School Finance: Regional School District Organization
Advisory Memorandum on FY10 Regional School District Budgets
July 3, 2009
On June 29, Governor Patrick signed the FY10 state budget into law. The state budget incorporates a number of adjustments to the Chapter 70 calculations. As a result, the required local contributions for cities and towns that are members of regional school districts differ somewhat from the preliminary estimates published last January, although in many cases the differences are nominal. We have been asked to provide guidance on how to incorporate these changes into the regional district budget process that is already well underway.
Neither the statute (G.L. c.71, s16B) nor the regulations (603 CMR 41.05) governing regional school district budgets explicitly deal with this situation. We have developed this guidance, in consultation with the associations, local officials, and other cognizant state agencies, with the goal of minimizing disruption and uncertainty for the districts and for their member communities.
Guidance for districts without an approved budget
If your district does not yet have a budget approved by your member communities, your school committeemusttake immediate action to adopt and certify a new budget, with assessments calculated based on the final required local contributions. In preparing the revised budget proposal, the school committee should also take into account the expected reductions in state aid. Member communities will need to put the revised budget before their local appropriating authorities for consideration. If a warrant has already been issued for a special town meeting to consider the previously adopted budget, that meeting can still be held to consider the revised budget. If necessary, the district should arrange with the town's select board and finance committee to have the revised numbers substituted for the original numbers through an amendment introduced from the floor.
The process and requirements for member approval of the school committee's proposed budget remain unchanged. They are set out in the regulations governing regional school districts (603 CMR 41.05).
Districts that do not yet have an approved budget, if they have not already done so, should also immediately contact the Department's school finance office (see contact information below) to arrange for an interim "1/12" budget to be set by the Commissioner. This provides legal authority for the district to expend funds and collect assessments while final action on the district budget is pending.
Guidance for districts with an approved budget
If the members of your district have already approved an FY10 budget, and if the approved assessment for each member town exceeds the revised required contribution for that town, then in our opinion that budget remains valid and in force. There is no specific language in either the regional school district statute or regulations or in the general appropriations act that would invalidate previously approved budgets that meet net school spending requirements. In such cases, the school committeemaychoose to propose an amended budget with recalculated assessments, but it is not required to do so.
School committees that elect to amend their budgets for the purpose of updating the assessment calculations must submit the amended budget to the member communities for their approval. In addition to the normal 2/3 approval requirement, the statute (G.L. c.71, s16B) also specifies that no member's assessment may be increased without its approval. In other words, if a city or town has a higher assessment under the amended budget, and if that member does not approve the amended budget, the district cannot enforce the payment of that higher amount, even if the amended budget is approved by 2/3 of the members. For this reason, as well as the time and expense required to convene special town meetings over the summer, we expect that many school committees will elect not to seek an amended budget.
If the previously approved assessment for any of your member towns is below the revised required contribution for that town, the district budget remains in force but remedial action may be required. Regional districts mustcontact the Department's school finance office (see contact information below) to report this situation and receive further guidance. Because assessments exceed required spending in most regional districts, we expect this will be a rare occurrence.
Finally, if your district has an approved budget that is significantly out of balance, either because of the two percent cut in Chapter 70 aid, expected reductions in regional transportation aid, or for any other reason, the school committee should review the budget and determine the most appropriate course of action. Possible options include:
Reduce the budget. This requires a 2/3 vote of the school committee but does not require the approval of the member towns, assuming no changes are made to the previously approved assessments.
Increase assessments. The school committee can propose an amended budget with higher assessments, but as noted above, a member's previously approved assessment cannot be increased without its approval. In effect, this will require a unanimous vote of all the member towns, making it an impractical option for most districts.
Use available special funds. Many districts have available balances in special funds such as the circuit breaker account and the school choice revenue account. Most districts will also be receiving additional federal American Recovery and Reinvestment Act (ARRA) funds under the Individuals with Disabilities Education Act (IDEA), Title I, and/or state fiscal stabilization fund (SFSF) programs. As appropriate and allowed by law, planned general fund expenditures can be shifted to these special funds, allowing a corresponding reduction in the general fund budget.
Use available E&D funds. Districts with available, certified excess and deficiency funds may elect to amend the budget to use those funds as an additional revenue source to support the previously approved spending level. This requires a 2/3 vote of the school committee but does not require the approval of the member towns, as it neither increases the amount of the budget nor does it increase the members' assessments.
Districts whose operating budgets are out of balance by nominal amounts may elect to take no action at this time, with the expectation that reductions in spending can be achieved through the course of the year to offset the projected revenue deficit. Note that any deficit remaining at the end of the fiscal year will be closed to the E&D account, reducing the available fund balance in that account.
We strongly advise all districts to consult informally with the finance officials in your member communities before deciding on a proposed course of action. We also appreciate everyone's patience and cooperation in dealing with these difficult issues during a difficult time. After the budget process is completed, we plan to solicit feedback from local officials on the usefulness of this guidance as well as any problems encountered. Based on that feedback, we will consider statutory or regulatory changes that might be useful in future years.
If you need additional information or assistance from DESE on these issues, please contact Jeff Wulfson (781-338-6500 email@example.com) or Christine Lynch (781-338-6520 firstname.lastname@example.org) in our school finance office.