08 Program Component

2008-09 Administrative Component (Proposed Budget) ______ =
2008-09 Administrative Component (Proposed) + 2008-09 Program Component (Proposed)

If, in this example, the proposed budget was defeated and the district decided to immediately adopt a contingent budget, then the administrative component of that contingent budget could not be greater than 11.11%. If, as allowed by law, the district did hold a budget revote and the budget proposed again was defeated, then the administrative cap of the contingent budget could not be greater than the lesser of the 2007-08 adopted budget administrative cap or the administrative cap of the budget that was proposed in the revote.

APPENDIX III

CONVERSION OF THE BUDGET TO THREE COMPONENTS

FUNCTION OR ACCOUNT	SBM CODE	TOTAL	ADMIN.	PROGRAM	CAPITAL
Board of Education	1099.0		X
Central Admin	1299.0		X
Finance	1399.0		X
Legal Services	1420.0		X	X
Personnel	1430.0		X
Records Mgmt.	1460.0		X
Public Information	1480.0		X
Operation Of Plant	1620.0				X
Maint. Of Plant	1621.0				X
Other Central Serv.	1699.0		X
Judgments & Claims	1930.4				X
Refund of Taxes	1964.4				X
Other Spec. Items	1998.0		X
Curr. Dev. & Sup.	2010.0		X
Supervision Reg. Schl.	2020.0		X
Supervision Spec. Schl.	2040.0		X
Res. Eval. & Plan.	2060.0		X
FUNCTION OR ACCOUNT	SBM CODE	TOTAL	ADMIN.	PROGRAM	CAPITAL
Instruction (Net of supervision)	2999.0			X
Purchase of Buses	5510.21				X
Other Dist. Trans.	5510.0			X
Garage Bldg.	5530.0			X
Contract Trans.	5540.0			X
Community Service	8998.0			X
Employee Benefits	9098.0		X	X	X
Debt Service	9898.0				X
Trans. to Capital	9950.9				X
Trans. To Debt	9901.96				X
Other Transfers	9951.0			X

(This list includes only select sections of Education Law and Commissioner’s Regulations.)

[1] Legislation enacted for 2007-2008 provides that for districts receiving increased Foundation Aid in 2007-2008, such increase is to be considered a Grant-in-aid. Grants-in-aid are excluded from the calculation of the contingent budget cap, thus allowing the district to spend the increased Foundation Aid without it being subject to the cap.