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Glossary
of Budget Terms
Below are a few
definitions to help you follow the school budget process
in New York State.
Bond: Money
borrowed to pay for a school district expenditure.
Typically, the money is used for capital expenditures,
such as the purchase of buses or the construction or
renovation of a building, although in some cases school
districts also issue bonds for other large expenditures
such as the repayment of back taxes in a certiorari
settlement. The goal in borrowing is to spread the cost
out over a period of years and lessen the cost to
taxpayers in any one year. By definition, a bond is a
written promise to pay a specified sum of money, called
the face value or principal amount, at a specified date
in the future (the maturity date), together with
periodic interest at a specific rate.
Budget: A
plan of financial operation expressing the estimates of
proposed expenditures for a fiscal year and the proposed
means of financing them.
Budget
calendar: The schedule of key dates that the Board
of Education and administrators follow in the
preparation, adoption and administration of the budget.
Budget cap:
In the event of a school budget defeat and the adoption
of a contingent budget, school districts must cap their
spending increase at 120% of the Consumer Price Index or
4 percent, whichever is lower. For more on this, see the
definition of a contingent budget.
Capital outlay:
An expenditure that is generally more than $20,000 and
results in the ownership, control or possession of
assets intended for continued use over long periods of
time. These can include new buildings or building
renovations and additions; new school buses; as well as
new equipment (i.e. desks, computers, etc.) and library
books purchases for a new or expended school building.
Consumer Price
Index (CPI): An index of prices used to measure the
change in the cost of basic goods and services in
comparison with a fixed base period. Also called
cost-of-living index. However, the CPI does not take
into account many of the items that cause school
district budgets to rise, such as the increasing cost of
health insurance, liability insurance and retirement
contributions.
Contingent
budget: Under state law, school boards can submit a
budget to voters a maximum of two times. If the proposed
budget is defeated twice, the board must adopt a
contingency budget. The board also has the option of
going directly to a contingent budget immediately after
the first budget defeat. Under a contingent budget, the
district may not increase spending by more than this 120
percent of the Consumer Price Index or 4 percent,
whichever is lower. The items exempt from this cap are
tax certiorari and other legal settlements, debt service
(mortgage payments), and costs associated with
enrollment growth. Under a contingent budget, the
percentage of the budget devoted to administrative costs
cannot increase from what it was in the prior year's
budget or the last defeated budget, whichever is lower.
Once a contingent budget is established, community
residents are no longer allowed to petition boards of
education to put additional items up for a separate
vote.
Employee
benefits: Amounts paid by the district on behalf of
employees. These amounts are not included in the gross
salary. They are fringe benefits, and while not paid
directly to employees, are part of the cost of operating
the school district. Employee benefits include the
district cost for health insurance premiums, dental
insurance, life and disability insurance, Medicare,
retirement, social security and tuition reimbursement.
Equalization
rate: In simple terms, an equalization rate
represents the average level of assessment in each
community. For example, an equalization rate of 80 means
that, on average, the property in a community is being
assessed at 80 percent of its market value. The works
"on average" are stressed to emphasize that an
equalization rate of 80 does not mean that each and
every property is assessed at 80 percent of full value.
Some may be assessed at lower than 80 percent, while
others may be assessed at higher than 80 percent.
Equalization rates
are established by the New York State Board of
Equalization and Assessment. School districts that
comprise more than one city, town or village must use
the equalization rate to determine the tax rates for
each municipality. The purpose is to bring some
semblance of equity to how the taxes are distributed in
any one school district, so that ideally a home with a
full market value of $100,000 in one community will pay
the same taxes as a home with a market value of $100,000
in the next community, regardless of how those two homes
are assessed.
Expenditure:
Payment of cash or transfer of property or services for
the purpose of acquiring an asset or service.
Fiscal Year:
A fiscal year is the accounting period on which a budget
is based. The New York State fiscal year runs from April
1 through March 31. The fiscal year for all New York
counties and towns and for most cities is the calendar
year. School districts in the state operate on a July 1
through June 30 fiscal year.
Fund Balance:
A fund balance is created when the school district has
money left over at the end of its fiscal year from
either under spending the budget or taking in additional
revenue. Part of the fund balance (appropriated fund
balance) may be applied as revenues to the district's
following year budget. A portion - up to two percent of
the total budget - may also be set aside (unappropriated
fund balance) to pay for emergencies or other unforeseen
problems.
Fundamental
Operating Budget (FOB): The total amount of money
required to pay for current-year programs, staffing and
services at next year's prices -- i.e., what the next
year's budget would be if the current year's budget were
simply "rolled over."
Revenue:
Sources of income financing the operation of the school
district.
Salaries:
The total amount paid to an individual, before
deductions, for services rendered while on the payroll
of the district.
Tax base:
Assessed value of local real estate that a school
district may tax for yearly operational monies.
Tax levy:
Total sum to be raised by the school district after
subtracting out all other revenues including state aid.
The tax levy is used to determine the tax rate for
property owners in each of the cities, towns or villages
that makes up a school district.
Tax rate:
The amount of tax paid for each $1,000 of assessed value
of property. In districts that cover just one
municipality, the tax rate is figured simply by dividing
the total assessed property value by 1,000 and then
dividing that again into the tax levy (the amount of
money to be raised locally). In districts that encompass
more than on municipality, the formula for figuring the
tax rate is more complicated. It involves assigning a
share of the total tax levy to each municipality and
applying equalization rates to take into account
different assessment practices.
STAR: The
New York State School Tax Relief (STAR) program provides
exemptions from school taxes for all owner-occupied,
primary residents, regardless of income. Senior citizens
with combined incomes that do not exceed $62,000 may
qualify for a larger exemption.
Supplies:
Consumable materials used in the operation of the school
district including food, textbooks, paper, pencils,
office supplies, custodial supplies, material used in
maintenance activities and computer software.
Support
services: The personnel, activities, and programs
that enhance instruction. These include attendance,
guidance, and health programs; library personnel and
services; special education services; professional
development programs; transportation; administration;
buildings and ground operations; and security.
Three-part
budget: School district must, by law, divide their
budgets into three components - administrative, capital
and program - and each year they must show how much each
portion has increased in relation to the whole budget. A
further definition of the three components is as
follows:
-
Administrative Budget Component: These
expenditures include office and administrative costs;
salaries and benefits for certified school
administrators who spend 50 percent or more of their
time performing supervisory duties; data processing;
public information; legal fees; property insurance;
and school board expenses.
- Capital
Budget Component: This covers all school bus
purchases, debt service on buildings, and leasing
expenditures; tax certiorari and court-ordered costs;
and all facility costs, including salaries and
benefits of the custodial staff; service contracts,
maintenance supplies and equipment; and utilities.
- Program
Budget Component: This portion includes
salaries and benefits of teachers and supervisors who
spend the majority of their time teaching;
instructional costs such as supplies, equipment and
textbooks; co-curricular activities and
interscholastic athletes; staff development; and
transportation operating costs.
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Budget