Consultant: Schools must be conservative in budget process
January 22, 2004
With its new basic aid status, the Tahoe Truckee Unified School District may need to budget more conservatively for the 2004-05 school year, according to a public finance consulting firm.
In an attempt to un-muddy the waters of what “basic aid” means for the school district, Tahoe Truckee Unified held a workshop Wednesday to explain the particulars of the funding status to a room of school administrators, union representatives, committee members and parents.
“In our opinion, a basic aid district needs to be conservative, and they need to have additional reserves – more than they would as a revenue limit district,” said Lori Raineri, president of Government Financial Strategies, a consultant employed by TTUSD to work with the district on basic aid issues.
Currently the district holds a 3 percent reserve – totaling more than $1 million – for times of economic uncertainty. Raineri said some basic aid districts bump their reserves up to 5 or 6 percent.
What does ‘basic aid’ mean?
As a potential basic aid district, TTUSD is part of a minority in the state. In the 2002-03 school year 67 of the 983 school districts in California were basic aid.
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There are two ways California school districts can receive their primary funding – as a revenue limit district or as a basic aid district.
Revenue limit districts receive most of their state funding based on the district’s average daily attendance (ADA) from the prior school year.
A district is “basic aid” when local property taxes meet or exceed the revenue limit. These districts receive all of their property tax revenue plus $120 per student from the state.
Tahoe Truckee Unified’s business office did not expect the district to become basic aid until the 2004-05 school year, according to this year’s budget projections.
Property tax revenue projections indicate that Tahoe Truckee Unified entered basic aid status this school year. However, the district won’t know its status for certain until property tax revenues are calculated by the counties in February.
Now the school district business office will monitor property tax revenue projections in TTUSD’s three different counties: Nevada, Placer and El Dorado.
To further complicate property tax calculations, each county has different “tax rate areas” in which each taxing agency (TTUSD or other special districts, for example) receives its share of the county’s 1 percent property tax rate. There are 116 tax rate areas in Placer County, 55 in Nevada County and five in El Dorado County.
In some areas TTUSD’s share of the taxes is greater than others.
“Consequently, what’s going on in some TRAs is more important than other TRAs,” Raineri said.
Because of constant fluctuations in local property values, state policies and ADA, uncertainty is greater in a basic aid district, she said.
Declining enrollment is a usual characteristic of a basic aid district, said Patrick Larrigan, manager of projects and analysis for Government Financial Strategies.
“In my experience, the way a district becomes basic aid is when property taxes are going up and families with children couldn’t (afford to) move to the area,” Larrigan said.
With basic aid status, most of the school district’s funding will be based on what is occurring locally rather than at the state level.
“Fluctuations in local property tax revenue require fluctuations in approximately the same proportion of the budget,” Raineri said in her workshop presentation.
Because basic aid districts receive most funding from local property tax revenues and not ADA, “The more kids we have, the less money we have per student,” Raineri said.
She said the best way for a basic aid district to be sure it is providing as much as it can for each student is through conservative planning.
“I can’t emphasize strongly enough that it is important for a basic aid district to set aside additional reserves,” Raineri said. “If the district hires teachers or adds programs and then has to take that away, we’re only going to hurt the students.”
The TTUSD business office will provide a glimpse into 2004-05’s budget assumptions, including the impact of basic aid and the governor’s budget proposal, at the Feb. 4 school board meeting.