School Budget 101: Balancing the Budget
Each year, school boards must develop a balanced school budget proposal for district residents to vote on each May, but what goes into that task? What are a school district’s expenses? Where does the money come from? What is fund balance?
Each year, school boards must develop a balanced school budget proposal for the following school year and put it to a public vote on the third Tuesday in May. In New York, this requirement for a balanced, voter-approved annual budget is unique to public schools. The school budget is the only government spending plan that residents can impact directly by voting.
A balanced budget means that revenue, the money coming in, must equal expenses, the money going out to support student programs and services. Here are some examples of revenues and expenses.
EXPENSES = REVENUE
Money going out:
- Curriculum/Staff Development
- Facilities Maintenance & Operation
- Debt Service
Money coming in:
- State Funds
- Federal Funds
- Property Taxes
- Miscellaneous Income
- Appropriated Fund Balance*
School district expenses at a glance
Salaries and benefits: Education is a people business. On average, approximately 80 cents of every dollar goes to pay for salaries and benefits of teachers and staff.
Facilities maintenance and operation: Districts must ensure students can attend schools that are safe, clean, functional and well-maintained in a healthy environment with adequate heating, ventilation and lighting.
Curriculum development, technology and supplies: Ongoing curriculum development and training enhances the ability of teachers and support staff to provide students with a high-quality education, while instructional technology and supplies help students gain skills necessary for future success.
Transportation: Districts must ensure that all school vehicles meet state safety standards and provide an efficient, reliable mode of transportation in accordance with school board policy and state law.
School district revenues at a glance
State funds: New York state provides funding for public schools in the form of aid for general operations and funding designated for particular expenses.
Federal funds: The federal government does provide some aid for schools in New York. On average, this aid is less than 5 percent of a school district’s annual revenue.
Property taxes: If there is a gap between state/federal funds and estimated total expenses, districts generally fill it with local property taxes. Districts are required to calculate a “maximum allowable tax levy” under the property tax cap law. Exceeding the cap requires approval by a supermajority of voters (60 percent or more).
School Budget Q & A
Q: What is a fund balance?
A: If revenue collected for the school budget remains at the end of a district’s fiscal year, that money becomes part of its fund balance. Districts must adhere to state laws that govern how fund balance can be spent. Options include applying it to a future budget in the form of revenue, earmarking it for anticipated future needs and/or saving it for unexpected emergencies.
Q: What is the difference between the tax levy and tax rate?
A: The tax levy is the total amount of money a school district raises in taxes each year from all property owners in the district. Tax rates are calculated by dividing the total amount of the levy by the total taxable assessed value in a community. Tax rates are affected by changes in both municipal assessments and state equalization rates, which are determined in the summer. The tax rate is used to calculate each individual property tax bill.
Q: What is an equalization rate?
A: As the name implies, equalization rates are intended to spread the tax burden across all municipalities (cities, towns and/or villages) within the school district as fairly as possible. In New York state, each municipality determines its own level of assessment. The rates are intended to “equalize” or balance these differences within the same school district. For example, one municipality’s assessments may be more recently updated than others, and property values don’t change equally in all municipalities within the school district.
A municipality’s equalization rate is set by New York state to reflect a municipality’s level of assessment. It is calculated by dividing total assessed value by total market value.
- An equalization rate of 100 means that the municipality is assessing property at 100 percent of market value.
- An equalization rate of less than 100 means that the municipality’s total market value is greater than its assessed value.
- An equalization rate of greater than 100 means that the municipality’s total market value is less than its assessed value.
You can find additional information on equalization rates and links to local assessment rolls here: https://tax.ny.gov/pit/property/learn/eqrates.htm.
Q: What is the tax levy limit, or tax cap?
A: The tax levy limit is the highest allowable tax levy (before exemptions) that a school district can propose as part of its annual budget. When staying at or below the tax levy limit, budget proposals can be approved by a simple majority of voters (50 percent + 1). Any proposed tax levy amount above this limit would require budget approval by a supermajority (60 percent or more) of voters. The tax levy limit sets a threshold requiring districts to obtain a higher level of community support for a proposed tax levy above a certain amount.