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Each original is also photographed in one exposure and is included in reduced form at the back of the book. Photographs included in the original manuscript have been reproduced xerographically in this copy. Higher quality 6" x 9" black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. University M icrofilm s International A Bell & Howell Inform ation C om pany 300 North Z eeb Road. Ann Arbor. Ml 48106-1346 USA 313/761-4700 800/521-0600 O rder N u m b e r 9 4 31314 B u d g e ta ry d ecisio n -m ak in g in M ichigan school d istric ts: A c o m p a ra tiv e s tu d y Sielke, C atherine C., P h.D . Michigan State University, 1994 C opyright © 1 9 9 4 by Sielke, C atherine C. A ll rights reserved. 300 N. ZeebRd. Ann Arbor, MI 48106 BUDGETARY DECISION-MAKING IN MICHIGAN SCHOOL DISTRICTS A COMPARATIVE CASE STUDY By Catherine C. Sielke A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Educational Administration 1994 ABSTRACT BUDGETARY DECISION-MAKING IN MICHIGAN SCHOOL DISTRICTS: A COMPARATIVE CASE STUDY By Catherine C. Sielke Reliance on property taxes is a persistent educational issue. In Michigan, a power equalizing formula has brought some equity to school districts. However, the State has been unable to fund the formula at an appropriate level, so the disparities of the annual have State grown. Aid Act Delays have in timely passage created revenue uncertainties. Research conducted in public organizations other than school districts has shown that certainty of that wealth processes. the amount affects Organizations with certainty of wealth are more of the wealth and the decision-making greater wealth and greater likely to engage in rational decision-making; those with less wealth and less certainty of wealth are more likely to engage in garbage can decision­ making. Incremental decision-making is most often used by organizations with resources between these two extremes. This study investigated budgetary decision-making in four school districts representing different combinations of wealth/less wealth and certainty/less characteristics that goals to budgeting, timely decisions, were certainty. examined were The planning, evaluating past expenditures, openness vulnerability to the environment. and specific linking reaching inclusiveness, and Data were obtained through interviews. reviewed. Financial documents and board minutes were Research clearly suggests that certainty of wealth has a greater impact on budgetary decision-making than does the amount of wealth. The districts with more certainty of wealth displayed those characteristics most closely associated with rational certainty of decision-making; wealth displayed the those districts with less characteristics most closely associated with garbage can decision-making. In the districts with revenue certainty, boards of education were in the background, lines of understood. that were the business authority were official was clear, and highly visible, expectations were Districts with revenue uncertainty had boards active while the business official was in the background, lines of authority unclear, and expectations were not understood. Research suggests that certainty of revenues is more important than wealth. Copyright by CATHERINE C. SIELKE 1994 ACKNOWLEDGMENTS I owe a debt of gratitude to the many people who had a part in this dissertation. special contributions. There are some people who made I would like to thank my guidance committee, Drs. Ellen Kossek, Gary Sykes, and Suzanne Wilson, for their many helpful suggestions. I especially thank my committee chairperson and advisor, Dr. Philip Cusick, for his encouragement, his suggestions, his time, his helpful criticisms, and his friendship. On a more personal note, I wish to thank my especially my son, Jeffrey, and my husband, support, encouragement, and patience. family, for their love, I especially thank my husband, Malcolm, for his computer expertise and skills, his unwavering support and encouragement, his patience, and most of all, for his unselfishness. v Thank you. TABLE OF CONTENTS Page LIST OF TABLES .................................... ix LIST OF FIGURES........................................ CHAPTER I. INTRODUCTION AND PURPOSE OF THE STUDY. X . 1 1 The Background.......................... The Property T a x ................. 1 The Property Tax, Local Control and School District Funding. . . . 3 The Property Tax and Unequal Funding 4 Attempts to Equalize Funding . . . . 5 The Michigan Experience........... 8 Uncertainty of Wealth.............. 10 Theoretical Framework ................... 13 Decision-Making Theory and Budgeting Theory ................. 13 Organizational Decision-Making and W e a l t h ....................... 15 Purpose and Research Questions.......... 17 M e t h o d o l o g y ............................. 21 Pilot S t u d y ............................. 24 Significance of the S t u d y ...............28 II. REVIEW OF THE L I T E R A T U R E .............. 30 Decision-Making Theory ................. 30 Rational Decision-Making Theory. . . 30 Incremental Decision-Making Theory . 34 Garbage Can Decision-Making Theory . 36 Budgeting Theory............................ 3 9 Definition of a B u d g e t .............39 Characteristics of Public Budgets. . 40 Budgetary Decision-Making.......... 42 Rational Budgeting ................. 46 Incremental Budgeting...............51 The Effects of Wealth and the Garbage Can Model of Budgeting . . . . . . 57 Chapter Summary ......................... 65 vi III. METHODOLOGY 66 Introduction............................. 6 6 Theoretical Framework ................... 66 Selection of the School Districts . . . . 70 Data C o l l e c t i o n ............................ 71 Validity.................................... 73 R e l i a b i l i t y................................ 75 Field Procedures............................ 76 Data A n a l y s i s .............................. 78 Chapter Summary ..................... 79 IV. PRESENTATION AND ANALYSIS OF DATA. ... 81 District A .................................. 82 The Setting......................... 8 2 The Principals and Special Education D i r e c t o r ............................ 84 Board Member and T e a c h e r .......... 96 Central Office Administrators. . . . 99 Document and Observation Data. . . . 108 Analysis of the F i n d i n g s ............ 115 District B ................................. 122 The Setting........................... 122 The P r i n c i p a l s .......................125 The Directors.........................136 Board Member and T e a c h e r ............ 142 Central Office Administrators. . . . 146 Document and Observation Data. . . . 155 Analysis of the F i n d i n g s ............ 162 District C ................................. 170 The Setting........................... 170 The Principals and Community Education Director ............... 173 Board Member and Central Office Administrators ................... 182 Document and Observation Data. . . . 192 Analysis of Findings ............... 199 District D ................... 205 The Setting...........................206 The Principals and Special Education D i r e c t o r .................. 207 Transportation and Maintenance Directors...........................218 Board Member and T e a c h e r ............ 219 Central Office Administrators. . . . 224 Document and Observation Data. . . . 231 Analysis of Findings ............... 239 Across District Analysis.................. 245 Revenue............................... 246 Process............................... 251 Expenditure........................... 259 Balance and Implementation ........ 261 vii V. FINDINGS AND C O N C L U S I O N S ................ 264 Reviewing the Research Questions.......... 265 General Findings........................... 275 The Conclusion............................. 278 Reflections on the L i t e r a t u r e ............ 279 Further Reflections ..................... 284 Suggestions and Recommendations ........ 289 APPENDICES A. B. C. D. E. DISTRICT A'S FINANCIAL DATA.................... 291 DISTRICT B'S FINANCIAL.DATA.................... 295 DISTRICT C'S FINANCIAL.DATA.................... 299 DISTRICT D'S FINANCIAL DATA.................... 303 INTERVIEW QUESTIONS............................. 307 LIST OF R E F E R E N C E S ........................................314 viii LIST OF TABLES Table Page 4.1 District A Expenditures..................... 110 4.2 District B Expenditures..................... 157 4.3 District C Expenditures..................... 193 4.4 District D Expenditures..................... 233 4.5 Revenue Comparison .......................... 248 4.5 Expenditure Comparison ..................... 260 A. 1 District P r o f i l e ............................ 291 A.2 1988-1992 Expend i t u r e s ..................... 292 A. 3 Budget to Actual Comparison................. 294 B.l District Profile ............................ 295 B .2 1988-1992 Expend i t u r e s ..................... 296 B .3 Budget to Actual Comparison................. 298 C.l District Profile ............................ 299 C.2 1988-1992 Expenditures ..................... 300 C .3 Budget to Actual Comparison................. 302 D.l District Profile ............................ 303 D.2 1988-1992 Expenditures ..................... 304 D.3 Budget to Actual Comparison................. 306 ix LIST OF FIGURES Figure Page 4.1 Budgeting Model for DistrictA ............. 116 4.2 Budgeting Model for DistrictB ............. 163 4.3 Budgeting Model for DistrictC ............. 200 4.4 Budgeting Model for DistrictD ............. 240 4.5 Composite Budgeting Model................... 247 5.1 Districts' Decision-Making Characteristics . 274 x CHAPTER I INTRODUCTION AND PURPOSE OF THE STUDY The purpose of the study was to describe and explain the differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. The background and theoretical framework will establish that: there is a property tax; there is a belief that the property tax is a form of local control; there is a heavy reliance on the property tax; there is an inequality in wealth due to the reliance on the property tax; there is uncertainty of wealth due to the reliance on and local control of the property tax; and there is some evidence that such inequalities of wealth and uncertainties in wealth result in different types of decision-making. The Background The Property Tax Property taxes have existed in this country from its earliest beginnings. form of property tax According to Jensen levied on colonists "quitrent" and was payable to the Crown. 1 (1931) the first was called a The quitrent was a 2 remnant from the feudal period in Europe when land was owned by a feudal lord and not by those who lived on and farmed it. In an agrarian society as we were in the 1700s and 1800s, one's property was a reflection of one's wealth. Therefore, farmers were taxed on the number and quality of their acreage. People who lived in towns were taxed on the size and value of their home. During the early 1800s, state constitutions introduced the concepts of universality and uniformity. meant that all property, would be taxed. taxed at an land and personal property, Uniformity meant that all property would be equal rate. McClelland, and Thomson, and both Universality uniformity in According to Benson, Benson, (1965) the concepts of universality taxation were the most contribution to the property tax by Americans. important Benson et a l . stated that universality and uniformity "were powerful tools in the widespread attempt to guarantee that the property tax be 'general' and 'equal' concept of democracy" and truly reflect the American (p.44). Pennsylvania in 1873 was the first state to discard the uniformity principle when it began classifying land according to its usage property for tax purposes. classifications agricultural, were and timberlands. could have its own tax rate, uniformly. For example, some of the residential, industrial, Because each classification property was no longer taxed By the early 1900s, the classification movement 3 had spread throughout the United States, and methods of taxing property have remained unchanged. The Property Tax, Local Control and School District Funding Throughout its history, the property tax has remained a good, reliable source of revenue for operating schools and providing other local government services. According to Burrup, Brimley and Garfield (1988), Cline and Shannon (1983), and Jones (1985), the property tax has many advantages. The property tax is highly productive and more stable than other taxes as it is less dependent on the general state of the economy. The property tax is highly visible; the bill is sent directly to the property owner and is paid directly to the local taxing unit. government, and The tax is easily collected by the local its payment is not easily avoided. The property tax provides fiscal accountability as taxpayers can see a direct link between the payment provision of services such as education. of taxes and the The property tax allows the community to recapture for its own use some of the value it has created. Cline and Shannon refer to the property tax as the "sheet armor for local fiscal independence" (p.47). The property tax for schools, because it is regulated and controlled by local boards of education and approved by local citizens, extends the concept cherished in this country. of local control which is According to Burrup et a l . (1988) local control means that people who live ". . .in small towns and neighborhoods can make their voices heard in determining 4 who shall be educated and by what process" (p 131). The ability to select school board members who set district policy and to vote for or against millage is highly valued. The Property Tax and Unequal Funding The property tax provides a major source of revenue for school districts. All property has an assessed value. In Michigan, property is usually assessed at 50% of its market value for the purposes of taxation. State Equalized Value (SEV). This value is called its Property equalization reduces the gap in property taxes paid by people who own homes of differing values in the same community. For example, without equalization, a person owning property with a market value of $100,000 would owe $100 per mill levied, while the person owning property with a market value of $50,000 would owe $50 per mill levied. With equalization at fifty per cent, however, the first property owner would owe only $50 per mill, and the second property owner would owe $25 per mill. The value of the property within a school district's boundaries is the district SEV. The district generates revenue by levying a tax rate, expressed in mills (1/1000 of a dollar), on the SEV. In a school district with a large tax base, each mil] that is levied generates more dollars than can be generated in a district with a smaller tax base. For example, one mill levied on an SEV of $100,000 will generate $100; levied on an SEV of $1,000,000 will generate one mill $1,000. A district with an SEV of $100,000 would have to levy 10 mills 5 to generate the same number of dollars that a district with an SEV of $1,000,000 can generate with 1 mill. Therefore, a school district with a larger SEV has the ability to generate more funds for schools than a district with a smaller SEV. Because of differences in property wealth of school districts, the reliance on the property tax as a major source of school district revenue has created disparities in dollars available to districts to fund their educational programs. So far, it has been established that there is a property tax; there is a belief that the property tax is a form of local control; there is a heavy reliance on property tax; and there is an inequality in wealth due to the reliance on the property tax. The inequality of taxable property wealth and the reliance on the property tax to finance school districts has created differences in funds available to different school districts. efforts The next sections will establish that even though have been made by states to equalize funding, inequalities still exist. Attempts to Equalize Funding Education, because States Constitution, 1900, states According to is a state responsibility. provided Garms, it is not addressed in the United funds Gutherie, to schools and Pierce in Prior to several (1978) ways. a common method of distributing funds was a flat grant based on pupil enrollment. This method favored city schools because they had more pupils. Rural districts had fewer pupils but often found 6 they had to hire more teachers on a per pupil basis, thereby increasing per pupil costs. states provided a According to Jones (1985) other matching grant based on a standard percentage of the dollars raised through the local property tax levy. Under this system a district that raised $20,000 locally received an additional $10,000 from the state, and a district that raised $10,000 received $5,000. Although both approaches gave local districts more dollars with which to fund their programs, neither the flat grant nor the matching grant attempted to equalize the number of dollars available in different schools district. Cubberley, a pioneer in school finance, was the first to recognize and write about the problems associated with differences in wealth available to fund education in different school districts. state is to In 1906 he stated that "the duty of the secure for instruction as possible" all as (p. 17). high a minimum of good Cubberley suggested that states provide a flat grant to school districts based on the number of teachers employed and pupils in attendance. Although Cubberley, at the turn of the century, attempted to address the proposal is inequities. differences not in considered city and a solution Cubberley did, however, rural to schools, school his district focus attention on the concept that education is a state and local partnership and set the stage for the development of state school aid plans (Jones, 1985). 7 By 1970, districts sources; 1988). the approximately 55% of the revenues for school came from and 5% came local sources; from federal 45% came sources from state (Burrup et a l ., Even though states were providing a large portion of funding, great differences in the level of funding available to individual school districts still existed. 1971, the California Supreme Court handed down a landmark decision in the Serrano v Priest case. the funding of In schools in The court found that California protection clause of the Constitution. violated the equal At issue was the fact that disparities in funding existed between school districts. According to Burrup et al (1988) the court found that due to: heavy reliance on property taxation, school districts with a low value of taxable property per child cannot levy taxes at high enough rates to compete with more affluent districts; in many instances they cannot even provide funds for a minimum program of education, (p. 146) The court ruled that it did not matter whether or not the districts provided an adequate education. The issue was that unequal dollars violated the equal protection clause of the California Constitution because the disparities allowed some districts to offer a higher quality program than others. The court ordered a change in education funding in California. The decision opened the door for others to sue districts on the basis of inequitable funding and provided an incentive for states to evaluate their funding methods. 8 The Michigan Experience Prior to 1973, Michigan schools received state aid based on a Strayer-Haig formula (Caesar, McKerr & Phelps, 1974). This type of formula attempts to compensate for differences in school districts' tax bases by giving more state aid to those districts with lower SEVs. State aid was calculated using "a deductible millage formula which subtracted, from a specified foundation program or 'gross allowance,' the amount which a given number of mills would produce in each district" (p.3). The difference raised between the gross allowance locally was the state aid. In and the amount 1972-73, a school district levying 30 mills with a per pupil SEV of $10,000 received $300 from the local levy and $515 from the state for a total of $815 per pupil. On the other hand, a school district levying 30 mills with a per pupil SEV of $35,000 received $1,050 from the local levy and $84 from the state for a total of $1,134 per pupil. The formula provided poorer districts with additional funding for programs, but wealthier districts still had more dollars per pupil to spend. this formula did make more funds available to While low-SEV districts, it did not correct the disparities in wealth among districts. On August 14, 1973, SB110, also known as the Bursley Act, was signed into law. The Bursley Act provided for state aid to education based on an egual yield concept. Under the Bursley Act, districts that levied the same number of mills would receive the same number of combined local and state 9 dollars regardless of the district's SEV. This legislation placed Michigan as a front runner in the move to provide equal funding to all school districts (Caesar et al., 1974). Twenty years after the passage of the Bursley Act, Michigan school districts vary widely in the wealth available to them for Michigan has not funded the formula in the amounts needed to maintain the equal yield concept. Kearney and Chen (1989) point out that if the policy goal to guarantee equal revenue to school districts levying the same number of mills regardless of the district’s taxable wealth (SEV) were being attained, "there should be no relationship between property tax wealth and basic revenues or expenditures. find such relationships, but their Not only do we strength and magnitude generally increase [from year to year]" (p. 364). to an article in Jefferson Schools the Monroe in Monroe Evening News According (Krolak, 1992) County levied 21.75 mills and spent $8,412.85 per student for the 1989-90 school year. On the other hand, Dundee Schools, also in Monroe County, levied 30.53 mills and spent only $3,228.17 per student. These figures provide a striking illustration of the inequities in school district funding that exist in Michigan. The current Michigan state aid formula is a combination of a flat grant per student levied. The flat grant per student can be increased if the district qualifies calculation allowance and a dollar amount per mill of for curriculum related incentives. this or GMA. The formula produces difference a between gross The membership the GMA and the 10 dollars the district can raise locally through property taxes is the district's state aid. If the local district has a high SEV, the local property tax levy is able to raise more than the GMA; the district then receives no state membership aid and is referred to as being out-of-formula. In 1991-92, according to Michigan Department of Education report R2 743 (1992), approximately one third of Michigan's school districts were out-of-formula. So far, it has been established that there is a property tax, there is a belief that the property tax is a form of local control; there is a heavy reliance on the property tax; and there is an inequality in wealth due to the reliance on the property tax. The next section will establish that uncertainty in wealth is due to reliance on the property tax and local control of the property tax. Uncertainty of Wealth Property taxes for Michigan schools must be approved by voters in the school district. Local taxpayers control, through voting in millage elections, the number of mills to be levied and, voter therefore, support resources millage, district. for the available resources. of millage means the district. means uncertainty of Property wealth, certainty Voter lack Continued of of wealth support for wealth or resources i.e. a high or SEV, for the does not guarantee certainty of wealth.A districtmay have a high SEV, but if voters are reluctant to approve millage levies, 11 the district, even though it has property wealth, limited resources. has very On the other hand, a district with a low SEV but a high millage rate can have certainty of wealth and many resources because the state aid formula rewards high local taxing efforts. An out-of-formula district with strong voter support of millage does have advantages other than more wealth. Because the out-of-formula district generates the major portion of its wealth from the local property tax, it enjoys greater local control over its finances. An out-of-formula district is better able to project its revenues because the majority of funding is based on the locally approved mill levy. Further, the district is better able to control its cash flow, since the tax dollars are paid to local government by specific due dates which typically do not vary from year to year. Therefore, past records are reliable indicators of when these local revenues will be available to the district. In-formula districts, because they rely on state aid for a portion of their funding, do not enjoy the same degree of local fiscal control. The state aid act must be approved annually by the legislature and be signed by the governor. Even though information is available describing the various versions of the bill, it may be well into the fiscal year before the state aid act is passed and a school district's state aid revenue can be calculated. subject projected to executive revenue that order cuts, had been Further, state aid is which budgeted means can be that the changed. 12 Recently, changes in the timing of state aid payments and the warnings that problems have payments may be withheld further eroded local due fiscal to cash control flow for in­ formula districts. So far, it has been established that,there is a property tax; there is a belief that the property tax is a form of local control; there is a heavy reliance on the property tax; there is an inequality in wealth due to the reliance on the property tax; and there is uncertainty of wealth due to reliance on and local control of the property tax. The inequality of taxable property wealth and the reliance on the property tax to finance school districts has created differences in funds and certainty of those available to different school districts. funds Even though efforts have been made by states to equalize funding, discrepancies continue to exist. Researchers have studied organizations (other than school districts) of varying wealth and varying certainty of wealth. The purpose of this study was to describe and explain differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. Attention will now be turned to the matter of what discrepancies in organizational decision-making. wealth and processes, uncertainty particularly in wealth do to organizational 13 Theoretical Framework The theoretical framework for this study is derived from two strands of theory: theory. decision-making theory and budgeting This section will present decision-making theories, budgeting theories that are representative of the decision­ making theories, and evidence that differences in wealth and differences in certainty of wealth result in different types of decision-making. Decision-makina Theory and Budgeting Theory Organizational decision-making theory began with the work of Simon (1957, 1982), March and Simon (1958), and Cyert and March (1963). Cyert and March developed computer simulations based on two basic assumptions: that goals of an organization are clearly known and that decision-makers act with perfect knowledge. Simon (1957, 1976, 1982) recognized that the purpose of the organization limits the available choices for alternative resource use. organization's objective According ". to Simon (1976) the . .is the means whereby their [owner, consumer, employee] organizational activity is bound together to achieve a satisfaction personal motives" (p. 17). bounded rationality. of their own diverse Hence Simon's theory is known as Simon states (1976) that the organization achieves its objectives by integrating behavior through substantive and procedural planning. human limitations, individuals and To overcome the organizations adapt 14 decision-making procedures. Instead of searching for optimal choices, decision makers satisfice or look for satisfactory choices. According to Chichura (1989), the rational decision­ making model emphasizes knowledge and understanding of the resources necessary to reach desired goals. The process of rational decision-making links resources and goals. (1987) states programming, that budgeting budgeting processes systems such (PPBS), as Cibulka planning, performance based budgeting, and zero based budgeting. Incremental decision-making theory emerged because Lindblom (1959, 1979) believed that the theories of rational decision-making did not match reality. Lindblom states that the decision-makers do not consider all possible alternatives, and analysis is limited. history. changes, Instead small of There is a heavy reliance on past making decisions incremental steps are that reguire taken. major Incremental decisions avoid conflict because they are not radical, and they are easier to correct if they prove wrong or unpopular. Wildavsky describe (1979) the used budgeting the term model incremental that does budgeting not examine to the previous years' expenditures (the base) but adds to them in small, generally across the board, increases. The incremental model relies on past history but does not evaluate it. Once an item appears in a budget, funding will most likely continue whether or not the expenditure meets an organizational goal. Since effectiveness is not evaluated, maintained and conflict is avoided. the status quo is Maintenance of the status 15 quo and avoidance of conflict are more important than meeting an organizational goal. Cohen et a l . (1972) developed the garbage can decision­ making model. occurs They theorized that garbage can decision-making in organized anarchies. organization uses trial decision-making model, avoidance or approaching problems. making, there is and error. problems oversight Goals are inability usually more In garbage an ambiguous; the Under the garbage can are the are not common resolved; methods of can budgetary decision­ to plan for the use of resources, budgets are subject to many revisions as decisions are made over and over again, and budgets that are not fully implemented because of inability to reach decisions in a timely manner. Organizational Decision-Making and Wealth Wildavsky (1975, 1979) studied the budgetary processes of the federal government, municipal governments, and other national governments and found that differences that occur in budgeting are caused by differences in wealth, predictability of wealth, organization of the political institution, values assigned to those who budget, and dollar size of the budget. The findings of Wildavsky (1975, 1979), Rubin (1980, 1990a, 1990b), Levine (1980), and Pammer (1990) provide evidence of differences in budgetary decision-making in organizations of varying wealth. organizations All of the researchers found that wealthier engaged in more planning activities, 16 particularly on a multi-year basis, organizational goals to their and more often linked use of resources. The researchers reported more innovative approaches to problem solving and more risk taking by wealthier organizations. budgeting processes used in wealthier organizations The then, closely align themselves with rational decision-making theory. Wildavsky experiencing (1975) studied constant growth. bureaucracies He found that that were these bureaucracies tended to simplify budgeting decisions by adding dollars to each line item without questioning the previous year's expenditures. Wildavsky (1980) and (1975), Pammer Rubin (1990) (1980, also found 1990a, that 1990b), the Levine ability to predict the availability of wealth affected decision-making. Organizations that were less wealthy or were experiencing a decline in wealth had more difficulty in predicting available resources. These researchers found that the less able the organization was to predict its wealth, the more chaotic the decision-making process became. The processes found in less wealthy organizations or in organizations experiencing decline in wealth align themselves with garbage can decision-making. The background and conceptual framework have established that: there is a property tax; there is a belief that the property tax is a form of local control; there is a heavy reliance on the property tax; there is an inequality in wealth due to the reliance on the property tax; there is uncertainty of wealth due to the reliance on and local control of the 17 property tax; and there is some evidence that such inequalities of wealth and uncertainty of wealth result in different types of decision-making. Purpose and Research Questions The purpose of the study was to describe and explain differences in decision-making about resources in school districts of varying wealth and varying certainty of wealth. Studies of organizations other than schools have shown that wealthier organizations use rational decision-making and budgeting. Organizations of increasing wealth use incremental decision-making and budgeting. Less wealthy organizations and those experiencing declining wealth use garbage can decision­ making and budgeting. Studies further show that organizations with greater certainty of wealth use rational decision-making and budgeting. Uncertainty of wealth tends to produce garbage can decision-making and budgeting. The criteria which were used to assess the decision-making in other organizations were used to assess districts. decision-making about resources in school The argument of this study was that varying wealth and varying certainty of wealth will result in different types of budgetary decision-making in school districts as was the case with other organizations that were studied. The use of organizational goals is one criterion used to assess decision-making. Rational decision-making emphasizes the importance of linking organizational goals to decision­ 18 making; therefore, rational budgeting resource usage to organizational goals. emphasizes linking Incremental decision­ making is usually based on maintaining the status quo and minimizing conflict. Agreement with the decision is more important than whether or not the decision is linked to a goal. Garbage can decision-making occurs when ambiguous goals exist. l_i_ Therefore, the first research question is: Are there differences organizational goals in in linking school decisions districts of to varying wealth and varying certainty of wealth? Planning is the second criterion used to assess decision­ making. Rational decision-making and rational budgeting rely on planning for resource availability and usage. Revenue, expenditure, and cash flow projections are part of planning. Alternative uses of resources, service delivery systems, which may involve different are considered in planning. Incremental decisions do not rule out planning, but because only small changes from the status quo occur, planning is not essential. making and Planning is not part of the garbage can decision­ budgeting processes. Therefore, the second research question is: 2. Are there differences in planning in school districts of varying wealth and varying certainty of wealth? Evaluation decision-making. is the third criterion Cost-benefit used analysis to and assess program 19 effectiveness are key elements in rational decision-making and rational budgeting. Such analyses deciding how to use resources. programs when they are not provide for effective are not rational. Comparisons of expenditures provide a guide to projecting future fiscal matters. Evaluation is generally not used to decide to fund programs. can basis Decisions to continue to fund Incremental decision-making limits evaluation. previous years' a decision-making and Evaluation is not part of garbage budgeting. Therefore, the third research question is: 3. Are there differences in evaluating previous organizational decisions in school districts of varying wealth and varying certainty of wealth? A fourth criterion used in assessing decision-making is the openness of the process and the number of decision-makers involved. Rational decision-making and rational budgeting are completely open processes. the achievement Community needs of Many people who have a stake in organizational and values goal(s) are considered. reached that are easily defended. are included. Decisions are Incremental decisions are usually made by a consistent group of decision-makers. The process is not particularly open because decisions are often reached through negotiations between administrative levels. In the garbage can model, the decision-makers often change. In budgeting, the process can evolve into decisions being made 20 by only one or two people in a top down fashion. Therefore, the fourth research question is: 4_i_ Are there differences in openness and inclusiveness in decision-making processes in school districts of varying wealth and varying certainty of wealth? The fifth criterion used to assess decision-making is time. more Research has shown that less wealthy organizations take time to make decisions. Poor planning, lack of evaluation of decisions, or decisions reached behind closed doors can create the need re-consider decisions. can decision-making, In garbage issues are rarely resolved by the first decision reached, and decisions are often made over and over as new information becomes available. in less wealthy organizations show Findings of budgeting that decisions may be reached too late to be of value or new circumstances present themselves impossible. that make Rational implementation of the decision-makers use time decision to plan, evaluate and prioritize to prepare for the decision event. Because incremental decision-making emphasizes maintaining the status quo and minimizing conflict, minimal time is spent on decision-making. 5. Therefore, the fifth research question is: Are there differences in time usage in decision-making in school districts of varying wealth and varying certainty of wealth? 21 The sixth criterion used to assess decision-making is vulnerability to the environment outside the organization. Garbage can decision-making occurs in organizations that are highly vulnerable to the environment. The organization finds itself unable to plan and unable to implement decisions due to circumstances it cannot control. engaged in rational The organization that has decision-making, however, has made surveying the environment and planning for possible changes part of its decision-making process. Incremental decision­ making attempts to minimize the effects of the environment by making only small changes that can easily be reversed. Therefore, the sixth research question is: 6. Are there differences in the influence of the environment outside of the organization on the decision-making process in school districts of varying wealth and varying certainty of wealth? Methodology The purpose of the study was to describe and explain differences in decision-making about resources in districts of varying wealth and varying certainty of wealth. the purpose, the researcher used budgeting To carry out as the indicant which varied just as the concept of decision-making varied. The researcher used a case study approach; four individual case studies were conducted and the findings were compared. Four districts were selected. One school district 22 was wealthy with certainty of wealth; another was wealthy with uncertainty of wealth; a third was less wealthy with certainty of wealth, and the fourth was less wealthy with uncertainty of wealth. Wealth was determined by dividing the revenues available to the district through its local mill levy and its state membership aid by the number of pupils. wealth was determined by the district's Certainty of millage rate. Financial and millage information was obtained though Michigan Department of Education reports. Data were collected through open-ended structured interviews with key participants in the budgetary process. The participants included the superintendent, the business official, central office administrators, building principals, a union official, and a board of education member. guestions gathered information decisions Rubin budgeting process. The developed to information which (1990b) elicit about identified questions Interview the five as essential to foreach clusters the cluster related to of were the six criteria used to assess decision-making that formed the basis of the research questions of this study. Other documents such as audit reports, Form B reports, budgets, board minutes, notes, and memos were used to verify the responses given in the interviews. the researcher district result to and will of the trace provide budgetary the Numerical data allowed financial a quantifiable decision-making condition of analysis process. the of the Board 23 minutes provided documentation of the process. matching was used in the analytical component of Patternthe study. Internal validity of this study was addressed through triangulation which consists of using multiple evidence to support a finding (Yin, 1989). sources of Yin (1989) lists six specific sources of evidence to be used in triangulation. Four of those six were used by this researcher: minutes, other written reports of events; archival records; interviews; and direct observations. Case studies are often criticized for lacking in external validity. The school districts that were selected may not be representative of all school districts. However, Cusick (1983) states that a field study is an: attempt to unravel and explain a human event. . . . If the event is significant, and the account is intelligible and plausible, then the result can be of value to those interested and involved in similar events, (p. 135) Since allocation of resources is required in all school districts, the event studied here, budgetary decision-making, is significant and the results can be of value to all districts. Reliability of a study can be greatly increased through careful documentation of the procedures used by the researcher (Miles & Huberman, 1984; Yin 1989). easily retrievable The researcher created an data base that consisted of case study notes, interview data, documents and quantitative data. The study included citations within the report to the relevant portions of the case study data base. The researcher 24 documented the procedures that were followed in the data collection process. Pilot Study A pilot study was conducted in April of 1993 in a school district in the Detroit area. The district considered wealthy with certain revenues. the top basis. would be The district is in 10% in terms of dollars available on a per pupil The district is out-of-formula and has a history of strong community support in millage elections. Nine during administrators a three day in the district period. The were interviewed interviews lasted approximately one hour with two exceptions: an administrator who had been in the district only six months was unable to answer many of the guestions made that interview very short. The interview with the business official took two hours. Additional time was spent in consultation with the business manager to procure documents. Although audits, other financial reports, employee contracts, fourth Friday reports, district goals, employee contracts, and board minutes were all made available to the researcher, only the minutes and goals were reviewed as part of the pilot. Uniformity in the answers to the interview questions was startling. There was knowledge of current board goals which had been adopted in response to Public Act 25. stated that these are curriculum oriented. Interviewees Although they are 25 not discussed directly during the dollars do get spent on curriculum. budgeting process, the One of the goals included staff development, and each of the principals indicated that within their building budgets they were allocating more funds for staff development. One administrator expressed concern that the district had changed from adopting more local goals, which had included goals on the financial management of the district, to adopting the more global goals to meet state mandates. All interviewees agreed that the district had a multitude of plans. One administrator said that nothing was done in the district that was not well planned. The 1993-94 budget is completed and projections for 1994-95 were being discussed. researched, thought out, and Everyone expressed concern over the uncertainties of revenue projections because of what is happening plans, in Lansing. based on However, differing the assumptions, expenditures if that is necessary. for curriculum development district in has place several to cut Plans are also in place which allow replacement of textbooks and materials. for systematic There are plans for replacement of furniture, roofs, and other types of capital outlay, although the researcher was told that only major projects that could be covered by a building and site fund were being completed. The Board has requested that a plan for preventive maintenance be developed. training of staff are in place. Plans for the systematic 26 The budgeting process is very open and inclusive. The researcher was told that ALL budgeting decisions are reached at administrative team meetings. Building administrators are given a per pupil allowance for their building over which they have complete salaries autonomy. This and benefits, allowance utilities, does not or textbooks. include Building administrators varied in allocation processes within their own building budget. All mentioned that they operated under site based management. consultation representative At the high school, department heads, in with their from allocated the funds. community members the respective union met with staffs, the and principal a and In some buildings support personnel and are included in the allocation process because they are part of the School Improvement Team. One elementary school principal told me that the teachers wanted no part of budgeting. Central office administrators review their previous line items and request funds for those line items for the ensuing year. All administrators must justify, in at least a few sentences, every proposed expenditure. If cuts in expenditures are necessary, criteria for those cuts are developed by the entire administrative team. Budgets are presented to the board of education at all day workshops which are open to the public (but no one attends), reviews the budget line item by line item. and the board Administrators expressed pleasure that they were included in so much of the decision-making and that they were kept so well informed as to the financial condition of the district. 27 The administrators of this district spend a lot of time gathering information, action, and planning. adopted proposal, with the considering alternative courses The budget for 1993-94 is ready to be acknowledgement that the June ballot of which details were unknown at this time, necessitate a of revision. However, in spite of may the uncertainties, plans are in place so that the budget will be balanced and spending can occur. The two statements that were made over and over were that "kids come first" and "program will not be cut." Board minutes revealed that the budget is generally adopted in the spring prior to the ensuing fiscal year, revised in the fall after the revenues are more certain, and revised in the spring prior to the close of the fiscal year for "minor adjustments." during the last few years, The researcher was told that one "threat" had been made that spending would have to stop because the district was running out of money; but spending continued as projected. Another instance was pointed out that a math program had been adopted but a hold needed to be put on purchasing the textbooks due to a lack of funds. The pilot revealed that some of the interview questions were redundant and needed to be deleted. The order in which some of the questions were asked needed to be changed. It was decided that a review of school district documents prior to visiting knowledgeable interviewing. the site about the would make district the and researcher guide some of more the 28 Significance of the Study The importance of this study was the comprehensiveness with which the researcher chose to examine the processes used budgeting in school districts. This study focused on decision-making about the entire budgetary process including raising revenues, expending funds, balancing the budget, implementing the budget, and deciding who will be involved in the process and to what extent. The choice of four cases studies representing school districts with differing levels of wealth and differing levels of certainty of that wealth provided an understanding of how the financing of education in Michigan impacts organizational decision-making. Specific contributions or potential outcomes include the following: 1. The study adds to the body of knowledge about organizational decision-making in general. 2. The study provides a comprehensive understanding of how school districts makes decisions about budgeting. 3. The study provides a broader understanding of the relationship between the level of available resources and the decision-making processes used to allocate those resources. 4. The study provides a broader understanding of the relationship between certainty of resources and the decision-making processes used to allocate those resources. The study has policy implications for educational leaders and politicians regarding the effects of wealth and the certainty organizational decision-making. of wealthy on CHAPTER II REVIEW OF THE LITERATURE The purpose of the study was to describe and explain differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. The purpose of this chapter is to review the literature from the two strands framework: of thought identified in the theoretical decision-making theory and budgeting theory. Decision-Making Theory This section will decision-making theories: review the literature of three rational, incremental, and garbage can. Rational Decision-Making Theory Rational decision-making is described in the works of March and Simon (1958), Simon (1957, 1976, 1982) and Cyert and March (1963). In a decision-making situation, the rational decision-maker knows all the available alternative choices and all the consequences that are connected with each alternative. The decision-maker has the ability to rank all of the sets of 30 31 consequences that may occur. the decision, the If there is no risk involved choice quickly becomes uncertainty orrisk enters the process, maker will choose the alternative clear. in If then the decision­ with the least worst consequences. According to economists Cyert and March (1963), who developed computer simulations of decision-making, rationality relies on two assumptions. One is that the goals of an organization are clearly known; in economics, for example, the goal is profit-maximization. decision-makers computer act simulation, The second assumption is that with perfect all available knowledge. information Using the about all possible alternatives for resource use could be fed into the computer, and it could produce a decision that would maximize profit. The theory has been called rational decision-making because the model eliminated the possibility of the decision being made on anything other than logic. According to Simon (1982): The classical model calls for knowledge of all the alternatives that are open to choice. It calls for complete knowledge of, or ability to compute, the consequences that will follow on each of the alternatives. It calls for certainty in the decision maker's present and future evaluation of these consequences. It calls for the ability to compare consequences, no matter how diverse and heterogeneous, in terms of some consistent measure of utility, (p. 481) Chaffee (1983) summarized the basic tenets of classic rationality by describing it as a normative theory in which goals are known, needed information is obtainable, adequate 32 resources are available, prediction is feasible, effects are judged according to criteria, and cause-effect relationships are known. Simon (1957, 1976, 1982) explored limitations of classic rationality. the Simon constraints or recognized that the purpose of the organization limits the available choices for alternative resource use. of a shoe factory. Simon (1976) uses the example Decision-making about resource usage for the shoe factory would not include the consideration of using resources for any purpose other than making shoes. The organization's purpose or objective is shared by the owners, the consumers, and the employees. The owner wants to make a profit; the consumer wants to purchase a good product; and the employee wants to earn an income. According to Simon (1976) the the organization's objective "is means whereby their [owner, consumer, employee] organizational activity is bound together to achieve a satisfaction personal motives" (p. 17). bounded rationality. researchers are decision-making. their own diverse Hence Simon's theory is known as Bounded referring of rationality to when they is refer what to most rational Simon acknowledges that decision-making in private organizations is simpler than in public organizations. Simon (1976) states, take into "The private organization is expected to consideration only those consequences of the decision which affect it, while the public agency must weigh the decision in terms of some comprehensive system of public or community values" (p. 69). 33 Simon (1976) states that the organization achieves its objectives by integrating behavior through substantive and procedural planning. Substantive planning involves broad decisions about the values to which the organization will direct its activities, the methods which will be used to attain those values, and the knowledge, skills and information that are needed to make particular decisions. planning involves designing and establishing Procedural the ways to direct attention, information and knowledge so that specific day-to-day decisions are made to conform with the substantive plan. Simon (1957, 1982) recognized limitations on human abilities to have perfect knowledge and to compute and predict the consequences of alternative selections. these limitations are risk, information about limitations, individuals making procedures. uncertainty, alternatives. To and organizations The causes of and incomplete overcome human adapt decision­ Instead of searching for optimal choices, decision makers satisfice, looking for satisfactory choices. The organization forms an aspiration level as to how good an alternative choice should be, and then searches for the choice that will satisfice. Simon (1982) states, "Aspiration levels are not static, but tend to rise and fall in consonance with changing experiences. many good In a benign environment that provides alternatives, aspirations environment, they fall" (p. 483). with tangible rise. In a harsher Abstract goals are replaced subgoals that can be observed and measured. 34 Even though limitations exist, Simon believes that individuals and organizations can engage in rational decision-making. Simon (1982) states, "If human decision-makers are as rational as their limited computational capabilities and their incomplete information permit them to be, then there will be a close relation between normative and descriptive theory" (p. 480) . Incremental Decision-Making Theory The intellectual origin of incremental decision-making is in the work of Lindblom (1959, emerging theories concluded that reality. In of classic 1979). and After examining the bounded rationality, he the processes they described did not match an article called "The Science of Muddling Through" (1959) Lindblom describes a decision-making process that relies believes on that successive rather than limited evaluate comparisons. all Lindblom possible outcomes, decision-makers in actuality list only those which occur to them, relying heavily on their own past experience. Lindblom states that decision-makers select the first alternative that seems minimally acceptable. Analysis is severely limited. Many possible outcomes and alternative potential policies or decisions Lindblom are neglected; states that and this affected values are process organizations and bureaucracies. is typical ignored. in public In public organizations it is difficult to identify whose values - citizens, Congressmen, public administrators - should be considered. If values can 35 be agreed upon, Wildavsky they are difficult to rank. (1979), Boyd (1982), and According to Cibulka (1987) the incremental decision-making model is often referred to as a bureaucratic model of decision-making. Decisions are made to preserve the bureaucracy. Decisions are reached based on the collective of those involved. interests self-interests may include striking bargains maintaining between opposing environment can be maintained. that the decision-maker power These and groups so self- prestige that or a work Lindblom (1959, 1979) believes intertwines goal setting with the analysis of action needed to remedy a situation; there is no separation of means and ends. A good decision is one that brings agreement whether or not it is the best means to an end. Lindblom defends sequential incrementalism because it allows consideration approximations. of alternatives successive The alternatives which are considered differ only incrementally from the status-quo. small segments, using for By looking at only knowledge can be gained along the way and predictions can be tested before making any further changes. Lindblom states that incrementalism does not necessarily rule out long term considerations. Because it proceeds chronologically, the past makes the decision-maker aware of probable consequences of similar decisions. Further, the decision does not need to attempt great changes; there is no expectation that the incremental decision is the final word. Lindblom (1959) states: 36 The incremental pattern of policy making fits with the multiple pressure pattern. For when decisions are only incremental - closely related to known policies, it is easier for one group to anticipate the kind of moves another might make and easier too for it to make correction for injury already accomplished, (p. 82) Garbage Can Decision-Making Theory Cohen, March, and Olsen (1972) developed the theory of garbage can decision-making to describe what occurs in an organized anarchy. An organized anarchy is an organization which lacks a consistency that allows it to use other methods of decision-making. An organized anarchy has ambiguous goals; it "discovers preferences through action more than it acts on the basis of preferences" (p. 1). unclear technology; organization An organized anarchy has an its processes are not understood. survives through the use of trial procedures and pragmatic inventions of necessity. and The error There is fluid participation; the participants change frequently and vary in the amounts of time and effort they are willing to contribute to the organization. Cohen et a l . (1972) state that it is convenient to think of choice opportunities consideration of consequences, evaluation (chances decision to make alternatives, of decisions) as examination of consequences in terms of objectives, and finally decisions; but in reality this does not occur. Instead, a choice opportunity is a "garbage can into which various kinds of problems and solutions are dumped by participants as they are generated" (p.2). They further 37 state that the outcome of the garbage can decision process is influenced by (1) the time pattern of the arrival of problems, choices, solutions, allocation of and energy decision-makers; by potential and (2) the in the participants decision. Cohen et al. (1972) derived their theory of garbage can decision-making from a study of universities using a Fortran simulation of 324 situations. The results of the study show that decision-making generally does not resolve problems. The decision style more often selected is oversight or avoidance. The study showed that problems are measures of conflict, and that active decision-makers through the process and problems without coming to track each other resolution. decision-making process is very sensitive to load. The If there is an increase in net energy load ("difference between energy required within available" p. an 12) organization there will be and an the effective increase in energy problem activity, decision-making activity, decision difficulty, and an increase in the use of avoidance and oversight. Variables such as wealth and the effects of adversity were studied. The concept of slack was introduced and defined as "the difference between the resources of the organization and the combination of demands made on it" (p. 12). was sensitive to two factors: March et a l . found that slack the amount of money and resources provided by the external environment and the number and consistency of demands made on the organization. The researchers found that less wealthy universities experience 38 more conflict and take more time to make decisions. resources combined with result fewer problems in greater and inconsistent being resolved. Fewer demands, Decision-makers shift from one problem to another more frequently. Decisions take longer, are made over and over with different results, or are left unmade. Under the garbage can decision-making model, decisions are sometimes made too late to be of use or need to be re-examined due to changing circumstances. Cohen et al. decisions change. (1972) also found that interpretations of When this occurs, the problems, choices, and decision-makers arrange and re-arrange themselves to make another decision. This means that some problems are solved, but rarely by the first decision choice reached. Cohen et a l . (1972) concluded that: the garbage can process is one in which problems, solutions, and participants move from one choice opportunity to another in such a way that the nature of the choice, the time it takes, and the problem it solves all depend on a relatively complicated intermeshing of elements, (p.16) These elements are the mix of available choices, having access to the organization, solutions problems looking for problems, and the outside demands on decision-makers. Cohen et al. (1972) conclude that garbage can decision­ making cannot be eliminated from many organizations. It is advantageous to understand that garbage can decision-making is occurring so that organizations can account for and manage it. This section has decision-making theories: reviewed the literature on three rational, incremental, and garbage 39 can. Attention will now be turned budgeting theory. budgeting involves decision-making, the next Because section will describe the meshing of decision-making theory with budgeting theory. Budgeting Theory This section will budgeting theory. review literature on budgeting and Definitions of a budget will be presented, and the characteristics of public budgeting will be presented. A discussion of the types of decisions that must be made in budgeting will representative follow. of decision-making, discussed. Budgeting rational and models decision-making, garbage can that are incremental decision-making will be A review of studies of public budgeting will also be presented. Definition of a Budget A budget is a legal document that becomes the basis for spending public funds (Hartman, revenues and expenditures James, Kelly & Garms, 1966). 1988a). (Cibulka, A budget forecasts 1987; Hartman, 1988a; It is a record of the past and a statement about the future (Candoli, Hack, Ray & Stollar, 1984; Wildavsky, 1979). allocating resources, alternatives (Cibulka, A budget is a mechanism for a way to make choices among competing 1987; Hartman, 1966; Rubin, 1990b; Wildavsky, 1975). 1988a; James et a l ., Wildavsky (1975) states that a budget is "a translation of financial resources into 40 human purposes" (p. 1). Wildavsky (1979) further states that a budget is a "series of goals with price tags attached" (p. 2) and the motivation to accomplish those goals. A budget is a form of power, a way to control the behavior of others (Becker 1968; & Green, Hartman, 1988a; Wildavsky, 1975). Caiden (1988) states that budgets express society's decisions about efficiency and equity issues such as who should benefit and who should pay. Budgets express philosophical values as to what should be financed and at what level. Candoli, Hack, Ray, and Stollar (1984) state that "the educational budget is the translation of educational needs into a financial plan that, when formally adopted, expresses the kind of educational program the community is willing to support, financially and morally, for the budget period" (p. 127). Characteristics of Public Budgets Rubin (1990b) identifies five characteristics unique to public budgets. The first characteristic is the variety of actors involved. In addition to those employed by the public organization, there are taxpayers, special interest groups, legislative bodies and locally elected officials, and court decisions which play a role in public budgeting. Each has different priorities, different levels of power. The second characteristic of the separation between taxpayer and spender. that if public officials: public budget is a Rubin (1990b) states knowingly make decisions that differ from what the public wants, there is pressure to present the budget in a way that makes it appear acceptable. That pressure creates a tension between accountability, which requires nearly complete openness, and acceptability, which sometimes involves hiding or distorting information or presenting it in an unclear fashion, (p. 16) The third characteristic of the public budget relationship between accountability. the budget document is the itself and Rubin believes that the more complex the budget, the easier it is to hide costs. A complex document allows put greater choice in places to revenues and expenditures resulting in the ability to highlight some parts of the document and to gloss over others. The fourth characteristic of the public budget is an openness to the environment. The environment influences the level of resources and the degree of certainty in receiving those revenues. The environment forces the budget to be subject to emergencies, to decisions that are made at other levels of government, and to public opinion. The fifth characteristic involves constraints. The major constraint is the requirement to have a balanced budget. Other constraints previous include court organizational decisions, decisions, legislative collective actions, bargaining agreements, and spending restrictions on some revenues such as federal grants. 42 Budgetary Decision-Making Rubin (1990b) states that because a budget is the allocation of resources, it represents choices which require decision-making. Rubin discusses budgetary decision-making by identifying clusters of decisions that must be made. Each cluster has its own set of processes and works independently of the others, but at the same time relies on all of the other clusters to produce a budget. calculations vary from Rubin found that strategies and cluster to cluster depending on stability of resources, the need to acquire more resources, and the environment. The Revenue Cluster The revenue cluster involves technical estimates of what the incoming financial resources will be. This cluster emphasizes the scarcity of the resources and shows the tension that occurs resources been fall accountability short of what and is acceptability. needed to When support the projected expenditures, a tax increase is usually considered. Public officials must get support carefully to be successful in raising taxes. Officials must be accountable for past expenditures and must ask for a tax level that is acceptable to the public. The environment must be right; either there is no opposition group strong enough to fight the increase or the need must be overwhelming. Public officials need to be completely open to the public but try to buffer themselves from interest groups which usually have only their own agenda in mind. The strategies that are often used include: tying 43 the tax to a highly needed service, earmarking the tax for a special project, or raising more than is needed so that the excess funds or slack can be used to negotiate with groups that have particular wants. The Process Cluster The decisions reached in the process cluster determine who will participate, to what extent, itself will be presented. the process. decision. and how the document Time lines are set for completing Who will participate in budgeting is a major As pointed out above, there are a variety of people with a variety of goals wanting to have input. executives or administrators, bureaucrats (such as teachers), heads of There are departments, governing boards, citizens, and interest groups each having differing needs and goals. The degree to which budget requests are scrutinized and the criteria used to prioritize requests are determined. process be centralized or decentralized? Will the With a bottom up development of the budget, more people are involved and less prioritizing of requests occurs. With a top down process, fewer people are involved, and there is more spending control. Will the process be open or closed? An open process allows more accountability but can also increase expenditures as more people and groups are involved and each has its own needs. A closed process controls increases in the budget. The format the budget takes can control the competition for available resources. most control. A line item budget represents the It plays down competition because there is no 44 comparison of programs. other issues. The performance based budget raises Each administrative unit is required to put forth what it is trying to accomplish, what it plans to do, what resourcesit will use, and what it accomplished previous year. in the The program budget creates competition for resources between programs regardless of the administrative units under which they may fall. The Expenditure Cluster Decisions reached in the expenditure cluster emphasize the choices involved the in allocating organization programs and reveal conflict with funding. Expenditure decisions determine which programs will be funded and at what level. as resources compete for Technical estimates, based on previous years' expenditures and knowledge about future costs, are as important in this cluster as they are in the revenue cluster. Budgetary constraints become a focus in this cluster as legal obligations must be met prior to making discretionary decisions. The Balance Cluster Balance cluster decisions determine what will be cut (or possibly added) if revenues and expenditures do not match. If expenditures exceed revenues, decisions as to how to bring the budget back into balance must be made. The choices available involve increasing revenues or decreasing expenditures. The issues that are raised in this cluster involve the scope of government and spending priorities. Conflicts that were created in the expenditure cluster may increase if programs 45 need to be cut. The tensions of accountability and acceptability that surface in the revenue cluster may appear in the balance cluster as well. An imbalance can occur because of overestimated revenues and/or underestimated raises other expenditures. issues. Rubin deficits are embarrassing, deficits, those responsible (1990b) when A deficit states condition that governments "because run chronic for them tend to deny them or minimize their size and importance" (p. 145). The need to minimize the size of deficits often diminishes the accuracy of the numbers being used in the budget. The more obscure the numbers become, the more difficult it is to bring the budget back into balance. The Implementation Cluster Implementation cluster expenditures can be made. decisions determine when The technical estimates made in the revenue and expenditure clusters become vitally important. The match of actual revenues and expenditures to those that were projected determines whether implemented. Decisions to delay or not spending a budget due can be to uncertainty or cash flow problems may be necessary. revenue A change in the environment may change spending priorities and dictate the need for a budget revision. A changing economy, changing leadership, changing political battles, and changing problems can necessitate a need to review and revise a budget. 46 Rational Budgeting While there is no normative or descriptive theory of rational budgeting, models of budgeting have been developed that meet the criteria for rational decision-making. Planning, Programming, Budgeting Systems (PPBS) and Zero-Based Budgeting (ZBB) have been identified as models of budgeting that most closely utilize the (Cibulka, 1987: Chichura, 1989). these models of budgeting decision-making According to Rubin (1990a), evolved decades due to demands for more accountability. demand The rational during the information, arose for a last three planning and shift from administrators requesting what they wanted in their budgets to requesting and justifying what was needed to deliver their services. processes, means of Cibulka (1987) decision-makers achieving the cost/benefit analysis. states that identify ends, and in ends these or make budgeting goals, select decisions using These decisions are autonomous from environmental pressures. Hartman based (1988a) on program describes structure. PPBS The as a budgeting system budget is organized by function of the program (in education, that would be a primary breakdown between instruction and breakdowns by individual programs). support, with further The process calls for a careful specification and analysis of objectives and a search for relevant alternatives. indirect, and initial) are Estimates of the cost made for each (direct, alternative. Estimates of the effectiveness of each alternative are made. 47 Singleton, Smith, and Cleaveland (1980) describe based budgeting as a four step analytic process. zero Budget units are established and then divided into service levels which represent a forecast consequences. Each of cost level and is service then or non-service analyzed. priority ranking of all service levels occurs. Finally a The criteria for ranking priorities are the importance of the service level in terms of satisfaction. by the perceived health, welfare, safety and The statutory and contractual commitments met service level are considered. The potential consequences of not offering the service are analyzed. The funding that may and be received or withdrawn from state federal funds depending on the level of the service provided is examined. effectiveness analysis of An of the assessment the cost of the service is of services the administrative costs is examined. quality performed. in and cost Finally, an relationship to This process, in theory, is done every budgeting year. According to Barber budgeting in the (1968) educational rational decision-making. and Cibulka environment (1987), ideal should epitomize Budgeting should involve surveying the goals of the community and ranking those goals in the order of importance. Plans for the future should tie budget setting to multi-year goals (Cibulka, 1987). The costs and benefits of alternative choices of programs should be made. Program results should be evaluated (Cibulka, 1987). Knowledge of statutory and contractual commitments and of the 48 importance placed on the provision of services in terms of "perceived health, (Singleton et welfare, al., 1980, safety, p.188) and should "Comprehensive knowledge of economic, satisfaction" be political, evident. historical and ecological character of the entity" (Barber, 1968, p.262) should be available and utilized. Revenue forecasting systems and information systems with data bases on pupils, employees, and programs should be used. A system of internal auditing and Board of Education policies addressing borrowing, cash flow management, surplus and reserve management should be in place (Cibulka, 1987). Those involved in budgeting project the future, analyze resources, operations, and plans and then determine the of the educational organization (Barber, 1968; Smithies, 1968). The final the step, best then, means to the is to allocate meet the the ends resources among various activities to reflect the priorities. Chichura (1989) views PPBS, performance based, and ZBB budgeting models as attempts to improve school productivity based on the assumption that the following exist: one or more agreed-upon products or outcomes of schools, scientific instruments for measuring progress toward those outcomes, and research techniques which make it possible to separate school effects and out-of-school effects upon student achievement. Chichura (1989) stated that rational decision-making is the process that understanding forms and the of "essential efficiency link between of knowledge, inputs of [necessary resources] and the outputs [desired goals or results]" (p.3). 49 Candoli, Hack, Ray and Stoller (1984) and Greenhalgh (1984) view school site based management as a way to bring rational budgeting to the school setting. Under this concept, all decisions that can reasonably be made at the individual school level are kept there. Policy and general regulations are made by the Board of Education. District wide goals and objectives for all students are adopted. site is allowed, decide how to students. of Then each building through decentralized decision-making, achieve those goals and objectives for its The concept advocates the inclusion of a wide range individuals from both the educational setting and community in general in the decision-making process. the process, spend. to the Under each building is allocated a dollar amount to It is then up to the persons involved within that building to decide how those dollars will be spent. Site- based budgeting is used to continually match student needs and available resources. Much criticism of PPBS and ZBB exists. Wildavsky (1979), the major proponent of incrementalism, stated that one of the problems with PPBS and ZBB is that no one knows how to do them. He further states that they call for calculations and knowledge beyond the realm of man's ability and conflict among the people involved in budgeting. increase He states that objectives are often altered to match resources so that the general purpose is defeated. final outcome — the budget — Wildavsky believes that the is not impacted by the process 50 used. In his view, PPBS and ZBB may create more work and more paperwork without effectively changing the final outcome. Hartman expenditures (1988a) states by programs, it that is because complex. PPBS organizes It cuts across administrative boundaries resulting in a mismatch of budget categories and responsibilities. programs and activities which ZBB forces comparison among are difficult to compare. Hartman (1988b) states that: while implementation of these rational budgeting approaches has generally not succeeded in elementary and secondary school systems, the concept of alignment of organizational objectives with budget decisions remains a useful measure of rationality in evaluating the resource allocation process. At a minimum, educators acting rationally should consider student outcomes and allocate resources in a way which they believe will improve student learning, (p. 5) Studies rational decision-making conducted in high schools and universities results. of and budgeting have had mixed Hartman (1988b) reported in his findings of a study of four high schools, two of which used site-based management principles, that student outcomes were not considered in any of the budgeting processes. He found that the staffs had only very general knowledge of what the student outcomes were in their schools. Further, there was "no mention made in any of the interviews, budget meetings, or documents of a connection between resource allocation policies, decisions, or alternatives and student outcomes" (p. 21). On the other hand, Chaffee (1983), after studying budgeting at Stanford, concluded that there was strong but not 51 unequivocal evidence of rational decision-making. her conclusions on the presence of known She based and prioritized goals, simultaneous rather than sequential consideration of a wide range of expenditure alternatives, analysis of costs and benefits of the alternatives, and selection of the maximizing alternative. Incremental Budgeting Wildavsky (1975; 1979) analyzed the budgeting process of the United States federal government. Wildavsky (1979) stated that there are three institutional decisions in budgeting to be made: How much to ask for, how much to recommend, and how much to give. In answering these questions, actors within the bureaucracy assume Administrative expenditures. roles agencies According with are expected advocates to Wildavsky, behaviors. of each increased administrator considers his own requests for increases to be too small to affect the total. Administrators do not see revenues as fixed; the money will come from somewhere to support their own needs. For administrators, prestige is dependent on new or expanded programs. Administrators do recognize that it is unrealistic to believe that someone higher in the hierarchy will not make cuts. their requests. Therefore, administrators tend to pad The game then becomes deciding how much the submitted requests will be cut so that the requests can be padded enough so that the end result is an actual increase in 52 previous years' budgets. Sometimes the padding consists of programs the administrator wants but can do without. Rational decision-making procedures do not appear to be functional in a bureaucratic setting. Rational making is linked to profit maximization; interested in utility maximization incentive structures effectiveness and for public are not decision­ bureaucracies are (Cibulka, 1987). The employees are not tied to calibrated to profit/loss consequences. Boyd (1982) believes that because there are no profits, rewards the come from seniority and longevity. Cibulka further states that "self-interested preferences of producers shape the organizations" (p. administrators try prestige and salary. internal 9). to Boyd external of [bureaucratic] points benefits such out as that power, They try to maximize bureaucratic growth stability of the organization. strike bargains groups. (1982) maximize to gain power and internal Administrators processes They try with to both employees simultaneously meet environment's expectations and exploit its resources. there are no profits to maximize, and administrators the Since try to maximize their budgets. During the budgeting strategies designed confidence of to process, cultivate other government bureaucrats clientele, officials, individual opportunities to the maximum. develop develop and the exploit There are various strategies that are adopted if one is called upon to defend the base (ongoing projects of the agency) of the budget. One 53 is to suggest cutting a popular program knowing that it will be replaced. Another is to recommend cutting less visible items such as administrative cuts (based on the premise that bureaucrats promotional are wasteful), activities. nothing approach: housekeeping Another approach activities, or is or the all if the program experiences a diminished funding level, the whole will need to be scrapped. Another strategy is to declare that the program can be continued but only at a much lower level of service. Another strategy is to shift the blame or let someone else make the decision. If one is trying to expand the base beyond the usual increment, then it is possible to begin a large program by requesting only a small beginning, the wedge in the door, then later, expand the program. At the Federal government level, appropriations committees decide which programs to fund and at what level. Politically, it is expedient for appropriations committee members to at least appear that they are saving or wisely spending taxpayers' money. Therefore, their role is to cut budget requests as much as possible. Since it is assumed that the requesters have padded their requests, the committee feels justified in reducing the requests. According to Berry (1990), the assumption of standard roles for the bureaucratic players in the budgeting process reduces time and the need for analytical ability. Wildavsky (1979) states: Budgeting proceeds in an environment of reciprocal expectations that lead to self-fulfilling prophecies as the actions of each participant 54 generates the reaction that fulfill the original expectations, (p.23) Therefore, everyone is basically happy because each group got what it really wanted. In approaching incremental light. approach their look Last year's budget considerations. task, at the budgeters budget in using an the historical forms the base for this year's According to Barber (1968) and Berry (1990), attention is restricted to only small segments of the whole and with only marginal departures from the previous year's budget. Therefore, the budgeting tends to be incremental. Wildavsky (1979) found that budgeting is fragmented as each agency presents its requests without taking the whole budget into consideration. Often, line item budgets are presented, making it difficult to focus on programs but easy to compare one year to another. Problems often remain unsolved, sent to a special committee or simply go away over time. Budgeting is performed by considering requests sequentially rather than simultaneously. Wildavsky (1979) stated: Once enacted, a budget becomes a precedent; the fact that something has been done once vastly increases the chances that it will be done again. Since only substantial departures from the previous year's budget are normally given intense scrutiny, an item that remains unchanged will probably be carried along the following years as a matter of course, (p. 3) The fragmentation inherent in incremental budgeting generally dictates line-item budget format be used. According to Hartman (1988a) line item budgets are easily understood and controlled. The objects of expenditure are the focus. There 55 is no disaggregation of data, planning. Hanson (1979) making it inappropriate disagrees with Hartman, for however, stating that the line-item budget is not easily understood. Hanson states: Confusion over where the money goes in a school district can . . . retard the potential for turbulence. No better instrument could be devised for such purposes than the line-item budget, which is the type of budget system used in most school districts in the country. By viewing a line item budget, an outsider (and even most insiders) cannot determine, for example, how much a Spanish language program is costing as compared with mathematics, counselling, or industrial arts programs. Nor can an outsider determine the priorities established by the school district by studying the budget, (p. 171) Hanson (1979) points out that school districts have the basic characteristics which Weber and bureaucracies in their seminal works. Taylor assigned to Schools are mechanistic organizations with fixed hierarchies, precisely defined roles and production vertical processes, interaction patterns. socio-political systems. whose interactions clear command Hanson structures, viewed schools and as A social system has a set of actors are intended to lead accomplishment of some more or less defined goal. system consists of strategies used by toward the A political members of the social system to influence the decision-making process and lead it to a preferred choice. Educational organizations have goals that tend of be non-operational. There is no way to measure goal achievement nor is there a way to determine the relationship between the educational process and goal achievement. For example, if the goal is to produce good citizens, it may be 56 difficult to agree on what constitutes having achieved that goal and egually difficult to determine what role school played in producing the good citizen. Goals in education are also vulnerable to the desires of legislative bodies such as schools boards and to manipulation and lobbying by employees (Boyd, 1982). Hanson (1979) further states administrator that the main "task of the neutralize as many conflicting goals as possible is to [so that] school can proceed with a more or less coordinated plan" (p. 91). The organization solves problems blocking, compromising, and conceding. it is through this bargaining by bargaining, Boyd (1982) believes process that the needs of teachers and principals often take precedence over students. Incremental decision-making becomes the main tool of the administration because it takes small steps toward solutions to problems, minimizes conflict, and makes mistakes easier to correct. Many of the studies involving schools and universities have found evidence Studies by Barber of incremental (1968) and Gerwin budgeting (1969) practices. were conducted during a period of growth of governmental bureaucracies. More current studies showing evidence of incrementalism are those by Hartman (1988b), Schmidtlein and Schmidtlein (1989-90) and Shannon (1988). Milton (1988-89), Hartman found in studying four high schools that decisions regarding resource allocation were not based on student needs or student outcomes; rather, decisions were based on staff needs and were 57 reached through bargaining and negotiating. Schmidtlein and Milton studied sixteen college campuses and found that almost all were plans, nature engaged however, and in some type of planning activity. were basically thought to be political were not used in budgetary The in decision-making. Schmidtlein1s study found that negotiations and bargaining, which resulted in incremental budgets, were prevalent. Shannon found incremental budgeting was the norm in the six Washington school districts she studied. The slack — the differences between the resources of the organization and the demands made on it — was negotiated among the budget actors. LeLoup (1988) states that the late 1970's signaled the end of viewing incrementalism as the paradigm of budgeting. Econometric analysis and the recognition of new economic and political forces have forced the demise of incrementalism in public budgeting. Miller (1991) states that incrementalism is useful only when there is general satisfaction with existing policies, continuity in the nature of problems, and continuity in resources. Rubin inadequate it as (1990a) assumes states that incrementalism is moderate revenue growth and it ignores environmental changes such as budget constraints. The Effects of Wealth and the Garbage Can Model of Budgeting When Cohen et a l . (1972) made their study of university decision-making that resulted in the garbage can theory of decision-making, they analyzed variables such as size and 58 wealth of those universities. They found that under conditions of prosperity, wealthier schools experienced more problem latency possibly due to the fact that slack in the budget could be used to resolve issues before they became problems. They found that poorer universities experienced more overt conflict and took more time to make decisions. Cohen et al. found that under conditions of adversity, problem activity increased among all of the universities, but that the large poorer universities had a greater increase in problems, took substantial amounts of time to make decisions, and had few resolutions to problems. Wildavsky (1975) budget differently. found that rich and poor These differences are due to size of the budget, wealth and predictability of that wealth. a budget alters countries the relationships of budgetary The size of items. A $10,000 purchase may be a large expenditure in a budget of small size but the same purchase may be insignificant in a budget of larger size. In a school district, the decision to hire a teacher at $25,000 per year may be an insignificant increase in a large budget, but it may be a decision requiring much review and discussion in a small budget. a country is determined by its per The wealth of capita resources. Predictability is defined as the amount of certainty regarding availability of resources and the certainty of the demands for spending. Wildavsky devised a two by two matrix which wealth to predictability of that wealth. relates The cells of the 59 matrix show the behaviors, strategies and calculations used in acquiring and allocating the wealth. Rich organizations with an assumed level of income use incremental budgeting. organizations with an assumed level of Poor income use revenue budgeting, which means decisions on the use of revenue are made when the revenue arrives. uncertain level of Poor organizations with an income use repetitive budgeting. Repetitive budgeting is an example of garbage can decision­ making; the budget is changed over and over as revenues become available or unavailable. uncertain level of income found that Rich use organizations incremental or with an repetitive budgeting. Wildavsky wealthy countries with certain resources engage in incremental budgeting; the base is not in dispute, no cuts need to be made, so concentration can be placed on the addition of large projects. The ability to keep budgetary once finalized, commitments expenditures exists, so that can be made. He a budget is found that poor countries with certain resources have few decisions to make. They add a little in good times and take away a little in bad times. savings They engage in revenue budgeting since there are no from previous condition of countries make information. poor and and years. Wildavsky uncertain re-make is budgets Decisions are delayed. found that devastating. depending on the These any new Expenditures can not be made until the revenues have arrived with certainty. 60 Rubin (1980) studied universities which had budgeting experienced processes at five growth during the late 1960s and early 1970s but were then faced with the problem of reduced budgets. budgeting Rubin hypothesized that the quality of the decisions would depend on the completeness of relevant information, the quality of the information used, the definitiveness of decisions (the number of times a decision is made), the existence of explicitly formulated criteria for decision-making, the degree to which decisions are made with a view to maximizing decisions. Rubin goals, found that decision-making was the norm. information. and the the timeliness garbage can of the model of There was a lack of useful Long term planning became effort was made to maximize goals. impossible. No Decisions were made over and again using different assumptions. Often, budgets were not approved until the fiscal year was well underway, and budgetary approval did not necessarily mean that expenditures would be made. Uncertainty was a key factor in the chaotic decision­ making process used to allocate resources at the universities Rubin (1980) studied. As a consequence of uncertainty, there was a reluctance to make commitments to expend funds. Many times when decisions were finally made, they were too late to be of use. Another consequence was distorted information. Financial information became unreliable due to conservative estimates of expenditures. resources and exaggerated estimates of Financial information was further distorted by 61 obscuring some expenditures, such as administrative costs, in order to protect them. subsumed with other Some line items were renamed and/or line items. The lack of resources intensified the inner politicking for those resources. Rubin further found that because there was no well-defined point of organizational efficiency, cuts may have been made impaired the organization's functioning and adaptability. that She found that the universities had less ability to be innovative, and it was less likely that they would utilize mechanisms to reduce their fiscal stress. Fiscal stress is defined by Levine (1980) as the: gap between needs and expectations of citizens and government employees for government services and benefits and the inability of the economy to generate enough economic growth to expand (or sustain) tax-supported programs without putting unacceptable demands on taxpayers' take home pay. (p. 4) Levine believes dissatisfaction that of the this stress public with occurs the due methods to the used for setting priorities, for taxation and revenue generation, and for scaling down or terminating programs that are no longer a high priority. The public also becomes disillusioned with the way are services compensated. Levine organized (1980) and public employees are found that in order to satisfy these demands from the outside, bureaucrats usually react with a disjointed response, believing that the situation is only temporary. Fiscal stress causes problems in managing because the attempts to cutback are often based on across the board cuts, the opposite of incremental budgeting. However, it is 62 generally not recognized that this process usually does not work. Across the board cuts may jeopardize the functioning of the entire organization and negatively impacts those parts of the organization that were already running at peak efficiency. Across the board cuts assume that there is "fat" across the board that can be eliminated. organization, resources are When there is slack in an available for planning, control, and for development of information systems. of scarcity, available. for In times those resources that are most needed are not Since the public organization has most likely approached its resource allocation through negotiations and bargaining, conflict grows as there are no slack resources for a win-win consensus. Further exacerbating the problem is the increased likelihood that many talented people will leave the organization to find work in an organization that does not have these problems. employees who tend Those who are left are often the oldest to be "inflexible, expensive and less creative" (Levine, 1980, p.15). Pammer (1990) studied 528 U.S. cities in 35 states and found that there were several causes of fiscal stress. Pammer identified social and demographic changes such as a changing population due to the exodus of wealthier citizens and businesses and the influx of poorer citizens with less ability to pay taxes but more needs for services to be provided as a cause of fiscal stress. Poor internal management was another contributing factor to fiscal problems. City administrators had a short term view of finances and survived each fiscal 63 year by using accounting techniques which placed their integrity into question. Levine (1981) and Pammer (1990) found that the municipalities followed a sequential pattern of behavior. The denial of the seriousness of the problem causes a delay in action. Budget manipulation, which includes cutting capital outlay projects, delaying maintenance projects and borrowing to cover short term deficits, is accompanied by the hope that the problem is temporary. The stretching-and-resisting strategies. second step is to use These include reduction of supervisory personnel, an increased use of volunteers, and a rationing of services by reducing hours and raising fees. The third step include layoffs, is cutting-and-smoothing strategies which facility closings, program termination and transferring responsibilities to other agencies. Rubin (1982), in her studies of financially stressed cities, found the same haphazard approach to budgeting as did Levine and Pammer. Rubin, however, did an in-depth study of one city that was in deficit. She found that the deficit condition caused further problems in the budgeting process. Because deficits are illegal and embarrassing, attempt to hide them. of financial universities. there is an This resulted in even more distortion information than she found in her study of Further, attempts to hide the deficit minimize efforts to reduce the deficit. The studies by Cohen, et a l . (1972), Wildavsky (1975), Levine (1980, 1981), Rubin (1980, 1982), and Pammer (1990) all 64 show evidence of the garbage model of decision-making in the budgeting process. The conditions of lack of wealth and the inability to predict that wealth are key factors in producing behavior which place the budgeting process into the garbage can. Chichura (1989) and Cibulka (1987) studied the budgeting processes of local school districts garbage can decision-making. districts and found that and found evidence of Chichura studied four school the source and the amount of available revenues had a direct impact on the decisions of the boards of education decisions. Changes in property assessment practices placed constraints on the budgets. One of the boards needed to meet seven times before approving a budget which had greater expenditures than revenues. One board the member problems. resigned over the Chichura found that, inability to resolve although the board members expressed desires to act differently, circumstances did not allow them to do so. Cibulka (1987) studied experiencing enrollment planning, goal setting, 10 school decline. or districts that were He found no evidence of revenue forecasting. School officials believed that the problems were only temporary and needed only temporary solutions. freezes at the permanently While there were spending end of the year, reduce spending. No there was layoffs implemented in an effort to avoid conflict. no attempt of staff to were 65 Chapter Summary This chapter presented a review of the literature of three decision-making theories: garbage can. incremental, and This chapter also reviewed the literature on budgeting and budgeting theory. the rational, characteristics of Definitions of a budget and public budgets were presented. Budgeting models that are representative of rational decision­ making, incremental decision-making, and garbage can decision­ making were discussed. The studies reviewed in this chapter provide for the resources framework in Michigan examining decision-making school districts about of varying wealth. Researchers have found that decision-making in organizations other than school districts varies as the amount of wealth varies. They approximate the found that models of wealthier rational organizations closely decision-making while poorer organizations closely approximate the garbage can model of decision-making. In schools, as in other organizations, we may expect decision-making in wealthier districts to closely approximate the rational decision-making models and decision­ making in poorer district to more garbage can decision-making model. closely approximate the CHAPTER III METHODOLOGY Introduction The purpose of the study was to describe and explain differences in budgetary decision-making in varying wealth and varying certainty of wealth. the purpose, the researcher will used districts of To carry out budgeting as the indicant which varied just as the concept of decision-making varied. In this chapter, the methodology employed and the underlying assumptions that guided this study are explained. The theoretical framework which guided and underpinned the study is presented. The selection and nature of the school districts in which the research was conducted is explained. Data collection and preparation is described. Data analysis is discussed, and the conduct of the research is described. The chapter ends with a brief summary. Theoretical Framework Researchers that have investigated decision-making processes in organizations have utilized case study analysis. Rubin (1980) used the case study to investigate university 66 67 decision-making under conditions of reduced resources. Rubin gathered data through open-ended structured interviews with administrators, minutes of observations meetings. at meetings, Descriptive present Rubin's findings. and narrative review was used of to Rubin's study lacked quantitative data because it was either non-existent or not made available to her. Tables were utilized to show changes in appropriated funds, the degree of match between enrollment and budget, and hiring trends. Where possible interview results were compared with data that represented the outcomes of decision processes. Hartman (1988b) also used the case study approach to analyze resource allocation at the high school building level. Hartman conducted interviews with key administrators, department heads, and building secretaries. He observed the allocation process by attending meetings. other information such as budget Hartman gathered request staffing and student ratios, and handbooks. tables to present forms, Hartman utilized an analysis of teacher/student dollar allocation per policy, student by department. load and Information obtained through interviews and observations was analyzed for evidence of different budgeting models. Hartman's findings were presented in narrative form. Chichura (1989) used the systematic case study approach to analyze the decision-making role of the board of education in resource allocation in four school districts. Information for the descriptive component of the study included a review of state and school district documents, observations at formal 68 meetings, and interviews with board members, superintendents, business managers, representatives from the teachers' union, and community members. Observations at formal included documentation of board member guestions, responses, conflict, conflict and analytical of reasons component any kind, given to of the board meetings community reaction to the justify the budgets. study involved The examining and comparing descriptive data to the theoretical perspectives of decision-making literature. that were presented Tables were developed in to the review of demonstrate the frequency of the presence of the concepts which occurred in the district and to demonstrate the absence of the concepts in the districts. The study concluded that no one model of decision-making existed but that there was an interaction of models. A figure was presented to depict the interaction of the models. The theoretical framework for this study is derived from decision-making theory, budgeting theory, and research that indicates that varying wealth and varying certainty of that wealth affects organizational decision-making processes. The problems of researching decision-making and budgeting were discussed with several research. Generally information could be individuals who had conducted such the conclusion was drawn that while gathered through the survey or questionnaire format, these instruments could not capture the environmental processes. effects on the decision-making and budgeting Based on those discussions, this researcher 69 decided to use a case study approach; four individual case studies were conducted and the findings of each were compared. Yin (1989) defines the case study as: an empirical inquiry that: investigates a contemporary phenomenon within its reallife context; when theboundaries between the phenomenon and context are not clearly evident; and in which - multiple sources of evidence are used. (p. 23) Yin further indicates that "the case study is preferred in examining contemporary events, but when the relevant behaviors cannot be manipulated" (p. 19). Yin states that the techniques of case study are direct observation and systematic interviewing. strength evidence is He stated its — observations" ability documents, that to "the casestudy's deal with a artifacts, (p. 20). full unique variety interviews, Resource decision-making, ongoing process of and or budgeting, is a contemporary, in a school district. Difficulty exists in separating decision-making from the environment in which the process occurs. Behaviors cannot be manipulated by the researcher, and multiple sources of evidence make a study of decision-making more robust. Pattern-matching will be used in the analytical component of the study. the most Yin (1989) describes pattern-matching as one of desirable strategies for case study analysis. Pattern matching logic "compares an empirically based pattern with a predicted one" (p. 113). that varying wealth The argument of this study is and varying certainty of wealth will result in different types of decision making about resources 70 in school districts as was the case with other organizations that were studied- Pattern-matching will allow the researcher to test this argument. Selection of the School Districts Random sampling is not necessary for the field methods of case study research. examine a phenomenon. The purpose of case study research is to Cusick (1983) explains that "it is not necessary that random selection assure representativeness, it is only necessary that the phenomenon be present in the site" (p. 135). Accessibility to the district is a key factor in site selection for case study methods. A matrix similar to that devised by Wildavsky guided the selection of the districts. (1975) Four districts were selected, each representing one of the cells of the matrix; i.e. one school district was wealthy with certainty of wealth; another was wealthy with uncertainty of wealth; a third was less wealthy with certainty of wealth, and the fourth was less wealthy with uncertainty of wealth. Wealth was determined by dividing the revenues available to the district through its local mill levy and its state membership aid by the number of pupils. Certainty of wealth was determined by the district's millage rate and its eligibility for state membership aid. Financial and millage information was obtained for 1991-92 from Report R2743 generated by the Michigan Department of Education on August 7, 1992. According to this report, the millage levied by Michigan school districts in 1991-92 ranged 71 from 5.36 mills 47.12 mills. combined (in a district with only seven pupils) The average millage rate was 33.05 mills. local tax levy dollars and state to The aid membership allowance ranged from $1,889 per pupil to $12,475 per pupil (in a district with only four pupils). The average dollars per pupil levy generated through the membership aid was $3,913. and state aid The district selected as wealthy and certain levied 35.22 mills, and had $5,095 per pupil. local received no membership aid, The district selected as wealthy and uncertain levied 43 mills, received a very small amount of state membership aid, and had $4,365 per pupil. The less wealthy and certain district levied 34.13 mills, received 44% of revenues from state aid, and had $3,561 per pupil. The less wealthy and less certain district levied 26.12 mills, received about 24% of its revenues from state aid, and had $2,680 per pupil. The researcher selected districts with approximately the same number of pupils so that the number of participants in each district were approximately the same. Data Collection Interviews Data were gathered through open-ended structured interviews with key participants in the budgetary process. Participants included the superintendent, the business official, central office administrators, building principals, a teacher that was education member. active in the union, and one board of Interview questions gathered information 72 about the five clusters of decisions Rubin (1990b) identified as essential to the budgeting process. The guestions for each cluster were developed to elicit information which related to the six criteria used to assess decision-making that formed the basis of the research questions of this study. The interview questions varied slightly depending on the assumed level of involvement in budgeting. The superintendent and business officials interviews were the longest, and elicited specific information and revenues and expenditures. The superintendent, business official, board member, and teacher were asked questions individuals or groups principals questions and were to more to roles in the budgeting process. central germane pertained office their administrators practices in of Building were asked developing their building or department budget and to their roles in developing the district's budget. Copies of the interview questions are in Appendix E. The highly structured interview questions were helpful in eliciting information as participants found it very difficult to discuss budgeting. The interview was structured so that each group of participants were asked the same questions. For the most part, information. the questions asked for very specific The researcher made notes and used checklists, but always allowed the participant to expand on any question. The use of notes made it easy to verify statements that were made in other parts of the interview, and to be certain that all participants answered the same questions. Near the end of 73 the interview, questions became more general and asked about budgeting problems and what the participant would like to see changed about budgeting. Finally the participants were asked if there were any other comments they would like to make. intent of the information more about how district's control budgeting process. open-ended questions decisions made (the environment) was outside The to elicit the school affect the district's The notes that were taken during the open- ended structured interview questions are the primary documents for the research. Other notes documenting the observations of board meetings are also primary documents. Other Data Other documents such as audit reports, Form B reports, budgets, interview board minutes, responses. and policy were used to verify the Board minutes and board observations provided documentation of the process. meeting Numerical data allowed the researcher to trace the financial condition of the district and provided a quantifiable analysis of the result of the budgetary decision-making process. Validity Internal validity of this study was addressed through triangulation which consisted of using multiple sources of evidence to support Huberman (1984) a finding state that (Yin, 1989). Miles and "since there was typically no external measure to check the new finding against, one looked to other internal indices that should provide convergent 74 evidence" (p. 234). Miles and Huberman compare the researcher's work with that of detectives who piece together various kinds findings. make of evidence to establish and corroborate Miles and Huberman state that "it is important to certain independent, that the sturdy, several of indices different chosen types and are indeed sources, and congruent" (p. 235). Yin (1989) lists six specific sources of evidence to be used in triangulation. this researcher. agendas, minutes, Four of those sixwere utilized by Documentation was other written used reports in the form of events, of and internal documents. Archival records such as organizational charts, budgets, and audits were used. Interviews were conducted and direct observations of board meetings were made. Researchers Rubin (1980), Hartman (1988b), and Chichura (1989) all used studies. triangulation Interviews, to increase the validity observations, documents, of their and archival records were the multiple sources of evidence used to validate their findings. Miles and Huberman (1984) concluded their discussion of triangulation by referring to it as a state of mind. They state: If you self-consciously set out to collect and double-check findings, using multiple sources and modes of evidence, the verification process will largely be built into the data-gathering process, and little more need to be done than to report on one's procedures, (p. 235) 75 Case studies are often criticized for lacking in external validity. The school districts that were selected may not be representative of all school districts. However, Cusick (1983) states that a field study is: an . attempt to unravel and explain a human event. . . If the event is significant, and the account is intelligible and plausible, then the result can be of value to those interested and involved in similar events, (p. 135) Since the allocation of resources (through the budgeting process) is required in Michigan in all school districts, the event studied here, budgetary decision-making, is significant and the results can be of value to all districts. Reliability Reliability of a study refers to the replicability of a study. Reliability of a study canbe greatly increased through careful documentation of the procedures used by the researcher (Miles & Huberman, (1984) and Yin (1989). Yin states that the creation of a data base and maintenance of a chain of evidence greatly increases reliability. The data base and consists of case study notes, documents, any quantitative data that was studied or created as part of the research. Yin advises that these items be readily retrievable. The chain of evidence includes citations within the report to the relevant portions of the case study data base. Further the researcher needs to carefully document the procedures that were followed in the data collection process. Miles and Huberman (1984) suggest constructing the equivalent 76 of an audit trail. This is not unlike Yin's chain of evidence except that Miles and Huberman include an explicit description of the decision rules that were used during any procedural operation. Careful documentation of procedures through a chain of evidence or an audit trail increased consistency in data collection, analysis, and interpretation of the data in this study. Such documentation will allow others to replicate this study. Field Procedures Prior to conducted. conducting this study, a pilot which changed. some of the questions were asked The order needed to pilot revealed that a review of to be Hand written notes were used and that was found to be expedient for the type of questions that were asked. prior was The pilot revealed that some of the interview questions were redundant and needed to be deleted. in study interviewing knowledgeable about would the The school district documents make district the and researcher guide some of more the interviewing. All research conducted at Michigan State University requires approval by the Committee on Research Involving Human Subjects (UCRIHS). The preparation of the application for approval allowed the researcher to clarify the purpose of the study and prepared, assessed. the procedures and the risks to and be used. benefits Consent forms were of study were the 77 The researcher identified four school districts which fit the purposes of the study. was contacted by In each case, the superintendent telephone and the study explained. The researcher followed up the phone call with a letter confirming approval for the researcher to study the district. The letter also included a request for documents and a copy of the letter and consent form that would be sent to participants. The researcher sent the participants the letter and consent form through the intra-office mail and then contacted them to set up an interview time. When the participants were contacted to set up an interview time, most provided a number of excuses to not be involved. The most common excuses were that they were too busy and that there were others in the district who were far more knowledgeable. However, only the teachers in district C refused to participate. The open-ended structured interviews occurred in May through August of 1993. Prior to the interviews, copies of the interview questions were made so that notes could be written directly on the questionnaire. Each insure confidentiality. participant was given a code to The code, the date, and time of the interview were recorded on each questionnaire. The resulting documents, with code, date, time, and notes are the primary sources of data. At the beginning of each interview, the purpose of the study was signed. explained. Participants, The consent for the most comfortable discussing budgeting. form was part, reviewed did not and appear Most said that the business 78 person in the district would be far more helpful in providing information. The researcher found it difficult to assure participants that the purpose of the research was to describe and not to evaluate. Immediately following the interviews, the notes were transcribed and coded for easy retrieval for data analysis. Data Analysis The purpose of this study was to describe and explain differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. The researcher wished to see if the patterns of decision-making that emerged from other organizations of varying wealth and varying certainty districts. of There was wealth no would attempt be to found evaluate in school budgeting processes. The interview notes were transcribed and coded according to the research interview. decision question(s) immediately following the Interview notes were additionally coded by the cluster (revenue, process, implementation) they addressed. expenditure, balance, Notes from board minutes were also placed in the data base and coded. Audits and other archival records were used to prepare spreadsheets so that financial data could be analyzed and compared. Data analysis proceeded by writing summaries of the interviews and grouping them according to district personnel groups. By retrieving data from the data base, the researcher 79 developed charts that summarized questions in each district. the summaries themes that were read emerged. the responses to the The text of the interviews and several times to Both the written find unexpected summaries and the charts aided the researcher in presenting the findings for each personnel group in the district. Information from documents and notes from the observations were also summarized and used to provide triangulation. The written summaries, charts and spreadsheets were used to develop a budgeting model for each district. and models were comparison. A Finally, the individual district findings combined to conclusion present was an across written district regarding the differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. Chapter Summary This chapter has been a presentation of the methodology employed study. have and underlying assumptions that guided this A brief review of methodology employed by others who studied framework, included. which the the budgeting was presented. the case study method, The theoretical that guided this work is The selection and nature of the school districts in research was conducted is collection and preparation was described. explained. Data Data analysis is discussed, and the conduct of research described. The following chapter presents the analysis of the data that were collected and the findings. The final chapter 80 revisits the research questions that guided the study and draws conclusions about budgeting in school varying wealth and varying certainty of wealth. districts of CHAPTER IV PRESENTATION AND ANALYSIS OF DATA The purpose of this study was to describe and explain the differences in decision-making about resources in school districts of varying wealth and varying certainty of wealth. To accomplish this purpose, four school districts were selected which represent a range of wealth and certainty of wealth. Although the certainty of that budgeting decisions amount of district wealth and the wealth varies, about each revenue, district process, must make expenditure, balance and implementation. The purpose of this chapter is to present the data and analyze Michigan the findings school as they districts. relate to budgeting Interviews, in four documents, and observations form the data base for this study. The first four sections present the data and findings for each of the four selected districts. The final section of this chapter is an across district comparison. 81 82 District A This section on district A is organized in the following manner. First, a brief description of the district provides a setting for the data presentation. grouped for ease in data Next participants are presentation. First, data and findings from principals and the special education director are presented. Second, data and findings from a board member and a teacher are presented. Next, data and findings from central office administrators are presented. documents and observations concludes with the are Then data from presented. presentation of This section a budgeting model for district A which is a compilation of the findings. The Setting District A was selected as the wealthier district with certainty of revenues. In 1991-92, Department of Education report according to Michigan R2743 (1992), the district ranked 56 out of 561 school districts in the state in combined local revenue (generated by local taxes) and state membership aid. The district SEV was $458,594,710 and there were 3,170 students. $144,667. This gave the The district district levied an 35.2188 SEV per mills. membership allowance was $5,095 per pupil. pupil The did receive special education, categorical etc.; however, aid for gross District A was out-of-formula and received no state membership aid. district of The transportation, about two-thirds of these 83 funds were re-captured or kept by the State because of the district's out-of-formula status. All school budgets. districts have many constraints on their Among these constraints are the legal requirements to collectively bargain with their employees for salaries and benefits. In 1991-92, District A spent 82.7% of its budget on salaries and benefits. utilities and School districts must also pay for maintenance; this accounted for a little over 6% of District A's 1991-92 budget. Other legal obligations, which are discussed in the section on data from documents, must be included in the budget. Thus, only a small percent of the budget is discretionary funds. In district A, only 3.02% of its budget was used for purchased services and supplies for regular K-12 programs. The district is approximately six square miles and shares a boundary with one of Michigan's largest cities. District schools are nestled in subdivisions with older but well-kept homes. According to the 1992 district's annual report, A Profile of Progress, all of District A's schools are fully accredited by the North Central Association: the high school since 1953, the middle school since 1962, and the elementary schools since 1975. enter college. Approximately 70% of graduating students The district drop out rate is 2.8%. In district A, 12 people were interviewed about their knowledge of and participation in district budgeting. title, these people were the superintendent, superintendent for personnel, the business By the assistant manager, the 84 special education director, the high school principal, the middle school principal, four elementary principals, a board member, and a teacher identified as active in the teachers' union. Although manager, expressed some concern about how much information he/she each could provide, interviewed. The participant, everyone interview except graciously data and the business consented to be findings for the principals and the special education director are presented first. The Principals and Special Education Director A high level of organization and planning characterizes District A's budgeting process. All of the principals said that budgeting for expenditures begins in January when budget books are distributed. binder containing A budget book is a large loose leaf pages of budget comprehensive budgeting calendar. page. line items and a There is one line item per Prior year and year-to-date expenditures are given. Principals estimate the amount needed for that line item for the upcoming year. Principals are responsible for textbooks, teaching and office supplies, equipment purchase and repair, some professional extracurricular development salaries. funds, Principals field are trips, responsible and for professional staffing needs but do not budget for salaries and benefits. Principals do not need to justify their requests, but some do include justifications for their own information. By mid-February, completed budget books are returned to 85 central office where the numbers are compiled. In March, the superintendent, assistant superintendent and business manager meet with each principal and review the requests line item by line item. The superintendent, assistant superintendent and business manager are often referred to as "central office" and are perceived as one unified decision-maker. After reviewing the total budget requests expenditure and picture, superintendent, looking the at the district superintendent, assistant and business manager decide on a per pupil allocation for each building. The high school and middle school receive larger allocations than the elementary schools. Principals know their next year's budget by April. While this part of the process is standard throughout the district, the processes the individual principals use to determine their budget requests and to expend their allocations differ. Principal Duane Principal Duane said that he meets with department chairpersons individually; they are told to brainstorm needs for their departments and to be innovative. Duane talks with the staff throughout the year about what is practical and what is a wish list. teachers The department chairpersons meet with their and then submit astronomical figure." their needs "which come to some Duane decides what can be purchased the next year and what can wait. Duane said that he used to inflate his budget but he doesn't do that any more. Duane, however, always asks for more than he thinks he can get. Once the per pupil allocation is received, teachers submit spending 86 requests. ordered. Duane makes the judgment call about what will be Duane said that he is conservative in spending and never goes over the budget. According to Duane, principals are allowed a lot of flexibility. to line item allocations; They do not need to adhere the only requirement is to stay within their total allocation. Duane said that he is included decisions when cuts are necessary. in district budgeting He said that the budget is discussed at administrative staff, but once it's set there aren't any major changes. are set at central priorities are. Duane said that spending priorities office but he is not sure what those Duane praised the superintendent for having a "high integrity budget." According to Duane, a few years ago there were situations where budgets were approved and then mid-year cutbacks occurred. Duane complained that last year, prior to a millage increase request, his budget was cut; when the millage passed, previous level. He would like replacement as area." the budget was not returned to its Duane said he pretty much gets what he wants. to see a regular policy for furniture "we are always operating in crisis in this Duane is aware of the district's five year strategic plan but does not think the plan is used in budgeting. Duane knows the district goals and said that some do pertain to budgeting and finance. Principal Mary Principal Mary said she uses the school improvement team and department chairs to develop the budget. Mary meets with 87 department chairs, reviews their requests, and asks them how their requests fit with the building goals and objectives. Mary compiles the requests, sends it to central completes the budget book, office. Central office reviews and the requests with Mary, and she is given a per pupil allocation. Mary said that she has great flexibility in expending the allocation. Mary said that administrators' suggestions are always considered in district decisions, but district-wide spending priorities are set at the central office level. budget is presented at a staff meeting. Mary Everyone's said that "central office is easy to work with; they're aware of our needs. of." They are accessible; emergency needs are taken care Mary is somewhat frustrated by the constraints of the purse. "There never seems to be enough; we always need more - more technology. funds." We have a new way of doing business but no Mary said that the district's formal plans are used in budgeting. These plans include the district's five year strategic plan, the district School Improvement (SIP) plan and each school's North Central Association accreditation plan. Mary further stated that the district takes care of matters a little at a time. "I see things happening on a planned basis." Principal Barbara Principal Barbara said she lets the school secretary act as the building's business manager and control the money. Teachers determine the budget to a certain extent, but Barbara 88 said that Teachers teachers present are wish not knowledgeable lists and make about budgeting. their needs known. Barbara said that it is difficult to say what criteria are used to determine purchases. "Everyone has enough; there's no need to ration, but it is not lavish either." When expending funds, Barbara gives priority to curriculum and considers the knowledge level of the teacher and the timing of the request. Barbara has great flexibility in using her allocation. fact, In she said that the principals had been asked if they would prefer a lump sum allocation with no need to consider line items. Barbara likes the line item approach as the "line items give . . . guidelines for kinds of items to purchase and help to keep track of spending." According to Barbara, the reviewed at staff meetings. total district budget is Barbara said that sometimes the elementary principals work together on their building budgets so that they can present a united front. buildings are equitable, much better. it." The four elementary but the "high school gets treated Everyone teases the high school principal about Barbara said budgeting priorities. that the district's philosophy sets She said, "The philosophy was developed by the superintendent. We all believe in it, even the most radical union people." Barbara said that the district has a five year strategic plan, district goals and objectives, and a district school objectives represent were improvement plan. developed community with values. The plans, community The plans goals and involvement give and financial 89 direction. According to Barbara, everyone believes that the money is spent wisely and fairly and that kids come first. She further stated, "The district is not the first to jump on the bandwagon for every new fad, but it certainly isn't the last to bring in new programs." Principal Shirley Principal building Shirley funds. has Shirley great said that flexibility when she in using became the building principal she was not satisfied with the budget she inherited. Shirley looked at needs and evaluated programs for spending versus return. the budget. needed. Shirley had no problems re-arranging Shirley said that at one point an office aide was Central office refused to fund the aide, so the principal paid the person through the school activity fund. When central office realized Shirley was serious about the need, "they" decided to fund it. She said lack of budgeting experience was a problem as a new principal, but the business manager spent a great deal time explaining the budget and the process. Shirley has found that teachers make better use of items they order rather than items the principal orders, so Shirley uses the SIP teams' chairpersons in Shirley hopes to eventually involve more staff. some budgeting. "There are 'camps' within the school that sometimes have trouble following district directives. I hope eventually SIP teams can look at the whole picture for the building." Shirley said that she has limited involvement in district budgeting decisions. Like the other principals, Shirley is 90 aware of the district strategic plan, goals, and objectives. Shirley does not know specific district spending priorities but assumes that financial decisions are based on the plan. Shirley said that sometimes priorities "seem to be the sgueakiest wheel and public relations programs such as the drama department." Shirley chairs a district-wide curriculum committee and said that many in the district are concerned about continued financial support for curriculum. Shirley fears the staff will lose enthusiasm if curriculum needs are not funded. materials. "[We] cannot create new curriculum without new Teachers need tools." Principal Carol Budgeting is not a priority for Principal Carol; she said that she thinks placing orders. about budgeting only in January and when Carol did not say how she decides how much to request in the budget book. Once the building allocation is received, Carol gives each teacher $40 per student. said that the building purchases. attitude school improvement Carol plan determines For example, part of the SIP is to improve student toward reading; therefore, the staff purchase paperback books instead of workbooks. decided to Carol said she controls approximately $15 per student for general building supplies such as paper and pencils. Carol said that letting staff decide what to purchase is new. She said she tried involving teachers a few years ago, but the teachers were not interested; they did not want the responsibility. Recently, 91 many older staff members retired, and the newer teachers are interested in more staff autonomy and responsibility. Carol said that although the administrative staff meets monthly, budgeting is generally not discussed. business manager presentations and during superintendent the year. make When cuts She said the multiple are budget necessary, administrators are asked what can be cut with the least impact on students. Carol said that principals autonomy on teaching staff decisions. have a lot of All the principals and the assistant superintendent interview applicants and decide who to hire. Carol said that in her building, student count should have warranted a reduction of a classroom. However, it was felt that this was not the best decision for the students involved, and the classroom was not cut. district has a five year strategic objectives that tie into that plan. Carol said that the plan and goals and She said, "The strategic plan provides a very clear cut vision [for district spending priorities]." evaluation. The goals become part of budgeting and part of Carol said that the biggest problem in budgeting is not knowing what will happen at the state level. Although this has not affected building budgets, it is difficult being held "at bay, not knowing what the state will do next." Principal Teresa Principal Teresa said she begins budgeting by projecting student enrollment and determining staffing needs. She meets with her staff by grade level and determines supply needs. Teresa then reviews the current year line items. If the 92 current year amount was satisfactory, it. she does not increase Teresa said that upon first becoming a principal, tendency was to want to bargain with the the superintendent, assistant superintendent, and business manger when they came to review the budget book. Teresa has decided, however, that bargaining isn't necessary because needs are taken care of, except in the area of capital outlay. additional arises. funds are available Teresa also said that during the year if a need Teresa said that when she became a principal, kept the budget a secret. she After two years she decided it is not her budget - it is everyone's money. Teresa said that she is now very open about what is available and what is spent. Teachers decide how the budget will be expended, but they must justify how they will use the materials. Teresa does not believe that all teachers can use all materials equally well, so she does not allocate dollars per teacher. Teresa said that curriculum needs usually dictate what is purchased. For example, the whole language approach requires that "big books" be purchased. Teresa said that every year she receives a print out of the total spending district priorities, precedent. plan, budget. which involvement. appropriate. but She said is that not sure they of district appear to be Teresa said that the district five year strategic includes goals, is the result of community These plans and goals are used in budgeting when For example, the district has a goal technology; therefore, computers have been purchased. about Teresa 93 stated that making decisions has become increasingly difficult because of the uncertainties caused by Lansing. Teresa said that but the budget is complete and ready to go, she is prepared to make cuts if decisions made in Lansing are adverse to the district. Special Education Director Frank Director Frank said that he is interested in program and tries to think the least he can about budget. is a combination of federal grants, funds, general fund and district expenditures Frank's are controlled department engages determines how the federal by in Frank's budget state aid categorical money. the Time federal extensive lines government. planning funds will be used. and which An annual evaluation or review helps to predict what is needed and leads to budgeting decisions. Frank said that many times budgetary decisions are determined by changes in the law over which he has no control. Frank said that central office sets the guidelines for the district support of his budget; he is given $X per line item. The formula, as provided by central office, is passed on to the teachers, who then have almost complete autonomy in ordering what they want. Frank said that entire budget. the administrative staff reviews the The staff is always looking for ways to cut back and for ways to re-distribute funds. According to Frank, the curriculum council and SIP council set district spending priorities. Frank said that the district establishes a strong curriculum and supports it financially. Frank said that the 94 district's strategic plan forms decisions the district makes. formulated with staff and the gestalt for all the The plan and the goals are community involvement and are reached through consensus building. The Findings: A Summary of Principals and Special Education Director To summarize, principals and the directors in District A are aware of their budgeting responsibilities. The business manager works closely with new principals to teach them about budgeting in District A. Budget books establish time lines and provide the format for administrators to project needs. Budget projections are based on past history and curriculum needs. Principals administrators to and directors meet with central office review line item requests. Principals receive a per pupil allocation; the special education director receives line item allocations. Principals and directors involve teachers in projecting needs and/or expending funds. Principals and directors have flexibility in exceeding line item amounts allocation. as No long as one they said do that not exceed there were their total problems in implementing the budget. These administrators are aware of long-range district plans, goals, and objectives and most believe they are used in budgeting. teams. building Teachers become involved in budgeting through SIP The school plans and goals help set the criteria for spending expenditures occurs decisions. at the Often building evaluation level. of Teachers past and 95 principals have changed purchasing patterns over the year to meet the building's goals and objectives. For example, decisions have been made to eliminate workbooks in favor of paperback books. The whole language approach requires different types of materials. These administrators are knowledgeable about the total district budget, but budgetingdecisions administrators involved only when have administrators, become a high cuts regard particularly the in district-wide are necessary. for the These central office superintendent. Some administrators are concerned that state level decisions will affect the affected. district; building budgets have not yet been Some administrators wish there were more money and more planning for equipment and furniture replacement. Most of are very of satisfaction with the adequate. administrators There is believe a that high level budgeting among district A principals. resources Every participant was asked what he/she would like changed in budgeting. No one wants budgeting in District A changed. So far, data and findings from interviews with principals and the special education director have been presented. Next data and findings from interviews with the board member and the teacher are presented. 96 Board Member and Teacher Board Member Donna Board member Donna said that the projects the revenues and expenditures. business manager The business manager incorporates the summary of expenses the principals submit. Donna said that the business manager decides if the district has enough revenue to support the expenditures. According to Donna, the superintendent's role is to support the business manager. Donna said that each school is given an amount of money to spend, but it is up to the staff to decide how to spend it. According to Donna, the superintendent and business manager determine district spending criteria. Donna said that the district is in the middle of its second five year plan. advisory committee. District plans are developed by an Donna said that the superintendent develops goals with input from other individuals. then adopts the superintendent's goals. The board Donna said that the plan and goals call for maintaining fund equity and having sound financial management. According to Donna, "everyone goes along with the goals." Donna said that the board does not have standing committees, so all board members are treated equally and hear the same information at the same time. Donna said that the board's role is to pass the budget and to implement it. The board holds many public workshops and hearings throughout the year. Donna said that while people can get any information they want, "only a financial crisis brings interest." Donna 97 said that the public is definitely included in millage campaigns. Donna said that a county allocation budget, reguired in April, is considered a rough draft. Adjustments are made until the final budget is adopted in June. that the budget stays the same." which is "After Donna praised the accuracy of the business manager's projections. Donna stated that accuracy of projecting revenues and expenditures becomes much more difficult in times happening in Lansing. like these because of what is Donna said that such problems include a property tax freeze, recapture, away retirement and FICA. and the threat of taking Donna said, "If everyone left us alone, we'd be okay." Teacher Jeff Teacher Jeff is active in the union. Jeff said that teachers are asked to write up their needs, and these are sent upwards to central office for the bigger picture. Although Jeff is not sure what the funding criterion is, he said that it is set by principals, other administrators, and the board. Jeff sees the superintendent as the guiding factor while it is the business manager's job to make projections and to determine whether or not the district can meet its goals. Jeff said that the board takes an active budgeting role in terms of making suggestions. Jeff believes the district is very responsible and has good fiscal management. financially He said that maintaining fund balance is important because "people know you 98 don't run on an empty tank." Jeff said that the staff is kept reasonably well informed about finances. The superintendent sometimes attends staff meetings and explains the financial situation. Jeff said that what happens in Lansing is creating uncertainty for out-of-formula districts. Jeff is aware of the district's strategic plan and goals. He is certain that they address financial issues but could not be specific. Jeff said that while some individuals may surface that do not agree with the direction the district is taking, he is amazed at the support the district has, especially from the community. The Findings: A Summary of Board Member and Teacher Both the board member and teacher agree that decisions in Lansing are uncertainties. creating both revenue and expenditure Both say that the business manager projects revenues and expenditures. Expenditures are projected from the bottom up with the business manager deciding if there are enough revenues to cover the expenditures. While the board member says that the superintendent and business manager set district funding administrators and priorities, board the members teacher are also believes that included. The teacher views the board as having a more active budgeting role than the board member does. fiscally responsible Both believe that the district is and that maintaining fund balance is important. Both the board member and teacher are aware district long term planning and district goals. Both believe that the goals 99 are used in budgeting, their specific use. Bothsay that everyone shares the goals. Both the board public and even if the teacher is not sure of member and the teacher believe that the staff are informed about finances. The superintendent regularly updates staff at board meetings; the public attends board meetings. The public is included in district planning and in millage campaigns. So far, data and findings from interviews with principals, the director, a board member, and a teacher have been presented. Next, data and findings from interviews with the central office administrators are presented. Central Office Administrators Superintendent John Superintendent John always speaks about the role others play in making things happen. He always gives credit to others and refers to the team efforts that go into running the district. John said that teachers, principals and department heads are involved in projecting expenditures. The last two years financial history of the district is used to determine the final budget. John said that the assistant superintendent, the business manager and he try to maintain prior year expenditures and try to honor all requests. becoming more and more difficult to approve It is increases in budgets unless they are the result of increased enrollment. John said class size is at a maximum. "nipped and tucked" as much as possible. The district has 100 John said he is the one who looks at the big picture, the one who makes sure the big questions are not overlooked. works closely personnel, with Bob, the as Bob controls assistant about superintendent 85% of the budget. John for The business manager works with both the superintendent and the assistant; it is her job to work out the nuts and bolts, the specifics. budget John said that the administration recommends the to the board, and the board approves. While the superintendent said that board members understand the lines between policy and administration. John said that there are four formal times during the year that the budget is reviewed. There is a fall financial workshop, a spring workshop to review the county allocation board budget, a Truth in Taxation Hearing, and a formal budget hearing. The budget is not adopted on the same night as the hearing, so there is an opportunity for public comments to be considered prior to final budget approval. once the budget is approved, Administrators have complete funds. He said that budget. "Wetrust them budget. In there John said that are few changes. flexibility in the use of their it is everyone's job to monitor [administrators] to stay within the the return, we don't touch their budgets." Although others credited him with the development of the philosophy which underlies the district's strategic plan and credit him with its success, Superintendent mention any role he had in its development. John did not Instead the John spoke of the contributions from community members, business 101 people, university people, and staff. John is pleased with the general agreement with the district plan and goals. Staff is "in-serviced in the district philosophy and goals. We bring staff up properly." John said that taxes. revenues John spoke 95% of district revenue is from local of increasing problems and expenditures because of what Lansing. in projecting is happening in He said that the district is negotiating a large abatement problem with a major taxpayer; there is no state aid act, and nothing is known about FICA, retirement or recapture. John is further concerned that the SEV ratio may be reduced from 50 to 45%. When asked if there was anything he would like to see changed in the budgeting process, the immediate answer was, "Get Lansing out of my life." Assistant Superintendent Bob Assistant superintendent Bob is responsible for all personnel functions, including negotiations. In addition, the maintenance, transportation, and data processing staff report to him. Bob bargaining projects trends. He enrollment works professional development area. and monitors closely with collective staff in the Bob works with the many groups within the district to be certain that everyone is included in district planning. a team, Bob said everyone in the district works as but the superintendent makes the final decisions. Bob said that he controls about 85% of the budget to the extent that he controls contract negotiations. Over the last several years, contracts have been reached through expedited 102 bargaining and have been ratified prior to their expiration, making for smooth employee relations and more accurate expenditure projections at an earlier date. Bob said that most district revenue comes taxes. However, he said that recent changes in state aid have affected district district is Recent from local revenues. out-of-formula, legislation has Bob it made said is FICA therefore, subject to re-capture. that affected a because by the recapture. categorical, and, Bob said that outguessing legislators is the biggest problem in projecting revenues. Bob said that budgeting is an ongoing process. He works two years in advance on staffing projections and schedules roof and boiler repairs three to four years in advance. Bob stated that principals develop a budget based on their needs, but most budgeting decisions are based on past history. The superintendent, the business funding criteria. manager, and Bob determine They rely on demonstrated need and the school improvement team's recommendations. Bob said that the district does not use zero base budgeting because "it isn't realistic; there are a certain number of number of teachers, and contract language." kids, a certain According to Bob, the budget is reviewed line item by line item by the three central office administrators and with the board at public workshops, so there are many occasions to review and evaluate. Bob said the district has changed its position on maintenance contracts as the result of a recent cost-effectiveness study. Bob also stated that programs are continually evaluated 103 through the work of the curriculum committee and through the use of test scores and other hard data. Bob said that the business manager does an excellent job of forecasting and controlling the budget. accurate projections and expenditure integrity and increase the trust. can't be emphasized enough. manager gives Bob said that control keep the Bob said and that this According to Bob, the business input and insights. "Although the business manager may not be involved in some decisions, she can pull us [the superintendent and assistant superintendent] back into line if the dollars aren't there." Bob said that the board of education is knowledgeable; they are given several workshops. "[The board's] role is not to pick and choose. difference between policy and [There is a] administration. The board expects administrators to do their jobs." Bob said that the district is in the second year of its second five year plan. The plan was developed by 30 people representing a cross section of the educational community. The plan includes goals and objections. master plan links goals and budgeting. are also linked to the master plan. Bob said that the Administrator goals Bob said that sometimes groups emerge with inconsistent goals. However, Bob said that part of his job is to work with these groups and "make them part of the plan." Business Manager Jane Business Manager Jane said that most district revenue comes from local taxes which makes it fairly easy to 104 accurately project revenues. Jane said that recent changes in Lansing are making it more difficult to project revenue. Jane said that the district is subject to recapture of categorical funds; recapture must be shown as a negative revenue. also said that in the past, the district's Jane FICA re­ reimbursement and FICA expense were accounted for as assets and liabilities instead of revenues and expenditures. changes in state aid now make FICA a part funding. Recent of categorical FICA is subject to recapture and must be accounted for as a revenue and expenditure. Jane said that the county allocation budget is adopted in April. Jane said that budget is then fine tuned and approved by the board in June. during the year The budget is usually amended twice because of staff changes and changes in grants. Jane said that budget projections are very accurate because almost collections; all staffing revenues come through is known and contracts Jane calculates multi-year projections, but local are she tax settled. said that projecting is becoming more and more difficult due to what is happening in Lansing. Jane described completely open. the district budgeting process as "There is a belief that the more open the process, the better educated everyone is, the less problems." Jane said that principals are involved in budgetary decision­ making. Principals project needs through the budget books. Once their budgets are set, they have great flexibility in spending their funds. Jane said that central office tries to 105 avoid placing holds on spending and setting spending cutoff dates. "It's a very beneficial arrangement. Principals spend more wisely; they know the money will be there, so there is no need to rush to spend. It ’s more responsibility for them and better for central office." determines the budget. Jane stated that central office Building budgets are a per pupil amount determined by requests and the total amount available. The central office looks enrollment increases. year. at year to year inflation and Jane said that "we don't just add every The controls are at central office." Jane said that if cuts are necessary, it is "the philosophy of the district is to protect the instructional program." recommendations of the The board acts on the superintendent and assistant superintendent but "the board is very active in deciding what is kept." Jane between said the business that district superintendent, manager. budgeting assistant While the is a joint effort superintendent superintendent decisions, he does not have absolute control. and influences Jane said that the superintendent is not very visible in the budgeting area unless there are questions; informed. financial Jane does the presentations. the superintendent is kept well number The crunching board of and makes education knowledgeable and involved in "a discrete way." the is very Jane said, "The board may say things and make comments, but it is up to the administration to do it." 106 Jane said that the district has a five year plan and adopts goals and objectives. The adopted goals trickle down through the organization; everyone adopts goals in line with district goals. Jane said that the financial goal to maintain an 8 - 10% fund balance became an issue in the last millage campaign. But, Jane said "The reasoning was explained. The public understood." Jane said fund balance is needed for cash flow and drastic situations. "Fund balance of this size (8- 10%) gives the district time to evaluate and decide how to react to state issues." The Findings: A Summary of Central Office Administrators Central office administrators say that accurately projecting revenues is becoming increasingly difficult. Even though local taxes are the major source of district revenue, recent legislative predictability. changes have affected the revenue The district's out-of-formula status makes it subject to recapture, which is a negative revenue. Accounting changes are affecting the status of FICA reimbursement. For 1993-94 the State Aid Act classified FICA as a categorical revenue rather than a reimbursement from the State. district A, then, FICA will be subject to re-capture. For There is also concern that SEV ratio may be changed causing a direct loss of real dollars to district A. Central office administrators view themselves as a team. The business manager is credited with finances so that the numbers are trusted. in district A. managing district Trust is a key word There is a mutual trust that all employees 107 will do their jobs. Principals are given almost complete autonomy over budgets. The business manager gives the public financial presentations. do their jobs. The board recognizes the lines between policy and administration. budget book, The board trusts administrators to Standardized procedures, long-term planning, goals, such as the and in-service training bring everyone into the team. Central office administrators agree that the district has a long range five year plan. year plan. goals District goals are part of the plan, and those trickle district This is the second such five and downward throughout individual building the SIP organization. plans and The goals are incorporated into the "master plan." Central office administrators describe budgeting as a completely open process. from the bottom up. Expenditure projections are made According to central office, expenditure decisions are based on prior year expenditures, demonstrated need, SIP According team to recommendations, central office, and there available is a dollars. commitment to maintaining fund balance. According to central office administrators, budgets are accurately projected. Holds on spending do not occur. Balancing the budget occurs by "nipping and tucking" and by maintaining a fund balance. So far, a brief description of the district and interview data and findings have been presented. Next, the data and findings from documents and observations are presented. 108 Document and Observation Data Data on Revenue District A's 1992 Financial Report and Form B show that in 1991-92 district revenues totaled $17,236,476. came from the following sources: local tax levy, state membership and categorical aid, and lease of school Financial documents period, revenues property, (1988-1992) steadily found in Appendix A. able to project (investment interest, gifts, with 5.13%. the local levy Detailed data on revenues can be Documents show that the district was its revenues on the original June adopted budget with 96.79% accuracy in 1991-92. projected revenues. The district over­ In June, the district did not know about tax base revenue sharing, Records etc.), show that over a four year increased averaging 88.7% of revenues. 93.70%; .85%; indirect federal grants, .32%; and miscellaneous revenue sale Revenues show that over nor did it know its re-capture. a four year period, revenues were projected with 97.7% accuracy. Although no participantsmentioned tax base revenue sharing, the legislation is explained in the financial notes to the Financial actions included Report for a 1991-92. tax base revenue Recent legislative sharing plan which captured part of the local property taxes from out-of-formula districts to be distributed to in-formula districts beginning with the 1991-92 school year. Even though a lawsuit was filed, out-of-formula districts were required to remit their share, but the money remains undistributed and un-refunded 109 waiting for the court to act. Tax base revenue sharing, like recapture, is considered a negative revenue. This district's share was $146,988. Data on Expenditures District financial documents, such as Form B and Financial Report, show that in 1991-92 expenditures totaled $17,650,328. Table 4.1, page 110, lists the expenditures by both function and object. four year period District records show that over a expenditures increased steadily. The percentages spent in the function categories varied by less than 1%. less The percentages spent in object categories varied by than 2%. District categorized by object. documents Table 4.1. also show expenditures shows that expenditures were made in the following object categories: salaries and benefits, 82.70%; purchased services, 8.41%; and supplies and materials, 8.89%. Within the purchased service and supply category, 6.24% of expenditures were used for maintenance and operations supplies and services (utilities, telephones, paper towels, cleaning supplies, etc.). Only 3.02% of expenditures were used for purchased services and supplies in regular K-12 classrooms. budget. control only 3.02% of the total Even though expenditures exceeded revenues, District A ended the equaled Principals 1991-92 about 9.6% fiscal of its year with a fund balance that revenues. expenditures can be found in Appendix A. the district was able to project its Detailed data on Documents show that expenditures on the original June adopted 1991-92 budget with 99.21% accuracy. 110 Table 4.1 District A Expenditures 1991-92 EXPENDITURES BY FUNCTION INSTRUCTION Basic K - 12 Programs Added Needs - vocational, special education, etc. Adult Education Benefits for Instructional Personnel SUPPORT Pupil Support Services - counselling, health services Instructional Services - library, media General Administration - central office and board of education School Administration Business Services Operations and Maintenance Transportation Central Services - data processing, etc. Benefits for Support Personnel Community Service - day care center, latch key Capital Outlay Other - athletics, lunch program 41.82% 2.62% 0.15% 8.36% 6.74% 1.89% 2 .22% 5.44% 3.45% 12.60% 3.55% 1.65% 6.44% 0 .2 1 % 1.51% 1.35% 100 .00 % EXPENDITURES BY OBJECT Salaries & Benefits Purchased Services Supplies and Materials 82.70% 8.41% 8.89% 100 .00 % % of budget spent on purchased services & supplies Basic Programs Added Needs 3.02% 0.66% 3.68% Ill Reports show that over a four year period, district A projected its expenditures with 97.3% accuracy. Satisfying legal reguirements is one of the criterion on which expenditures are based. The format the budget takes for board approval and the format for reporting expenditures and revenues are dictated by Michigan law. District A begins its projection of expenditures by using a line item budget which is then condensed to meet legal requirements. District A must fulfill the legal requirement of having its books audited, which is a cost to the district. Salaries and benefits accounted for approximately 81% of total expenditures. district is legally required bargaining with its employees. wages, benefits, contracts have and to in collective The resulting contracts set conditions clauses engage The of specifying employment. the maximum Teacher number of students that can be placed in classrooms, thereby dictating the size of the teaching staff. Special education laws require that students with special needs be placed in special classrooms. Often the students must be transported to special schools or to programs offered in only one school, increasing transportation costs. Health and thereby safety laws require the district to maintain its buildings to meet MIOSHA standards. Legislation on asbestos, underground tanks, and lead in drinking water has placed increased burdens on the district. In addition, PA 25 is mandating that certain personnel and program standards be met, all at a cost to the district. 112 A major taxpayer's requests for abatements has affected district finances, A settlement was reached, but it cost the district in SEV loss, in actual dollars that were refunded to the taxpayer, and in legal costs to reach the settlement. According to board minutes, this series of events required a budget amendment that included the tax refund of $81,937 and the additional legal fees of $128,932. Of course, the effects of the tax abatement are felt in succeeding years due to the reduction in SEV. Data on Planning and Goals A review of board minutes (July, 1988-May, 1993) reveals that District A engages in strategic planning and in goal setting. According to Board minutes, an Advisory Council of Educational Excellence was established in June of 1989. committee was composed of seven parents from each school), six business The (with at least one representatives, university and one college representative, one two high school seniors, two graduates, three teachers, one clerical employee, one secondary and one elementary superintendent, and one board member. administrator, the The council was charged with the duties of studying the current master plan along with individual school improvement plans and of revising the Master Plan as was deemed appropriate. The council was to submit the proposed plan to the board by January of 1990. The board would then hold a public meeting to discuss the plan with the Council, receive any additional input, share the details of the plan with the educational community, and make any 113 necessary final revision. February 12, 1990. The plan was to be approved by According to Board minutes, the procedure was followed and the Plan for 1990-1995 was formally adopted by the Board Educational in February Excellence comprehensive for document 1990. Strategic Plan School District A divided into is sections for a labeled Introduction, Vision, Beliefs, Parameters, Mission Statement, District Goals, School Objectives, and Appendix. The introduction explains that the plan has been adopted as "basis for making decisions consistent with long-range projections. . . an attempt to provide a unified approach to assessing and addressing the long-range needs of the District." The committee states, within the introduction, that the plan: in addition to providing philosophical direction for the future, will guide the formulation of budget and allocation of resources; the review of curriculum; the nature of in-service opportunities; and the evaluation of educational outcomes. The introduction adopted by the further states that once the document is Board, it is the responsibility of the superintendent to work with principals, teachers and staff "to translate objectives the to goals be outlined in the implemented on an professional staff." Plan annual into basis specific by the The plan is comprehensive and available to the public. Board Meeting Observations The business manager was highly visible. She was seated next to the assistant superintendent at a table adjacent to 114 the board table and apart from the audience. manager gave the financial presentations. opportunities comments. for the The only public ask There were many questions and make question from the audience was deferred to the superintendent. hoc committees: to The business The board president appointed two ad one is to review the orientation manual for board members; the other is to review and revise the board's self-evaluation instrument. The Findings: The Documents and Observations purpose observations is in to interview process. look at the collecting verify the data data from documents collected and through the Numerical data allow the researcher to district's financial condition. Financial Reports, Form B reports and board minutes document decisions that were reached. Data collected on revenues status of the district. verify the out-of-formula The data further verify the sources of revenue, the uncertainties that accompany that revenue, and the accuracy expenditures of revenue document the projections. use of the Data collected revenue. The on data provide verification and insight into the criteria that are used in making expenditure decisions. The data show that both revenues and expenditures increased steadily. variance in expenditure categories is The lack of indicative of incremental budgeting with its reliance on past history and formulas. projections. The data verify the accuracy of expenditure 115 Data collected from board minutes document and verify the planning and goal setting process used in district A. The board minutes verify the openness and inclusiveness of the process. The data also verify the process by which these goals are assimilated by the entire organization. Board meeting observations further verify the openness with which district opportunities for business is conducted. public to speak the Ample enhance inclusiveness of many viewpoints in decision-making. observations manager. verify the high visibility of the the These business The board deferred an administrative guestion to the superintendent. The board appointed two committees whose only purpose conduct is to board business and not district business. So far then, findings from the interviews with participants and from documents and observations have been presented. Next the findings from the participants and documents are compiled to present an analysis of findings of the district's budgeting process. Analysis of Findings So far, data and findings from participant groups and from documents and observations have been presented. section is a compilation of those findings. that district process, A makes expenditure, budgeting This The findings show decisions about revenue, balance, and implementation. Figure 4.1, page 116 is a representation of the findings. 116 District A: W ealthy/ Certain REVENUES Local Taxes State Aid Indirect Fed. Grants Miscellaneous Decision-Makers PROCESS Clear lines of authority Known expectations Shared goals Highly visible business official Board in the background No active board committees High level of administrator trust High level of satisfaction Criteria Legal requirements History/Tradition Stakeholder expectations EXPENDITURES INSTRUCTION Basic Program Added Needs Adult Ed Benefits SUPPORT Pupil Instructional General Admin School Admin Business Maint & Oper Transportation Central Services Benefits Community Services Capital Outlay Other BALANCE IMPLEMENTATION Implement budget Figure 4.1 Budgeting Model fo r District A FUND BALANCE 117 Figure revenue. local 4.1 shows that the Findings show that taxes, state aid, miscellaneous sources. first decision cluster is district A receives revenue from indirect federal grants, and The district is out-of-formula, so the majority of its revenue, 93.7% comes from local taxes. Re­ capture of state aid categorical funds and tax base revenue sharing give the district negative revenues. While some uncertainty about revenues existed at budget adoption time, at least 93.7% of the budget could be projected with certainty. The district was able to project accuracy in 1991-92. projections is its revenues with 96.79% The four year average for accuracy of 97.7% The ability to accurately project revenues greatly facilitates budget implementation. Figure process. 4.1 shows that the next decision cluster is Decisions about who is involved and the criteria determine expenditures are made. developed in a bottom up fashion. District A's in purchasing department and needs. The is Principals and department heads participate by completing a budget book. teachers budget to in projecting the They involve building superintendent, or assistant superintendent, and business manager review the requests and decide on an allocation. The entire budget is reviewed with administrators. Principals are included in district budgeting decisions when cuts are necessary. Administrators flexibility in spending their allocation. responsibility of office other trusts monitoring their own administrators to have They also have the budgets. stay Central within their 118 budgets. Other administrators trust central office not to change the budget, place holds on spending, or unnecessarily guestion purchases. Decision-makers have a high level of satisfaction with the process. Decision-makers in district A have a clear understanding of what is expected of them. New people in the district are in-serviced in district philosophy, goals, and expectations. In-service for staff superintendent. When is it a comes duty to of the assistant budgeting, in-service becomes the responsibility of the business manager. The board of education developed an orientation manual which explains the responsibilities of board members. There are clear lines of authority. Administrators are expected to do their jobs. The board approves administrator recommendations. In district background. A, There the is reviewed board no of committee with the education is structure. entire board in the Budget documents are at public meetings. At board meetings, the assistant superintendent and business manager sit at a table adjacent to the table where the board and superintendent sit. The business manager conducts the workshops or hearings and discusses the details of the budget. The board asks questions and makes comments, but their role is to approve administrator recommendations. There are clear lines of authority, and the business manager is highly visible. Decision-makers in district A have shared goals and a strategic plan for achieving them. Plans and goals are 119 developed by a cross section of the educational community. Building plans and goals are incorporated into the district plan. Findings show little evidence of sub-group goals. Figure 4.1 shows that the process decision includes the criteria used to make decisions. cluster The criteria in district A include legal requirements, the district's history and traditions, requirements and cause stakeholder's many budgetary expectations. constraints. Legal Special education laws require that handicapped students be provided with special classrooms, specialized schools. materials, and transportation to Health and safety laws mandate that buildings and equipment be maintained and that potentially hazardous conditions, such as asbestos, be eliminated. Laws such as Public Act 25 mandate requirements that have financial costs. Labor law requires bargaining with employees wages, benefits and conditions of employment. for Districts have a legal obligation to adopt a balanced budget in a specified format. salaries In 1991-92, District A spent 82.7% of the budget on and benefits. A little over 6% was spent on utilities and maintenance. History and expectations help to decide how the dollars will be spent once the legal requirements have been satisfied. In District A, there is heavy reliance on past expenditures to project future expenditures. The budget book, although it is a great organizing tool, emphasizes Findings records from financial budgeting pattern. However, reliance indicate an on the past. incremental central office administrators 120 said that each line item is reviewed several times. funding year after year does not happen. Automatic Frank said that administrative staff is always looking for ways to save money and ways to re-distribute the dollars. Less than 4% of the budget was spent on purchased services, supplies and materials for classroom use. Yet, it is within that small percentage of expenditures that evaluation occurs. evaluation of council's expenditures review and Evidence exists that occurs through recommendations building goals to determine purchases. and the curriculum through use of While past history dictates line item amounts, evaluation is determining how the dollars are used. Stakeholder Some staff expectations expectations bargaining. Some are also determine satisfied expectations are continuation or addition of programs. expenditures. through collective satisfied by the In district A, there are many opportunities for expectations to be discussed and considered. Cross sections of the entire educational community are included in committees to develop plans, goals, and curriculum. Board workshops and public hearings provide opportunities for individuals and groups to be heard. board meetings provide their concerns and Regular a forum for individuals to express expectations. Board minutes and observations showed no evidence of dissatisfaction with the district. Participants said they were pleased and sometimes surprised at district. Participants expressed a high level of satisfaction how much support the community has for the 121 with budgeting. There is no evidence that stakeholder's expectations are not being met. Figure 4.1 shows that expenditure decisions must be made. Decision-makers use the criteria to develop the budget. Law requires that districts adopt a budget by June 30 for the fiscal year which begins July 1. take. Law also stipulates the form this budget must Figure 4.1 categories. Decision-makers project expenditures for each of the categories listed in the model. lists the expenditure District A projected its expenditures with over 99% accuracy in 1991-92. The four year average for accuracy of expenditures is 97.3%. Figure 4.1 shows that there are no steps in the balance decision cluster. The certainty of the revenues District A to immediately implement the budget. holds on spending. allows There are no A summer tax collection and a large fund balance mean that District A does not have to borrow to meet cash flow needs. There are usually two budget amendments during the year, but these involve only minor adjustments. In District A, then, most of the revenue comes from local taxes. Because SEV and mill rate are projections can be made with great accuracy. known, revenue Decision-makers have clear lines of authority, known expectations and shared goals. Decision-makers exhibit a high level of trust, they are highly satisfied with the budgeting process. and The business manager is the most highly visible individual in the budgeting process. The board of education is in the background and has no committee structure. The decision-makers consider 122 legal requirements, past spending history of the district, and stakeholder expectations when making budgeting decisions. June 30, budget. the board reviews and approves a very By accurate The budget is immediately implemented. This section has presented the data and findings district A. for The next section of this chapter presents the data and findings for district B. District B This section on district B is organized in the following manner. First, a brief description of the district provides a setting for the data presentation. Interview participants are grouped for ease in data presentation. First data and findings fromprincipals are presented. Second, data and findings from directors are presented. Third findings froma board member and a teacher are presented. data and Next, data and findings from central office administrators are presented. presented. Then data from documents and observations are This section concludes with the presentation of a budgeting model for district B which is a compilation of the findings. The Setting District B was selected as the wealthier district with uncertainty of revenues. Department of In 1991-92, according to Michigan Educationreport R2743 (1992), the district 123 ranked 114 out of 561 school districts in combined local revenue (generated by local taxes) and state aid membership. District B, in 1991-92 was in-formula according to Michigan Department of Education reports. District B is the site of a steel manufacturer whose SEV represents about 50% of the tax base. However, this taxpayer frequently petitions the city for SEV reductions and files appeals with the Michigan Tax Tribunal. In 1991-92, the steel manufacturer challenged property assessments, and a subsequent settlement was reached. In 1992-93 the district received money from the settlement with the steel manufacturer and had to return the state aid membership. The assessments. and continues uncertain. $224,812,520. because In There were of tax 1991-92, 2,352 challenge abatements the its makes district students. district an SEV per pupil of $95,584. mills. to The fact that the district can so easily slip in out-of-formula revenues taxpayer This its SEV was gave the The district levied 43 In 1991-92 district B received $4,365 per pupil in combined local taxes and membership aid. All budgets. school districts have many constraints on their Among these constraints are the legal requirements to collectively bargain with their employees for salaries and benefits. In 1991-92, district B spent approximately 80% of its budget on salaries and benefits. School district must also pay for utilities and maintenance; this accounted for a little over 6% of District B's 1991-92 budget. Other legal obligations, which are discussed in the section on data from 124 documents, must be included in the budget. Thus, only a small percent of the budget is discretionary funds. less than 1% (0.96%) In district B of its budget was used for purchased services and supplies for regular K-12 programs. District B shares a boundary with the same large city as district A and is the miles. The high same school size and - approximately middle located in the city's business area. school are 6 square centrally A recent bond issue to build a new high school, middle school and board office was approved. adeguate However, the district is having problems finding an site on which to build. Elementary located in residential neighborhoods. are The elementary schools are secured with high cyclone fencing. locked. schools Doors are securely Visitors must ring a bell and wait for clearance to enter. According to the district's 1992 Annual Report, the high school is accredited by the North Central Association; elementary schools are studying accreditation tasks current requirements as they are made available." were given education. on the number of graduates who "the No figures seek higher In 1990-91 the district drop out rate was 9.2%. In district B, 12 people were interviewed about their knowledge of and participation in district budgeting. title, these director manager. and people (He For is were the frequently the purpose superintendent, referred of to interview as the the finance business grouping, included in the central office administration), By he is the special 125 education supervisor grouped with the (who for readability purposes will be directors), the director of grants, the magnet school director, the high school principal, the middle school principal, three elementary school principals, a board member, and a teacher identified as active in the teachers' union. Participants in district B tended to be hesitant to talk and provided very short, possible. Some themselves. one word responses whenever participants appeared to contradict It is difficult to know if the questions were not understood, if participants were confused, or if participants were not being totally candid. Rumors were rampant that the board was not going to renew the superintendent's contract. The June election changed the composition of the board; rumors were that the new board members have their own ideas about the superintendency. These rumors may have contributed to the reluctance to speak. The interview data and findings for the principals are presented first. The Principals The principals all said that no specific time lines for budgeting are completed set, in April but that normally building budgets are or May. Although the conducted from late May through June, interviews were the participants all stated that they had not yet been asked to submit a budget. One of the interviews occurred after the board adoption of the 1993-94 budget, and yet this principal still said that no requests to submit building budgets had been made. Principals 126 said their budgeting responsibilities include teaching and office supplies, eguipment. textbooks, and repair and purchase of Each principal receives a per pupil allocation. Either the finance director or the superintendent and finance director jointly decide the building allocations. assign dollar amounts to their line items. Principals The processes used to allocate dollars to line items and to spend those dollars varies within each building. Principal Diane Principal Diane meets with department chairpersons on an ongoing basis. They review spending proposals and set priorities, which ultimately fall under the PA 25 umbrella. Diane said that different curriculum areas are targeted each year to receive more of the available dollars. that she has budgeting, tried to involve parents and Diane said students but that effort has not been successful. in Diane said that the superintendent and business manager decide on the allocation based on the past three years experience and special needs. She is not really sure how the final allocation is figured, but it she said that it barely keeps up with inflation. Diane always exceeds the budget; in past years this was fixed through a budget amendment, but not this past year. According to Diane, the excess expenditures from 1992-93 will come from the 1993-94 budget. there is never enough money. formula district. reason to be poor." Diane said that "The district is a poor out-of- No matter how much money we get, we find a Diane said that there are problems with 127 budget implementation. "Purchase orders are sometimes held due to cash flow and due to the fact that the district has bad credit because it doesn't pay bills on time." staff development funds are centralized. Diane said that Staff members must submit applications and compete for funds. "Central office" decides who is awarded professional development funds. "We have to do a lot of time consuming activities to get money." Diane is Expenditure not issues included such in district budget decisions. as how the district will pay for computer maintenance and supplies are raised at administrative staff meetings. administrative Revenue issues are sometimes discussed at staff meetings. These issues include "the moves" the city and a major taxpayer are making, grants and categorical funding, and what will happen if the federal government ceases to fund the magnet school which the district is obligated to maintain. Diane said that she has some involvement in projecting teaching and support staff needs and in deciding who will be hired. Diane is not aware of any formal district planning activities. Diane said, "The board has goals and objectives, but they are not formally presented to the administration." used in budgeting. strategic plan. Accreditation These goals and objectives are not As a result of PA 25, each building has a The high school also follows North Central plans. Diane said that building goals objectives are adopted and are always used in budgeting. and 128 Principal Betty Betty program. is the administrator of a new middle school Consequently, budgeting for her program, which is referred to as a building even though it is housed within another school building, start up costs, was different. There were certain and no one knew how many dollars would be needed to make the program work. Betty believed that if needs were not taken care of this first year, they never would be. Betty worked one on one with the business manager on budgeting issues. Betty said, "I just placed orders and if the business manager questioned them, I let him deal with it." not use any staff in budgeting. Betty did Betty had thought about using department heads but thought that might require giving them each somewhat equal amounts. that the building School Betty did say, however, Improvement (SIP) team and discipline committee are involved in decision-making; "[they] are empowered - a team." Betty said that the business manager gives each building a per pupil allocation. Betty has great flexibility in moving dollar amounts between line items, but does not believe she has a lot of control over her budget. She said that she has to watch the business manager closely. "The business manager moves money around. accounts I didn't make. Charges are made to Budget numbers change without my knowing about it." Betty said she is not involved making. in district decision­ In staffing decisions, she interviews and recommends, but her recommendations are not always chosen. Betty said 129 that administrative staff budget discussions sometimes center on particular line item issues, but usually the discussions are very general. Betty does not know how district spending priorities are set. Betty said: The district is good at crunching numbers to make them look like what they want. When staff wants something, the money is not there; when the board wants something, for example a new position, the money is there. Betty said that there is a district school improvement team and a task force against gangs, but no other formal planning. She said that the board has no real Board members everything is objectives. have their politics. own goals or objectives. agendas. Betty's Betty building has said that goals and Betty said that they are used in budgeting but was not specific as to how they are used. When asked how she would like to see budgeting improved, Betty said she would like to have a better explanation of expectations. business about manager talks all of the problems "The without giving a firm grasp of what is expected." Principal Marvin Principal Marvin said he discusses building needs with the business manager. allocation. Marvin then receives his per pupil Marvin inventories books, and then determines purchasing needs. is divided per pupil per grade. supplies, textbooks, The money that is left Staff members, including the assistant principal and the secretaries, meet and reach a consensus items Marvin on other to purchase. spending criteria are not set. said that Marvin has flexibility in 130 moving dollars between lines items as long as they are not moved between Changes in amendment, the the instructional budget can occur and support through a functions. formal budget which is the business manager's responsibility. Marvin said that the budgeting process is dictatorial. He said he would like to see an earlier budget and an earlier, more definitive allocation as that would help in planning. Also, he would like to be able to place supply orders earlier so that materials would be in the building when school starts in the fall. Marvin said that uncertainties about proposed legislation, the state aid act, and a settlement with a major taxpayer are creating real budgeting problems. Marvin said he is included in discussions about finances but not in the actual decision-making. District priorities, such as language arts and math textbooks and the need to cover the magnet school costs if discussed at staff meetings. the grant is not funded, are Marvin said that no one talks about other administrators' budgets; no one wants to know. is not certain he would be told if he asked. He According to Marvin, PA 25 committees at the district and building level engage in planning activities. school improvement plan. There is a three to five year Marvin said that currently the plans are not used for budgeting; however, he thinks that PA 25 will impact the budget. more teacher "The MEA pushed for PA 25, which means involvement in decision-making, which means teachers spend more time, which means they want more money." According to Marvin, district goals include a mission 131 statement and a counselling requirement; no additional goals have been discussed. The building has goals as a result of PA 25, but these are not used in budgeting. Principal Bill Principal allocation. Bill said that he receives a per pupil Bill meets jointly with the finance person and the superintendent to discuss the budget. submit their needs and their wish lists. Bill's teachers Bill said that he, his administrative assistant, and the SIP team decide what to buy. They try to meet all the needs; basal purchased before supplemental materials. readers are Bill does not have enough budget information, and "would like to have financial information before the custodians." frequent budget amendments updates. adversely He said affect Bill would like more that building sometimes budgets, budget but administrators are not always told that their budget has been changed. Bill said that there are ordering cutoff dates, and sometimes there are lags in approving purchase orders. Bill would like more autonomy and more choices in budgeting. He is locked into existing line items. doesn't get out." "Once something is there, it Bill wants to allocate the dollars in other ways, but he is not given the choice. Bill said budgeting would be easier if he had more money. Bill said he is does not included not know district budgeting district's spending decisions, and priorities. Except for capital outlay concerns, budget is not discussed at staff meetings. the in Finances are discussed in very 132 general terms. Bill said that the has been presented with different financial scenarios recently. [No one] is sure which story to trust." meetings, "not much is said publicly. said in executive sessions." "district Bill said that at board [I am] sure things are Bill has input into teaching staff but is not included in the ultimate decision. Bill said that there is a district wide SIP team, but no real planning has occurred yet; passed. everyone was working to get the bond issue Bill said that the board discusses a lot of things but no one makes a choice of direction to follow. "I would rather see some direction set; if it doesn't work then change direction. . . but right now [there is] no direction." are no district goals. of the SIP process. are to provide behavior. a There Building planning and goals are part Bill said that the goals in his building safe orderly environment and to modify These goals are not part of budgeting; the PTA provides the rewards. Principal Gary Principal Gary said that the finance director decides how many dollars Gary will have for his budget; number of school board members that attendance area impacts the budget. however, the live in that school's "Right now B School has four board members and four votes. They get what they want." Gary does not involve other staff in budgeting because the budget is too limited. Gary assigns dollar amounts to his line items. He does not need to justify how those dollars are allocated among line items, and he can switch dollars between 133 line items. Gary said that there are never enough textbooks and supplies. Gary takes care of textbooks first, and then each teacher gets a per pupil allocation. Gary said that building maintenance used to be under the direction of the principal, but that has been centralized and maintenance has declined. Gary said he is not included in district budgeting decisions. Everyone is simply told what the budget will be after the fact. doesn't result "There in more is no need dollars." for more Gary input doesn't if it know district budget and isn't interested in finding out. the Gary would like more input on staffing and more say in hiring. Gary said political. that support staff decisions are especially According to Gary, an administrative position is open due to a retirement and although the board has had months to make a decision, it hasn't. "It's all politics." Gary said that his building needed an additional teacher due to class size. He was told to work it out with a split, but this still left large class sizes. In response, students dropped from the school and went elsewhere. According to Gary, the district does not have any formal plans, but it does adopt goals and objectives administrative staff. that are developed by the board and These goals are used in budgeting such as adopting new textbooks for reading and math. There is no planning at the building level, but building goals do exist as a result of the SIP team. 134 The Findings; A Summary of Principals To summarize, principals in District standardized budgeting procedures. B do not have Although the principals said that budgeting usually begins in April or May, interviews occurred in late May and June, and principals had not yet started budgeting for the ensuing year. There is no evidence of a standardized format for requesting funds. Principals receive a building allocation which they assign to already existing line items. Teachers are involved in some buildings in setting spending priorities; in other buildings, they just spend. There is some flexibility in spending, but there are holds on spending and problems in getting orders processed. A new principal complained that budgeting expectations had not been explained. Lines of authority are not clear. Some principals said their budgets are determined by the finance director while others said their budgets are determined by the superintendent and finance director. One principal said that the board influences what resources are made available to schools. Diane and Gary are dissatisfied with a move Both toward centralization of services because there is now more paperwork and less satisfaction with the services. At least three principals said that the board is very involved in staffing and budgeting decisions and that these decisions are politically motivated. Principals do not have knowledge of the district budget; some do not want to know. Budgets are not reviewed at staff 135 meetings. Principals are not included in district budgetary decision-making. Some principals do not trust the central administration in budgetary matters. Two said that their budgets were changed, and they were not told. said that so many different financial One principal scenarios had been presented that no one knew whom to trust. District and building planning occuronly as aresult of PA 25 or North Central Association requirements. In most instances, these plans are not part of budgeting. There is confusion about district goals. are no goals; Some principals said there those who said that there are goals did not agree on what the goals are or on who develops them. One principal the wishes someone would set a direction for district. When asked what responses varied. Some would would change about budgeting, One described the process as dictatorial. like involvement, and they more and earlier information, more autonomy. more Only one principal, Diane, said there was nothing she would change. However, even she said that there are too many time consuming activities when making some funding requests and that purchase orders are often held up. So far, data and findings from interviews with principals have been presented. Next data and findings from interviews with directors will be presented. 136 The Directors All of the directors are responsible for programs that receive major funding from federal sources; these programs are subsidized by funds from additional education and magnet school district operating funds. sources. programs are The special subsidized by Special education and compensatory education are subsidized by state aid categorical funds. Supervisor Nancy Supervisor Nancy is upset about her title. She does not understand why she is a supervisor while others who have the same work year, salary, etc. are directors. she is responsible supplies, for staff travel, special education Nancy said that supplies, special education transportation, pre-school program, and some smaller programs. these areas, said she what they need. includes pre-school teachers in budgeting They tell her Nancy discusses her budget with the finance director on a one to one basis. funds To budget for and adjusts the line items accordingly. because they helped to develop the program. more a Nancy reviews the previous year's expenditures, reflects on needs, Nancy office than are superintendent first, Nancy said that if she needs budgeted, she approaches then the finance director. the "Getting more funding involves a lot of arm twisting and then more arm twisting." Nancy said that one of her biggest budgeting problems is not having enough money to do things, especially staff development. 137 Nancy said that budgeting because she is not decisions. her responsible budget Nancy is knows linked for the general involved in district-wide to other building theirs. fund support budgets Nancy is not of her programs. Nancy said that budgeting is not discussed at staff meetings unless everyone is incurring a lot of costs. The superintendent reports globally on district finances. Nancy said that there is a problem with the trust - people don't believe there is no money. saying, According to Nancy people are "Where is the money? there is no money." It's a negotiations year so Nancy said that the superintendent sets district spending priorities. A K-12 alternative education program for students with behavior problems is a priority for 1993-94. "No one seems to have a real sense of what is going to happen there, just that it will be there." Nancy said that a team visited other alternative schools in the area and found the atmosphere "People seemed to be less different concerned from with that petty in district rules, such wearing a hat, and more concerned with kids as people. don't seem to care much about kids, it." B. as We or at least don't show Nancy believes that increased student behavior problems are due to the fact that a special program, which targeted problem students and included a police officer to work with students, was dropped when the grant that supported it ended. Nancy said that there are no formal district planning activities other than to build a new high school. never seen any district goals or objectives. Nancy has Nancy's 138 department does not engage in planning. Nancy said department goals are directed toward solving student behavior problems which have increased the special education case load tremendously. Director Neil Director Neil said that the various funding agencies set the parameters for his budgets. On the district level, Neil meets with the superintendent, explains the budgets, and talks about things he would like to see in the program. Neil involves other directors, supervisors, teachers, students, and parents in budgeting. direction and the Neil said that they talk about program activities, staffing, materials, equipment that are necessary to implement the program. and Then they try to match the needs with the available dollars. Neil said he is not included in district-wide budgeting decisions. district Finances are and discussed the in the administrative staff meetings. "solvent." financial very condition general of terms the at Neil said that the district is Line items are not discussed unless expenditures are getting out of hand. Neil said that in recent years, there is more central office control of the budget and more pinpointing of expenditures. terms of numbers, is high." activities occur through Neil said, "The trust level, in Neil said that district planning the district-wide SIP team which includes board members, administrators, teachers, etc. Neil thinks the board has goals and objectives which are part of the SIP book. The board has a mission statement. Neil said 139 that formal planning is used especially in the Chapter program to discuss program direction and fund usage. are no department goals. by the a**holes According to in Neil, I There Neil said that uncertainties "caused Lansing" other create budgeting uncertainties are problems. caused by the practices used to assess district property. Director Lisa Director Lisa said that her program was created to resolve a 1970's lawsuit that was filed by the Office of Civil Rights. The magnet school program operates in two of the three K-6 buildings. One building is devoted to math and science and the other to language development. grants have district funded at personnel discontinued. least are 50% of concerned the that Large federal program; federal however, aid may be The program, which costs over $1 million, would have to be continued using general fund dollars. Lisa said she is responsible for the federal portion of the budget; therefore, the federal government determines time lines and funding criteria. other administrators, and Teachers, academic specialists, a parent advisory group, which establishes the curriculum and program goals, are involved in budgeting. Lisa consults complete the budget. with the finance director to Lisa said that financial information was extremely open and that she was very satisfied with what she was allowed application. to do Lisa in said preparing that the central general fund portion of the budget. budget office and grant controls the 140 Lisa said she has input into the district budget but is not part of the actual decision-making. Lisa said she would like to be more involved in district budgeting. Although Lisa said that financial information was very open, she does not know other administrators' budgets. Lisa does not know how district spending priorities are set. Lisa is not sure of district the finances. She said that central office administration is not always believed about district finances. "Administrators believe negotiations year." is increasing. it. Teachers don't. It's a Lisa said, however, that the trust level Lisa said that beginning at the board level. formal planning is just The board is developing a five year plan which will include goals. Lisa said that there are no building or department goals even though she had earlier stated that the parent advisory committee establishes goals. The Findings: A Summary of Directors To summarize, program directors in District B, like the principals, do not have standardized budgeting procedures. Two directors meet with the finance director to discuss their budgets, while the third meets with the superintendent. Because these people work with federal and state funds, time lines and funding amounts are set by those agencies. Lisa and Nancy do not control the general fund dollars that subsidize their office. programs; those dollars are controlled by central Lisa and Neil involve more people in deciding how dollars will be spent than Nancy. These administrators are not involved in district budgeting decisions. The budget is 141 not discussed at administrative staff meetings. These three indicated that there is some distrust of the central office administration. As with the principals, lines of authority are not clear. Different directors discuss their central office administrators. budgets with different Nancy discusses her budget with the finance director, but appeals to the superintendent first if she needs extra money. complete control over Nancy and Lisa do not have their programs. Budgeting responsibility is divided; program directors control federal dollars, and central office controls general fund dollars. When asked what they would change about budgeting in district B, one said nothing. district decisions. One would Neil would like more like to involvement eliminate in the uncertainties caused by legislators and assessors. The directors differently. perceive district planning and goals Responses vary from no planning to starting to plan to plans are in SIP book. Goals either do not exist, are part of SIP book, or will be included in planning. There are no shared goals. So far, this section has presented the data and findings from interviews with principals and directors. Next data and findings from interviews with a board member and a teacher are presented. 142 Board Member and Teacher Board Member Marie Board member Marie said that the superintendent finance director project revenues and expenditures. and The board member thinks the auditors also help project revenues. said that budget projections are about 90% accurate. She Multi­ year projections for 1994 and 1995 have been presented to the board. Marie said that problems in projecting revenues and expenditures occur because the state aid act is unknown. district, therefore, formula. Further, The does not know if it is in- or out-of­ a major taxpayer is challenging its tax increases. According to Marie, budget. the finance director prepares the The finance director works with the board finance committee, which reviews the finances and passes the information on to other board members. Marie said that the committee individual does not meet often but freguently meet with the finance director. members Marie said that the superintendent and finance director prepare expenses for each building. The buildings and budgets; they do not develop their own. departments are given School district staff is involved in budgeting to the extent that they spend their allocation. Marie said that the superintendent's role in budgeting is to oversee the finance director and ultimately to set the spending criteria. Marie said that the superintendent and finance director are "very conscientious about looking at costs before something is adopted." Marie said that the 143 superintendent gives the public budget presentations but may at times refer to the finance director. Marie said that the public is welcome to attend board meetings and workshops. The public is kept "as informed about finances as much as can be expected. The district has an open door, director is very approachable." and the finance Marie was not sure if budgets are available to the public but said, "I'm sure it wouldn't be a problem to get them. " Marie did not know if there was a goal or policy regarding fund balance but said, have it. line. We're in good shape. "We like to It helps us keep expenses in We don't overextend ourselves; it's a reserve." Marie said that one board member has been getting the board involved in strategic planning. active in The board will work with consultants; Marie hopes that the public will be involved and that the plan will address financial issues. Marie said that the board adopted three to five year goals in 1990. These goals, one of which was to build a new high school, were accomplished in three years. a big thing right now. board would like to Marie said, "It's The board is pushing for it. see administrators adopt goals. not only the board but We're working toward it." The also Marie said that there are always people with individual or sub-group goals, but these are usually "misunderstandings and can be easily cleared away." considered a decision. Marie said that the board has never re­ There are no spending holds or any other problems with budget implementation. 144 Teacher Tom Teacher Tom is active in the union. Tom assumes that the superintendent and business manager project revenues, and the business manager projects expenditures. not difficult for the district to Tom said that it is project revenues and expenditures. Tom has no idea how accurate the projections are. is "A lot factual. concealed. The superintendent [We] are not given exact figures. big role. is never Politics plays a [It is] hard to get the facts, lots of agendas." Tom does not know funding criterion nor who sets it, but he thinks it is the board, finance director, superintendent and the attorney. everything, Tom and superintendent. said the that the finance Both the superintendent director staff, works the superintendent manipulates comprised of non-professional people. the knowledge." with including principals teachers, and the public are cut out of the process. that controls the board, the and Tom said which is "They just don't have Tom said that budgets have to be available to the public and staff, but that fact is not well advertised. Tom said that the public and staff are not kept well informed. Tom said that multi-year projections are presented at board meetings and study sessions. Tom said that board decisions are frequently reconsidered, especially about the new high school. "Every two weeks they change their minds about site, type of building, program." holds all the time. Tom said that there are spending Tom said that the holds are political 145 games. "The principal blames it on the business manager and vice versa." Tom does not think the district has any formal plans unless they are state mandated; SIP committees do have plans. Tom said the board adopts goals, and they are updated every six months. He assumes they relate to finances, but there are no specific financial goals. When asked specifically if there was a goal or policy about fund balance, Tom did not know. He thinks the fund balance is about $11 million to $12 million, but doesn't know the exact figure. balance is important. said, "Everyone administration. The Findings: Both the Tom does not know why fund When asked about sub-group goals, Tom has his own agenda: board, staff, It's politics." A Summary of Board Member and Teacher board member and teacher agree that the superintendent and the finance director project revenues. The board member thinks auditors are also included. The teacher believes that the business manager projects expenditures; the board member expenditures. believes the superintendent also projects The board member believes the projections are very accurate - about 90% - while the teacher has no idea. The teacher information. believes The that board it member is hard says to that get correct problems in projecting revenues occur because there is no state aid act and a major taxpayer is seeking abatements. not aware of any problems. The teacher is 146 Expenditures are projected from the top down. and teachers spend but do not budget. Principals The teacher says there are times when there are holds on spending. The board member says that the superintendent sets spending criteria, while the teacher says that it is the finance director, superintendent and attorney. The board member says that finance committee members meets frequently with the finance director. Both the board member and teacher agree that there is no formal district planning. The board member says that one board member is active in getting the board involved. The board member says goals were adopted three years ago, and they have been accomplished. every six months. The teacher says goals are updated Both agree that there are sub-group goals. The teacher calls them agendas, and says that everybody has one. The board member calls them misunderstandings. So far, data and findings from interviews with principals, directors, a board member, and a teacher have been presented. Next, data and findings from interviews with the central office administrators are presented. Central Office Administrators Superintendent Mike Superintendent Mike said that he and the business manager do the district budgeting. budget is rolled over, He said that the previous year's then other adoption and roofs are considered. needs such as textbook Principals receive a per pupil allocation which they in turn allocate to various line 147 items. In projecting expenditures such as utilities, the past history is reviewed. A three year average is calculated, and that average is increased by 3% for the new year. Mike said that expenditure projections for 1993-94 are expected to be close. The district is in contract negotiations with the teachers; attorneys, rather than school district staff, do the negotiating. Mike said that the business manager projects revenues. Mike said that the projections are about 98% accurate because of the high dependence on local taxes. Currently the district is out-of-formula, but until the State Aid Act is passed the district will not know if it will remain so. Problems in projecting revenues have occurred because of city assessment practices and tax assessment challenges by a major taxpayer. Mike said that these impact on revenues." calculates challenges Mike said five year projections. balance of 9-10% is a goal. the "could mean a significant summer months. Mike the Mike business manager said that a fund About $1 million is needed for said that fund balance was deliberately used in 1992-93 because a major growth in the 1993-94 imminent SEV, with and the therefore a completion growth of a in major local taxes, taxpayer's is new facility. The fund balance that was used will be replaced in 1993-94. Mike said that the district evaluates the accuracy of its budget projections by looking at fund equity - did it end up at what was projected. 148 Mike said that the district does not engage in program budgeting, zero based budgeting, or cost benefit analysis. Program evaluation resulted in re-structuring school grade levels, creating a middle school, and centralizing media and counselling services. Administrative responsibility for some programs was changed. Mike said that the board and staff set the funding criteria. He said that the maintenance budget is used for "fat." We: wait until May and then if it looks like there will be money left over, it is used for pet projects such as parking lots, roofs, etc. These are often projects that the board members have felt needed to be done. Mike said that five years ago, the district was broke. He said: The former superintendent had it easier. He could just say there isn't any money, recommend cuts, and implement. Now that the district has money, everyone wants it. I am always making decisions about spending it. Mike said that the budget is usually amended twice during the year due to minor adjustments. budgeting decisions, implementation. waiting on and The board does not re-consider there are no holds on budget Mike did say, though, that the district is implementing some staff and program because of 1993-94 funding uncertainties. decisions "We don't want to do these things and then have to go back and change them." Mike said that his role in budgeting is to keep the board on target, to keep revenues and expenditures in line, and to present options. presentations. Mike Mike generally developed does his the own public budget spreadsheet for 149 tracking investments because he doesn't think one person (the business manager) should be responsible for so much money. Mike said that the business manager analyses the budget, meets with the him regularly to keep him informed, and handles the board finance committee. Mike said that the board finance committee meets more frequently than other committees. The finance committee is kept informed of budget deviations and of accounting changes that may affect the district's finances. The finance committee then reports to the other board members. Mike said that budgeting decisions are the board's. that the public is tuned in to budgeting. He said "Parent groups make significant contributions to the schools but are not involved in the general fund." There are budget workshops hearings, and a copy of the budget is made available. and Mike said that about 75% of the people who attend board meetings, hearings, and workshops are staff. He said that the budget hearing for the 1993-94 budget was unusual because there were no questions. Usually the public makes comments "on whatever is up at the time." The budget is adopted the same night as the hearing, so there is no time to consider public comments prior to budget approval. Mike said that the board is looking into getting involved in strategic planning. The district has four Saturday board workshops; one meeting is specifically devoted to planning, and some of those plans do include financial issues. Mike said that he would like to change the budgeting process so that there is more time for planning. Mike said that the 150 board adopted goals in 1990 but not since. goals have been accomplished. Most of the 1990 He said that one in particular, building a new school, was linked to finances. individual or sub-group answered, "Absolutely!" projects. Sometimes goals exist, When asked if Mike emphatically He said that board members have pet they look for ways "to pay political debts." Finance Director Joe Finance director Joe begins budgeting in February or March, prior to the county allocation board meeting in April. Joe said he uses past history and formulas. salaries and contracts. quo. benefits, which are First he projects based on negotiated Supplies and other materials remain at the status District plans determine capital outlay funding. Joe calculates utilities by using either a five year average and adding 5% or by using a three year average and adding 3%. Extraordinary incidents are also considered. the district budgeting. does not engage in Joe said that program or He said that ZBB is good for new programs. late May, he revises the allocation budget. principals are administrators specific zero-based decide about criteria are. involved which in the budgeting. funding Joe said that Joe criteria administrators decide In said but and that was not what the Buildings are given a per pupil allocation; usually the allocation to begin the year is the same as last year's. building In September, allocations. the finance Administrators director have adjusts "near the complete 151 freedom to allocate dollars as they deem appropriate." They have the flexibility to move dollars between line items as long as they do not impact the approved budget format. School administrators can order supplies from the county purchasing cooperative in the spring but are not allowed to order other materials until after school begins. All purchases must be made by March when a cutoff for spending is imposed. Joe said that revenue projections are more accurate than expenditure projections. problem because of aging issue, which was passed He said capital outlay has been a buildings and boilers. in winter of 1993, The bond however, will becoming more address these needs. Joe difficult. said that projecting revenues is Just this past spring, city officials increased the major taxpayer's SEV by $104,000,000. According to Joe, the city called in an expert who used a legal but highly questionable method of assessing value. The newly increased SEV brought the Headlee Rollback Factor to about .5, which meant that the school district could levy only half of its approved millage resulting in a significant revenue loss. The county equalization director became involved and decided that the remedy to the situation was to apply an equalization factor of .3 to all school district property. This action would mean that the district could levy all of its approved millage but on only 30% of the ad valorem SEV. many meetings and legal Finally, after costs to the district, the county equalization director agreed to allow the city to reduce the 152 assessment. Joe said the story is not quite over, however, as the involved taxpayer still has outstanding appeals with the Michigan Tax Tribunal. Joe said that in 1991-92, a drop in assessments put the district into formula. After litigation, a settlement was reached which retroactively increased the SEV enough so that the district should not have been in-formula, and the district received. had to repay the membership aid it had The taxpayer has appealed the decision. Joe said that the superintendent's role in budgeting is to give direction, options to cost to describe out. Joe crunches superintendent has the final say. all the public presentations. concepts, and to provide the numbers. The The superintendent gives At board meetings, Joe does not sit at the board table, but the school district attorney does. When asked about this, Joe said that he sits in the audience so that he can observe comments. the audience's mood and listen to Joe said he also watches the body language and actions of board members. Joe said that he supplies board members with a lot of information. Joe meets with the finance committee and reviews the budget step by step. He said that board members do not ask as many questions as they used to. Certain members adopt certain causes, however. the public is not involved in budgeting. workshops. Joe said that There are budget "A few concerned parents attend. They may not be concerned about finance per se; they are more concerned about program content." Joe said that the most recent budget hearing was atypical in the sense that there were three big 153 financial issues on the agenda: Truth-in-Taxation Hearing, budget adoption, and a budget amendment. Joe said that board meetings are fairly well attended, but most of the audience is staff. There are not many questions or comments. that the budget is usually amended twice: afterfourth Friday count is taken, insurance rates are known, and once in the fall staff is in again Joe said in place, May for and minor adjustments. Joe said that the board took action in participate in the strategic planning process. June to "Not all board members agreed with strategic planning, but all voted in favor of it because they did not want to look like they were against planning." Joe said that the board adopts one to five year goals which can be found in the board minutes. there are individual and sub-group goals. Joe said He said: Individual board members have pet projects. Sometimes the union doesn't care about the position [regarding fund balance] of the district. Sometimes union demands don't include quality program. [They] don't understand that what's good for the company is good for them. [They] don't understand what impacts the big picture. Joe said that he has brought a private industry mentality to the school district. minimize waste. He tries to maximize Joe said, "Time is money." revenue and At times Joe has taken financial responsibilities from administrators in order to make programs more efficient. Joe said that there are other areas within the district that may need his aid to become more efficient. 154 The Findings: Central A Summary of Central Office Administrators office administrators say that accurately projecting revenue is becoming increasingly difficult. The district is never sure about its in-formula/out-of-formula status. Changes in the law regarding SEV assessment and local city assessment practices cause the district many problems in projecting revenues. Central office prepare the budget. top down. administrators together to Expenditure projections are made from the Past history and expenditures. work Principals formulas receive are used to project building allocations. Principals have some flexibility in using their funds, but there are restrictions on when dollars can be spent. There is a blurring of the lines of authority. finance director controls many day to day decisions. The He has relieved administrators of budgeting responsibilities when they have not spent dollars efficiently, even though these administrators report to the superintendent and not to the finance person. director's The superintendent duplicates the finance tracking of records because he does anyone should have that much responsibility. not The finance director is not highly visible in public settings. meetings, given the the attorney, think At board a non-school district employee, responsibility of contract negotiations and is is seated at the board table; the finance director sits in the audience to listen and watch. The superintendent makes the 155 public budget presentations. The finance director works in the background with the board finance committee. Central office administrators agree that the district does not have goals. The board has recently decided to pursue strategic planning. Some budgetary decisions are made to satisfy individual board members. So far, a brief description of the district and interview data and findings have been presented. Next, the data and findings from documents and observations are presented. Document and Observation Data Data on Revenue District 1992 financial documents (Financial Report and Form B) show $13,034,336. that in 1991-92 district revenues totaled Revenues came from the following sources: local tax levy, 74.17%; state membership and categorical aid, 8.95%; indirect federal grants, 4.23%; direct federal grants, 7.35%; and miscellaneous revenue (investment interest, lease and sale of property, etc.), 5.30%. found in Appendix B. 1988-1992 levy averaged increasing revenues accuracy. FormB reports and Financial Reports for show thatover this four has Documents Detailed data on revenues can be 81.2% reliance show that on the of year period, the local tax revenues. Documents on federalfunding the district original June for show revenues. was able to project adopted an budget with its 87.92% District records show that over a four year period, revenues were projected with 90.4% accuracy. 156 In 1991-92 the district was in-formula because appeals by a major taxpayer challenged. reduced the SEV. These appeals were According to board minutes, the district received $696,000 as a result of the State Tax Commission ruling. this amount, Of $611,000 was returned to the state and $85,000 was used for litigation costs. Data on Expenditures District financial documents expenditures totaled $13,639,008. show that in 1991-92 Table 4.2, page 157, lists the expenditures by both function and object. Reports show that over a four year period, expenditures increased steadily. The percentages spent in the function categories varied by less than percentage 1% except spent that there was in basic programs increase in added needs programs. a decrease that was in offset by the an (This would be consistent with the additional reliance on federal funds for compensatory education.) The percentage dropped in general administration while it increase in instructional support, accounting change for certain personnel. due to an There was a similar exchange between the maintenance and operations category and the capital outlay category. District documents also show expenditures categorized by object. Table 4.2 shows that expenditures were made in the following object categories: salaries and benefits, 79.91%; purchased services, 7.22%; and supplies and materials, 12.87%. Within the purchased service and expenditures were supply category, 6.22% of used for maintenance and operations supplies and services (utilities, 157 Table 4.2 District B Expenditures 1991-92 EXPENDITURES BY FUNCTION INSTRUCTION Basic K - 12 Programs Added Needs - vocational, special education, etc. Adult Education Benefits for Instructional Personnel SUPPORT Pupil Support Services - counselling, health services Instructional Services - library, media General Administration - central office and board of education School Administration Business Services Operations and Maintenance Transportation Central Services - data processing, etc. Benefits for Support Personnel Community Service - day care center, latch key Capital Outlay Other - athletics, lunch program 34.08% 11.18% 0.28% 8.26% 4.51% 6.02% 1.87% 4.62% 3.39% 12.68% 1.48% 0.38% 6.38% 0.09% 3.30% 1.48% 100 .00 % EXPENDITURES BY OBJECT Salaries & Benefits Purchased Services Supplies and Materials 79.91% 7.22% 12.87% 100 .00 % % of budget spent on purchased services & supplies Basic Programs Added Needs 0.96% 1.29% 2.25% 158 telephones, paper towels, cleaning supplies, etc.)* Only 0.96% of expenditures were used for purchased services and supplies in regular K-12 classrooms. Principals in district B control less than 1% of the total budget. categories, percentage varied. spent salaries spent, and while benefits In the object remained purchased services constant and in supplies Documents show that the percentage of the budget on materials regular K-12 steadily purchases decreased. services, Even supplies though and expenditures exceeded revenues, District B ended the 1991-92 fiscal year with a fund balance that equaled about 10.6% of its revenues. Detailed data on expenditures can be found in Appendix B. Documents show that the district was able to project its expenditures on the original June budget with 96.17% accuracy. Records show that over a four year period, district B projected its expenditures with 95.3% accuracy. Satisfying legal requirements is one of the criterion on which expenditures are based. The format the budget takes for board approval and the format for reporting expenditures and revenues are dictated by Michigan law. District B begins its projection of expenditures by using a line item budget which is then condensed to meet legal requirements. District B must fulfill the legal requirement of having its books audited, which is a cost to the district. Salaries and benefits accounted for approximately 82% of total expenditures. district is legally required bargaining with its employees. to engage in The collective The resulting contracts set 159 wages, benefits, and conditions of employment. Teacher contracts have clauses specifying the number of students that can be placed in classrooms, thereby dictating the size of the teaching staff. Special education laws require that students with special needs be placed in special classrooms. Often the students must be transported to special schools or to programs offered in only one school. transportation costs. For district B, this is the only Health and safety laws require the district to maintain its buildings to meet MIOSHA standards. Legislation on asbestos has placed increased burdens on the district. In addition, PA 25 is mandating that certain personnel and program standards be met, all at a cost to the district. Data on Process District B has board policies that clearly delineate a budgeting process. According to those policies, the budget will be made up of best estimates from the individual schools and consolidate upward. be involved. Teachers and other staff members will Principals will prepare and submit an estimate of needs by January 15. The superintendent will determine the manner of compilation and issue instructions. He/she will establish a time schedule known as "budget calendar." Board Meeting Observations The meeting the researcher attended included a Truth-inTaxation Hearing, a budget hearing, a budget adoption, and a budget amendment. presentation. The The superintendent superintendent said gave that the the entire finance 160 committee had met just last week. He said the budget is very tentative because: There is no state aid act. We don't know what will happen with school finance reform. We have a significant increase in SEV because of [the new industrial facility]. Last year we allowed expenditures to exceed revenues because we knew [the facility] was going on line. This year revenues exceed expenditures. The budget includes an alternative education program and all present programs. The budget was developed in anticipation that the magnet school will be funded. The only comments came from board members. budget was approved without any One said that the discussion because board members had already spent so many hours working on it. said, "The board put in 8 to 10 hours on this one. lots of homework. We went over and over on this one. even on the finance committee." He We did I'm not No reasons were given for amending the 1992-93 budget. Further observations at this board meeting include the fact that the district's attorney, who is completely in charge of contract negotiations sat at the board table. he sits at the board table every director sat in the audience. meeting. People said The finance A newcomer to board meetings would not have known he was there. The board treasurer gave a financial report and offered the bills for payment. The board adjourned to a lengthy executive session before action items other than budget were considered. The Findings: The Documento and Observations purpose observations is in collecting to verify the data data from documents collected through and the 161 interview process. look at the Numerical data allow the researcher to district's financial condition. Financial Reports, Form B reports, and board minutes document decisions that were reached. Data collected on revenues verify the in-formula status of the district in 1991-92. Data further verify that the district can easily slip in- and out-of-formula. Data verify the sources of revenue, the uncertainties that accompany that revenue, and the accuracy of revenue projections. Data collected on expenditures document the use of the revenue. The data provide verification and insight into the criteria that are used in making expenditure decisions. The data show that both revenues and expenditures increased steadily. relative lack of The variance in expenditures is indicative of incremental budgeting with its reliance on past history. data verify the accuracy of expenditure projections. The Data indicate that because of revenue uncertainties, the budget is not completely implemented. Board minutes planning. The reveal no board existence of district verified through any documentation. adoption goals of long term could not be Board policy reveals that the process described by participants is not the one set forth in policy. Board meeting observations reveal a high level of board activity and involvement observations verify the director. in district decisions. The lack of visibility of the finance The attorney's prominent position at the board 162 table opens up questions decision-making. budget as to his position in district The fact that a Truth-in-Taxation Hearing, hearing, and budget adoption all occurred within minutes of each other reveals a lack of opportunity for public involvement. So far then, findings from the interviews with participants and from documents and observations have been presented. Next the findings from the participants and documents are compiled to present an analysis of findings of the district’s budgeting process. Analysis of Findings So far, data and findings from participant groups and from documents and observations have been presented. section is a compilation of those findings. that district process, B makes expenditure, budgeting balance, This The findings show decisions about revenue, and implementation. Figure 4.2, page 163 is a representation of the findings. Figure revenue. 4.2 shows that the first decision cluster is Findings show that district B receives revenues from local property taxes, state aid, indirect federal miscellaneous sources, and direct federal funds. grants, The district fluctuates between being in-formula and out-of-formula. assessment practices and SEV loss due to tax City tribunal decisions add to revenue uncertainty and contribute to its change in state aid status. The majority of its revenue, 74.17% comes from local taxes. District B receives additional 163 District B: W ealthy/ Uncertain REVENUES Local Taxes State Aid Indirect Fed. Grants Miscellaneous Direct Fed. Funds Decision-Makers PROCESS No clear lines of authority Unknown expectations Divergent goals Business official in background Board highly visible Active board committees Low level of administrator trust Varying levels of satisfaction Criteria Legal requirements History/Tradition Stakeholder expectations EXPENDITURES INSTRUCTION Basic Program Added Needs Adult Ed Benefits SUPPORT Pupil Instructional General Admin School Admin Business Maint & Oper Transportation Central Services Benefits Community Services Capital Outlay Other BALANCE Adopts wait and see attitude Waits for more information IMPLEMENTATION Implement budget Figure 4.2 Budgeting Model fo r District B FUND BALANCE 164 revenue through direct federal aid. funds finance program. about 50% of the These additional federal district's magnet school Direct federal funds require a lengthy application procedure. They often require negotiating and lobbying. Approved applications must then wait for an appropriation. The process for obtaining the funds leads to revenue uncertainty because the district is well into the fiscal year before it knows the direct federal revenues. funding it will funds In accounted 1991-92, for the receive. 7.35% original of In 1991-92 district budget's B's revenue projections were 87.92% accurate. Figure process. 4.2 shows that the next decision cluster is Decisions about who is involved and the criteria to determine expenditures developed in allocations. purchased. a top are made. down District fashion. B's budget Principals are is given Principals and sometimes teachers decide what is Directors have more involvement because they budget for federal funds. in projecting There are no standard procedures or time lines for budgeting. Budgeting is not discussed with administrative staff unless staff is exceeding line items. satisfaction. The process leads to varying levels of Principals and directors would like to be more involved in budgeting decisions and to have more information. Central office administrators are satisfied with the process. Participants expressed varying levels of administrator trust. budget Principals changes. complained The that they were superintendent feels not the told of need to 165 duplicate the finance director's work. Either the administrators themselves are unsure about district finances or said others, such as teachers, are. Decision-makers in understanding of what district B do not have is expected of them. a clear People new to budgeting are not told what is expected of them. At least one principal a always overspends her budget, yet different administrator had budgeting responsibilities changed because of "inefficiency." There are unclear lines of authority. Principals and directors meet with different central office administrators when they discuss budget. the general fund administration and Directors do not have control over support of budget their programs. administration Program become confused. Principals receive allocations to run their buildings, yet there are conditions under which those dollar can be used. Even though principals would like to have books, supplies, and materials in their buildings before school begins, the finance director does not allow this to happen. The finance director relieves administrators of their budgetary duties if they do not use dollars efficiently, administrators finance report director. to yet in the chain of command, the There superintendent is even and not confusion the over administrators' titles. People other than administrators are perceived as being decision-makers. revenues. Auditors are perceived as projecting Attorneys sit at the board table instead of school 166 district personnel, and they negotiate labor contracts. There is virtually no public involvement in budgeting. In district B, the finance director is visible in daily operations, but in the background at public meetings. The finance director does not have a prominent place at board meetings. He does not make public presentations. He does not present bills for payment nor inform the board of district finances. A newcomer to board meetings would not even know he was in attendance. The board of education is highly visible. The board has a committee structure; the finance committee is the most active. The finance committee members meet with the finance director as a group and as individuals. The committee is members responsible for supplying financial information. other board with The board treasurer presents the bills for payment and reports on the financial condition of the district. District B does not have shared goals. Confusion exists as to whether or not goals exist and who sets them if they do exist. Goals district were goals do not found exist, they in the are not Individual and sub-group goals do exist. pet projects or initiating the "agendas." move to board, staff, minutes. well If publicized. Board members have Even the board member who strategic because of a personal goal. board planning is doing is that The union member said everyone - administration - have their own goals. The finance director also pointed to the unions as having their own goals that sometimes run counter to "what is good for the 167 organization." District B decision-makers do not have shared goals. Figure 4.2 shows that the process cluster includes the criteria used to make decisions. include legal requirements, The criteria in district B the district's history and traditions, and stakeholder's expectations. Legal requirements cause many budgetary requirements must be met. constraints. Special education District B uses contracted services for its transporting special education students. Health and safety laws mandate that buildings and equipment be maintained and that potentially hazardous conditions, such as asbestos, be eliminated. Building maintenance has created budgeting problems in the past, but the bond issue will help to address those problems. Labor law requires bargaining with employees for wages, benefits, and conditions of employment. have a legal obligation to adopt a balanced budget. Districts District B has a legal requirement to fund a magnet school program. Federal funds are paying about 50% of the costs, but district funds must pay the rest. Regular K-12 students are not bussed in district B, but in order to make the magnet school work, transportation to the magnet schools is being added to the 1993-94 budget. In 1991-92 district B spent 79.91% of the budget on salaries and benefits. Utilities and maintenance accounted for 6.22% of expenditures. History and stakeholder expectations help to decide how dollars will satisfied. be spent once the legal requirements are In district B, there is a heavy reliance on past 168 expenditures to project budget is modified inflation. to Formulas future expenditures. accommodate are applied for to A roll over special existing items line and items. Principals begin the new year with last year's allocation. In the buildings, principals are locked into existing line items that never go away. ($131,177) materials was for In 1991-92 less than 1% of the budget spent regular on purchased K-12 services, classroom evidence that purchasing is evaluated. use. supplies There is and no There is no evidence that spending patterns have changed due to curriculum changes. Stakeholder Some expectations stakeholder reguirements. expectations Staff collective bargaining. continuation or also determine are expectations expenditures. satisfied are by satisfied legal through Some expectations are satisfied by the addition of programs. Board members' expectations are satisfied by the inclusion of their "pet" projects. Lack of public participation raises questions as to whether the public is satisfied or if it is either overtly or subtly denied involvement. Figure 4.2 shows that expenditure decisions must be made. Decision-makers use the criteria to develop the budget. Law requires that districts adopt a budget by June 30 for the fiscal year which begins July 1. this budget must take. categories. Law also stipulates the form Figure 4.2 lists the expenditure Decision-makers project expenditures for each of the categories listed in the model. District B projected its 169 expenditures with 96% accuracy in 1991-92. The four year average for accuracy of expenditures is 95.3%. Figure 4.2 shows that district B does not immediately implement its entire budget. District B waits for more information such as enrollment figures and the passage of the state aid act. A drop in SEV and an increase in student enrollment can easily put the district in-formula. district B is revenue so close uncertainty to being exists. an Other in-formula groups, Because district, such as city officials who control the SEV, the federal government which controls funding for the magnet school, and the taxpayer that persistently receives tax abatements, cause additional revenue uncertainty. Therefore, the district adopts a wait and see attitude before fully implementing the budget. The wealth of the district keeps it from having to implement cuts or asking for additional millage. Caution is taken to protect fund balance. In district B, then, most of the revenue comes from local taxes. It is a relatively wealthy district. enrollment and organization, actions by groups outside revenue uncertainty exists. projected with some accuracy. Because of its of the school Revenues can be Decision-makers do not have clear lines of authority as different principals and directors work with budgeting. different central office administrators in Decision-maker expectations are not fully known. Divergent goals exist among the many decision-makers. business official is not highly visible. The The board is highly 170 visible and has an active committee structure. Decision­ makers consider legal requirements, past spending history, and at least some stakeholder expectations when making budgeting decisions. Individual goals sometimes determine expenditures. The approves board accurate. a budget by June 30 which is fairly The budget is not fully implemented until the fall when more information about revenue is known. This section has presented the data and findings district B. for The next section of this chapter presents the data and findings for district C. District C This section on district C is organized in the following manner. First, a brief description of the district provides a setting for the data presentation. Interview participants are grouped for ease in data presentation. First, data and findings from principals and the community education director are presented. Next, data and findings from a board member and central office administrators are presented. Then data and findings from documents and observations are presented. This section concludes with the presentation of a budgetary model for district C which is a compilation of the findings. The Setting District C was selected as the less wealthy district with certainty of revenues. In 1991-92, according to Michigan 171 Department ranked of Education 352 out of 561 report R2743 school (1992), districts the district in combined local revenue (generated by local taxes) and state aid membership. The district is solidly in-formula. SEV was $142,006,704. students. In 1991-92 the district There were 2,561 full time equivalent This gave the district an SEV per pupil of $55,450. The district levied 34.1284 mills. received $3,561 per pupil in In 1991-92 district C combined local taxes and membership aid. All budgets. school districts have many constraints on their Among these constraints are the legal requirements to collectively bargain with their employees for salaries and benefits. In 1991-92, district C spent 79.72% of its budget on salaries and benefits. School districts must also pay for utilities and maintenance; this accounted for 4.6% of district C's 1991-92 discussed budget. Other legal in the section on data included in the budget. obligations, which from documents, must are be Thus, only a small percent of the budget is discretionary funds. In district C, only 2.11% of its budget was used for purchased services and supplies for regular K-12 programs. District C is rural; however, it is experiencing growth in upscale housing, business and industry as the boundaries of suburbia push further and further into what was once farmland. About 60 to 70% of the SEV is residential property, most of which is owned by farmers. All of the schools are District C is 116 square miles. located on a beautiful, centrally 172 located campus. recent bond accommodate The buildings and grounds are immaculate. issue the paid for a increasing elementary level. new elementary numbers of school students at A to the The administration building is a converted bus garage that was decorated by the central office staff and their spouses. According The building is functional and homey. to the district's 1992 Annual Educational Report, the high school received North Central Accreditation for the first time in 1991-92. have been Michigan honored recognized Department in 1991 and as of the state Two of District C's schools exemplary Education; elementary the schools by the school was 1992. The middle school in district has a dropout rate of 3.42%. In district C, eight people were interviewed knowledge of and participation in district title, these people were the superintendent, about their budgeting. By the assistant superintendent, the high school principal, the middle school principal, the later elementary school principal, elementary school principal, the early and the director of community education, and a board member. Teachers who were identified as active not participate. union members would With the exception of the teachers who refused to participate in the study, everyone in the district was cordial. made readily available. Information was The interview data and findings for the principals are presented first. 173 The Principals and Community Education Director Principals in district C budget for supplies, textbooks, small equipment purchase and repair, development. All of those and some professional interviewed agreed that the budgeting process begins in February or March; the assistant superintendent, who is responsible for the finances of the district, sets the budget calendar. to submit their needs on Principals are requested district prepared forms. The assistant superintendent reviews the requests and gives the principals an allocation. different grade level, allocation. items. assistant houses a principal then to meets individually review and with justify the the Principals said that they never exceed their They can present rationale for additional funding, after assistant negotiating, superintendent usually is education program. Supplies, education materials budgets. building each receives a different per pupil superintendent allocations. and, each Principals assign dollar amounts to various line Each budgets. Because classroom get more responsible textbooks are part dollars. for The the special and other special of the building Principals use different budgeting procedures within their buildings. Principal Dennis Principal Dennis said he meets with department heads after the assistant superintendent requests building needs. Dennis and the spending trends. secretary review the current budget and They look for excess from last year and for 174 new areas that need funding. Dennis said that when cuts are necessary, they look at "what's good for kids." Dennis gets suggestions from staff, but said that "everyone protects their own turf." Dennis said that in his building, continually looking to the future and working to accomplish goals is not new, but PA 25 has had an impact on the process. goals set spending priorities. Building Dennis said that in recent years there is more use of grant money to meet goals. Dennis said he is not involved in district budgeting decisions and does not know other administrators' Central office sets spending priorities. budgets. There is concern about staff allocations because of enrollment growth. said the board of education is involved only Dennis in the presentation of the budget; members become more involved when cuts are made. "That way the defense, not the administration." board takes the brunt of Dennis said that the public trusts the administration. Dennis said the district does not have long term planning, but newer board members are interested in strategic planning. Dennis said that teachers, parents, administrators, and board members meet in the fall and talk about issues and set goals. These goals are used in budgeting. Dennis said the biggest problems in budgeting are holds on spending and having funds. concern. an expanding student population without expanding Dennis said that the funding of PA 25 is a district 175 Principal Carl Principal Carl said that he discusses budgeting issues at staff meetings. He meets with department heads to discuss needs. Carl said he puts balance different departments, but resources. Carl sometimes set needs. he said said the budget together, Carl his assigns staff district at administrative is trying to dollars willing funding to to the share priorities staff meetings. are Spending decisions are usually reached on an individual basis through phone calls with the assistant superintendent. Carl said his building has planning and goals that are used in budgeting. "For example, this year we are trying to investigate different ways to provide in-service." Carl said his involvement in district budgeting is limited to helping prioritize items for funding. Carl has almost total autonomy in terms of teaching staff. According to Carl, principals must make central office aware of staffing needs early in the budgeting process; the interviewing and selecting is up to the principal. also participate in support staff interviews. posting, Principals Carl said that some district planning occurs in the fall when faculty, board and administrators meet and set goals. "The goals are not always budgetary, but almost everything affects the budget." Carl said the district set goals prior to PA 25, "but PA 25 provides a better instrument." Carl said biggest problem is not having enough money. the district's He said: 176 It would be great to know on a consistent basis what funds are going to be there without having to go to the people. But everyone realizes the problem; everyone has a real positive attitude. Carl praised "outstanding, the assistant trustworthy. couldn't anticipate. superintendent He is good calling him things you about He uses a very sharing, open process." Principal Jim Principal Jim said that for the 1993-94 budget he used current year figures and added an across the board percentage. Jim is principal of a new building which is costing much more to operate than was projected. The newness of the building is creating budgeting problems; there is no budget history. Jim complained that there are no dollars he can budget on his own. He said, "For example, new programs reguire manipulatives but there are no dollars for them. Somebody missed the boat." Jim said it is possible to request more funds through the assistant superintendent, "but it is easier if you have the superintendent's support first." teachers in budgeting by Jim said that he involves giving each teacher a dollar allocation to spend which amounts to about 85% of the building budget. The remaining 15% is kept in a building supply pool. Jim has the flexibility of moving dollars between line items but said the assistant superintendent is very particular about expenditures even though the money is in the budget. Jim is frustrated because many special education students that were part of a county program are returning to the district. Because special education program costs come from the building 177 budget, Jim believes regular education students are being shortchanged. Jim said that he has not been involved in district-wide budgeting decisions. Budgets are not discussed administrative staff meetings which Jim finds frustrating. "wants to be sure his own is not being shortchanged." assistant superintendent sets spending priorities. he would like discussions present. more at involvement and meetings where all would the at He The Jim said like budget administrators are He "would like to know district-wide where all the dollars are going. " Jim said that a lack of planning is hurting the district; however, he conceded that these are not normal times, and it is hard to plan for the abnormal. Jim said there are very general, broad district goals which are tied to budgeting. superintendent says, bucks there." According to Jim, the assistant "If you set goals, you have to put the Jim believes more emphasis needs to be put on curriculum; however, he said the district does maintain a good program, the strength of which is attributed to "people who are willing to sacrifice." He cited an example of teachers refusing a stipend to take students to band camp. Principal Linda Principal Linda said the assistant superintendent assigns dollar amounts to her budget line items. justify any changes she wishes to make. Linda must then Linda said there is heavy use of the prior year's budget and not much flexibility in use of funds. Linda would rather get a lump sum allocation 178 and not have to worry about line items. Within the building, each teacher receives $200 to spend on classroom materials. Grade level needs are considered; teachers develop wish lists and prioritize. Linda said usually the lists are reasonable. Teachers decide the spending criteria. priorities. Each grade decides its Linda said that the teachers are willing to share and have developed "closets" with materials everyone can use. Teachers take allocations. turns buying necessary items with their Linda said the teachers in her building have almost completely done away with workbooks so that they can purchase hands-on materials. Linda said that budgeting decisions. building because Linda does she is not included in district-wide not She knows the budget she and the other principal know how district spending decided; central office makes those decisions. the high school receives the most. time. of one other are friends. priorities are Linda believes "It is kept 100% all the It is the showplace of the district, where parents come for sports, etc. Time and money run out by the time they get to my building." Linda said that the assistant superintendent is highly trouble." trusted Linda as "he has has kept complete the district autonomy in out of posting, interviewing and selecting teaching staff; she has some input on support occurs staff. through the According K-12 directed at curriculum. SIP to Linda, committee. district These planning plans are The district sets five "target" goals which the board approves. Linda said, "In the past these 179 goals were more related to budget; now they are more student related." goals. Building goals are related to the five district In the building there are five teams; each team works on a goal. Linda said her building progresses because of innovative staff; however, the union is not very flexible in allowing changes. Community Education Director Fred Director Fred said his programs are market driven because they are funded by state aid and program fees. is responsible for approximately $750,000. Fred said he Fred projects his budget by starting with the previous year's numbers. The budget is amended about four times during the year. Fred said that the assistant expenditures; process. the superintendent sometimes then they negotiate. questions the Fred is happy with the "The superintendent and the board are supportive; assistant department, superintendent is great." Within the budgeting is done by program or service. Fred said that he involves coordinators and sometimes other staff. The funding criteria are demand, state policies and regulations, and available staff. Fred said that budgeting decisions. global terms at not discussed. he is included in district-wide The financial picture is discussed in administrative staff meetings;line items are Fred said there is a district committee that plans on an annual basis, budgeting. not but their plans are not part of According to Fred, district goals are adopted annually. Many of the goals are curriculum related, but they 180 are discussed in terms of their impact on the budget. Fred said that his department has no formal plans, but he tries to look ahead three to five years. Department goals are part of that informal planning. The Findings:_____ A Summary of Principals and Community Education Director To summarize, principals and department heads in district C are aware of their budgeting responsibilities. calendar is set and followed. administrators to project needs. Forms Administrators provided for The assistant superintendent works closely with the administrators. followed. are A budget know that Set procedures are they meet with the assistant superintendent to review requests and to negotiate for additional funds. they assign flexibility assistant to in line the Principals receive an allocation which items. fund Administrators usage, superintendent but sometimes Sometimes there are holds on spending. exceed their budgets. usually find a also questions allowed know the purchases. Administrators do not They know that if they need additional funds and the reason is good, will they are way to the assistant superintendent provide them. Teachers are involved in spending decisions. High school teachers are more likely to "protect their turf." are more likely to share. district budget decisions Other grade level teachers Principals are not involved in unless cuts are necessary. Principals have autonomy in teaching staff selection. 181 Lines of superintendent authority is are responsible clear. for The the assistant budget. Other administrators take care of all budgeting matters with him. Principals assistant are allowed to superintendent administer occasionally their budgets; questions the purchasing requests. Planning and goal setting occur at the building level. The district's K-12 District goals are set. SIP committee plans for curriculum. The curriculum plans and the district goals help set the direction for building planning and goal setting. Some of the plans and goals are either part of budgeting or have an impact on the budget. Generally, administrators are satisfied with budgeting in district C. Some would like more input and more autonomy, but they are not unhappy with what is occurring. more certainty in funding. Elementary principals believe that the high school is treated better. high level of trust of Carl would like the Principals expressed a assistant superintendent. Principals say that even though the assistant superintendent is conservative, he is trustworthy, open, helpful, and he has kept the district out of trouble. According to principals, the public trusts him too. So far, data and findings from interviews with principals and the community education director have been presented. Next data and findings from interviews with the board member and central office administration are presented. 182 Board Member and Central Office Administrators Board Member Mary Board member Mary said that the superintendent supervises budgeting. While the superintendent ultimately has the final say, he allows people to do their jobs and keeps a hands off approach. Mary said superintendent’s job. that budgeting is the assistant The assistant superintendent projects revenues; he and the building principals project expenditures. Mary thinks teachers are probably involved too because of PA 25. Mary said board members review the budget every month. While the board does have a finance committee, Mary said that it has only met once in two years and that was because cuts were necessary. Mary said that idealistically whatever least affects the kids is cut. "However, it sometimes seems in situations of cuts, that those things that would least affect kids can't be done because of contractual obligations." said the board superintendent. has completeconfidence "If [Raymond] in the Mary assistant left and someone else came in, the board would have to be more involved." public is not as involved as it could be. Mary said the According to Mary the public is kept informed through the local newspaper. She said that in addition to news articles, the superintendent has a regular weekly column. synopsis of board minutes. Mary is not sure thinks they are Mary said staff members receive a Budgets, by law, are available. how accurate budget projections are,but pretty close. Mary said a weakness of the district is that multi-year projections are not calculated. 183 She is sure the superintendent and assistant superintendent have mental projections. Mary said, "Budgeting problems are created at the state level, not at the local level. There are many uncertainties because schools are not funded properly." When asked about fund balance, Mary said the auditors advise 7-10%. "We don't have that; it's not our doing. Last year we lost money because of an increase in enrollment, but the state used the previous year's student count." Mary said that because there is no fund balance, the district has to borrow to meet cash flow needs. According to Mary the district does not engage in formal planning, but the board is talking about it. set annually for administrators. the district, Board goals are superintendent, and Mary said that while the goals may not be directly related to financial issues, they are all limited by finances. goals Mary said groups and individuals with sub-group exist, but no one group stands out. Mary added, however, that she hopes "unions would be involved in planning because the whole district needs to be involved, and what benefits the district benefits them." Mary is not aware of any formal evaluation of programs. "What would we evaluate? cut in a school There are not many things you can district." Mary consideration of budgeting decisions, is not aware of re­ nor is she aware of times when the budget cannot be implemented. 184 Superintendent Steve Superintendent advisory." Steve Steve said, described his as "strictly "The assistant superintendent was a teacher and former coach. Everyone trusts him. with the district for over 30 years. interfere." role He has been [There is] no need to Although Steve said principals and some teachers are involved in budgeting, he was not specific about what they do. Steve said that the board has workshops and study sessions, but budgeting is an administrative job not a board job. Steve said the public is involved in budgeting. members of the community are regular Some subscribers to board packets; they pay a fee and get exactly the same information that board members do, people regular attend meetings. additional millage budget hearings Since millage fails, including budgets. the and needs Steve and workshops district to prepare predicts that Steve said more needs than attend to reguest for cuts if that attendance will grow. Steve said that there are chances for the public to comment, and sometimes the comments can affect decisions which in turn affect the budget. Steve centered on any one issue. said public comments are not Each person has his or her own area of concern. Steve said that about 70% of the district's revenues come from homeowner's, particularly farmers. recently lost a lot of small industry. The district has A new industrial park is planned, and it is likely a large industrial facility will 185 locate there. Steve said delayed passage of the state aid act creates revenue projection problems. Steve said the state is making more drastic changes every year. trouble, and it is passing it on." "The state is in Steve said that district C, a growth district, has been hurt by using previous year's student counts in the state aid formula. a dilemma. "The district is in Enrollment is growing by about 5%; revenues are decreasing, so, there is a need to reduce expenditures while growing." According to Steve, projecting expenditures has become easier over the years. Steve said the district can control expenditures more a lot of people than understand. "The district controls what happens in a lot of areas, including negotiations." Steve said that although the district has used a third party to negotiate in previous years, it will not do that this year. Steve said the budget that is adopted in the fall is far more accurate than the one adopted in June to fulfill a legal requirement. By fall, enrollment is known and the state aid act has been passed. Steve said the district does not calculate multi-year projections. Steve planning. said the district does not engage in formal He said that the K-12 SIP committee set district goals and objectives. Steve said that the board adopts one year goals, some of which address financial issues. goals especially address financial issues. there are sub-group goals. Building Steve said that "The unions are not receptive to getting involved in school improvement, especially at the high 186 school. They don't want to change." Steve said there is a board policy regarding fund balance. The policy stipulates a fund balance of two months operating costs, but, according to Steve, the district doesn't have it now. Steve said the district does evaluate program on a regular basis but does not engage in ZBB, PPBS, etc. Steve said their administrators have flexibility in the use of funds, but sometimes there are holds on spending. budgeting is very traditional. changed in 25 years. Steve said He doubts that the process has "[The process] works well. The district has done as much with dollars as they can." Assistant Superintendent Raymond Assistant Superintendent Raymond said that projecting revenues and expenditures is becoming more difficult. He said that in-formula districts need the state aid act to budget with accuracy. the state changed According to Raymond, from using enrollment to current calculate year in 1992-93 enrollment membership to aid. prior year District C experienced enrollment growth and lost $500,000 because of that change. Raymond sees greater problems down the road unless there is a significant change in the funding formula. Raymond said that a few years ago, only one district in the county was out-of-formula. Now, district district in the county that is in-formula. C is the only Raymond wonders where this will leave the district in its relationship with legislators. 187 Raymond said that principals are involved in budgeting. They project their needs and submit line item allocations. Principals must justify their allocations and negotiate for them. Raymond said administrators have flexibility with their budgets, but there are holds on spending, and they are never allowed to spend 100% of the allocation. Raymond said that he "accommodates needs while maintaining control. Elementary people are weakest in budgeting; they like to stockpile." Raymond says projecting expenditures has become more difficult because of enrollment growth and a multitude of new programs. district education There is an expansion of the consortium concept; C is the and fiscal alternative agent for education county-wide programs. community Consortium members can make changes and spend dollars that impact the budget and leave district C with little budget control. In spite of these problems, Raymond states that if one looks at the October budgets, the district has been very accurate in its budget projections. to four times projections. a The budget is usually amended three year. Raymond does not do multi-year He said that they: take a lot of time and effort and usually are not worth the paper they're printed on. [They are] virtually impossible given the state of affairs. Other things have higher priority. Raymond said that he does not ignore looking ahead; he just doesn't do projections. Raymond said he has a free hand in budgeting. the public presentations. He gives Raymond said the superintendent 188 needs to know what is going on and needs to communicate with the business person. The superintendent needs to let the business person know in a timely fashion what he would like to see accomplished. Raymond said that sometimes board members comment on budgeting decisions, directly solicited. but their comments are not The board makes "political decisions rather than professional decisions." According to Raymond, and workshops, board meetings. and these the district has budget hearings are better attended than regular Raymond said the public becomes involved in financial decisions in a crisis situation. Raymond said there are times when the public can get very involved. meetings become open forums, such as the Often board 1993-94 budget hearing where the discussion of possible cuts was opened to the public for its suggestions and comments. Raymond said a strong board president is needed to bring things back in line. He said: Last night [the budget hearing] was okay because there were no additional items for approval. Sometimes the public becomes a part of the board; it is the board which must make decisions, not the entire public. Raymond did say, however, that ultimately it is the public that sets spending criteria. Cuts usually end up being made across the board, which Raymond said is more symbolic than anything else. Raymond said that there are no formal planning activities in the district. He said that the board adopts annual goals which are developed by the board and community members. The 189 goals are very general and do not address specific financial or budgeting issues. Raymond said the new superintendent, who has been in the district for three and a half years, has been very effective in following through reporting on the status of the goals. a board policy on fund balance. with monitoring and Raymond said there is It had been that the district would maintain a fund balance equal to one month's operating expenditures. Raymond said the board has completely revised its policies, and beginning July 1, the fund balance should be a minimum of 5% of expenditures not to exceed 10%. Raymond said the union does not agree with the fiscal management of the district. Raymond said budgeting has not changed. district has run 20 years close to the vest. changing." Raymond would like to He said, "The I don't see that have more control over revenue; then the district could make stronger commitments. He said: Personnel decisions often have to wait until state aid is known which is usually at least the end of summer; I don't feel the district is always getting the best people — may be getting leftovers. Raymond believes, however, that the board and staff get the job done with the available resources. Raymond does not agree with the critics of school and government employees. a good job with what we have." "We do 190 The Findings: A Summary of Board Member and Central Office Administration To summarize, budgeting in district C has become more difficult because of decisions reached at the state level. The district was adversely affected by the decision to use prior year enrollment in the 1991-93 the membership formula. The June budget requirement. is adopted only to comply with a legal The fall budget is more accurate because state aid and enrollment are known by then. Revenue uncertainty delays the hiring of staff and the full implementation of the budget. Both ultimate the superintendent trust longevity, the profile, assistant board member superintendent. The assistant are sure that management His district contribute to the feelings of trust and respect. makes financial have the superintendent and the of known. high in and expectations Budget time lines are set and followed. submit needs and negotiate exceed their budgets. for funds. They know that Principals Principals they can do not present rationale for additional funds and that they will probably get them. The assistant superintendent "accommodates needs while maintaining control." There is a reliance on spending history to project the new budget. Principals are given a fairly free hand in making purchases. There are clear lines of authority. assistant superintendent's responsibility. Budgeting is the While principals, board members, the public and the superintendent may provide 191 information, advise of needs, and comment, superintendent makes the decisions. the assistant Everyone acknowledges, however, that the superintendent has the ultimate say. The board of education respects the difference between policy and administration. Budgeting is an administrative job. The assistant superintendent is highly visible both in the day to day operations and at public meetings. The board reviews the budget and approves administrator recommendations. no active board committee structure. There is The board becomes more visible when cuts are necessary. According to these participants, community members and staff develop district goals that are adopted annually. superintendent and administrators also adopt goals. these are used in budgeting. The Some of Goals are reviewed periodically. There is evidence of sub-group goals. The teachers' union is resisting involvement in school improvement, and it does not always agree with district fiscal management. District C does not engage in formal planning but is looking into it. According to these participants, budgeting is an open process. Budgeting decisions are made from the bottom up. Teachers and expenditures. principals Community are involved members receive in projecting board packets. Board meetings are open for public comments and sometimes are conducted as open forums. So far, a brief description of the district and interview data and findings have been presented. Next, the data and findings from documents and observations are presented. 192 Document and Observation Data Data on Revenue District financial documents, such as the Financial Report and the Form B report, show that in 1991-92 district revenues totaled $10,449,479. following sources: Revenues came from the local tax levy, 46.38%; state membership and categorical aid, 43.55%; indirect federal grants, 2.89%; and miscellaneous revenue (investment education tuition, etc.), 7.18%. Reports (1988-1992) show changed slightly. adult Form B reports and Financial that over a revenues steadily increased. interest, four year period, The sources of the revenues have Local revenue declined by approximately 1% each year while state aid increased by approximately 1% each year. At least part of the reason for the increased state aid is the assumption of fiscal agency status for the county adult and vocational programs. found in Appendix C. able to Detailed data on revenues can be Documents show that the project itsrevenues on the original adopted budget with 94.64% accuracy. a fouryear period, revenues district was June 1991-92 Records show that over were projected with 92.7% accuracy. Data on Expenditures District financial documents expenditures totaled $10,338,934. show that in 1991-92 Table 4.3, page 193, lists the expenditures by both function and object. The data show that revenues and expenditures both increased steadily over the four year period. The percentages spent in most function 193 Table 4.3 District C Expenditures 1991-92 EXPENDITURES BY FUNCTION INSTRUCTION Basic K - 1 2 Programs Added Needs - vocational, special education, etc. Adult Education Benefits for Instructional Personnel SUPPO RT Pupil Support Services - counselling, health services Instructional Services - library, media General Administration - central office and board of education School Administration Business Services Operations and Maintenance Transportation Central Services - data processing, etc. Benefits for Support Personnel Community Service - day care center, latch key Capital Outlay Other - athletics, lunch program 36.98% 6.76% 9.01% 9.13% 2.54% 1.85% 2.87% 5.18% 1.98% 8.51% 3.97% 0.41% 4.30% 0.55% 1.39% 4.57% 100.00% EXPENDITURES BY OBJECT Salaries & Benefits Purchased Services Supplies and Materials 79.72% 8.67% 11.61 % 100 . 00 % % of budget spent on purchased services & supplies Basic Programs Added Needs 2 . 11% 0.56% 2.67% 194 categories varied only slightly. Expenditures education increased by approximately 6%. for adult Because district C is fiscal agent for the county adult and vocational program, expenditures are accounted for as district expenditures. The four year averages for expenditures by object are very close to 1991-92 expenditures. for 1991-92 were made Table 4.3 shows that expenditures in the following object categories: salaries and benefits, 79.72%; purchased services, 8.67%; and supplies and materials, 11.61%. and supply categories, Within the purchased services 4.6% of expenditures were used for maintenance and operations supplies and services (utilities, telephones, paper towels, cleaning supplies, etc.). Only 2.11% of expenditures were used for purchased services and supplies in regular K-12 classroom. 2.11% of the budget. district C added Revenues to its Principals control only exceeded fund balance. Detailed expenditures can be found in Appendix C. the district was able original June adopted Records show projected legal that to project data on Documents show that its expenditures on the a four year period, its expenditures with 94.5% accuracy. is expenditures are based. and the so 1991-92 budget with 96.62% accuracy. over requirements approval expenditures, format one of the criterion district C Satisfying on which The format the budget takes for board for reporting revenues are dictated by Michigan law. expenditures and District C begins its projection of expenditures by using a line item budget which is then condensed to meet legal requirements. District C must 195 fulfill the legal requirement of having its books audited, which is a cost to the district. Salaries and benefits accounted for approximately 80% of total expenditures. district is legally required bargaining with its employees. wages, benefits, contracts have and to in collective The resulting contracts set conditions clauses engage The of specifying employment. the maximum Teacher number of students that can be placed in classrooms, thereby dictating the size of the teaching staff. Special education laws require that students with special needs be placed in special classrooms. Often the students must be transported to special schools programs to offered increasing transportation in only costs. one Health school, thereby and safety laws require the district to maintain its buildings to meet MIOSHA standards. Legislation on asbestos, underground tanks, and lead in drinking water has placed increased burdens on the district. In addition, PA 25 is mandating that certain personnel and program standards be met, all at a cost to the district. Data on Goals A review of board minutes (July, 1988-May, 1993) reveals that district C has board adopted goals. minutes, According to the the PRIME committee, which is comprised of staff, board and public, develops the goals and gives a report on their progress at the end of the school year. usually adopted after school has begun The goals are in the fall. The superintendent updates the board and public on progress in 196 achieving the goals in January or February. very general in nature. The goals are A more specific financial goal was to increase the millage in 1992-93. Board Meeting Observations Approximately 50 including principals, people were attendance. Most, had their "board packets" with them. Attached to the meetings' agenda were guidelines for public participation at board meetings. financial issues: in The agenda included several adopting the 1993-94 budget, approving an operating loan application, refinancing a bond issue, setting the date for a millage election, and reducing program. assistant superintendent was highly visible. the board table. The He was seated at The assistant superintendent explained that the proposed budget was balanced only if the district reduced program by $500,000. He said that depending on the state aid formula, which had not yet been passed, another $500,000 in cuts may have to be made. He also said that the budget did not include any salary increases, were about to get underway. and contract negotiations Fund eguity was depleted. The borrowing was necessary because there is no fund eguity and there was no guarantee that there would be an August state aid payment. After the budget, operating loan and re-financing were approved, a discussion about a millage election and cuts followed. The assistant superintendent said that the district was in a real dilemma. Since the State Aid Act had not yet been passed, the district really did not know how much additional 197 millage it needed to request. The assistant superintendent explained that the district did not want to request more than was needed. On the other hand, the district did not want to ask for too little and end up still having to cut program while taxpayers paid more. The discussion ended with the decision to not set a millage date until more information is known. Because of the legal requirements for conducting a millage election, the district would not be able to hold the election until late August. It would, therefore, make cuts to begin the school year. The superintendent led the discussion of possible program reductions. be cut The principals gave an explanation of what could in the their buildings. They consequences these cuts would have. a public forum. also discussed the Then the meeting became Staff and community members gave suggestions. One said, "You can't tax and spend." Another said, "You must remember staff what's good for kids not suggested a pay to play athletic program. transportation cuts. decisions. members." Some Others suggested The meeting ended without coming to any The public was told that there would be several town meetings throughout the summer to discuss the cuts and the need for additional millage. The Findings: The Documents and Observations purpose observations is to interview process. look at the in collecting verify the data data from documents collected through and the Numerical data allow the researcher to district's financial condition. Financial 198 Reports, Form B reports and board minutes document decisions that were reached. Data collected on revenues verify the in-formula status of the district. The data further verify the sources of revenue, the uncertainties that accompany that revenue, and the accuracy of revenue expenditures document projections.- Data collected the use of the revenue. on The data provide verification and insight into the criteria that are used in making expenditure decisions. The data show that both revenues and expenditures increased steadily. variance in expenditure categories is The lack of indicative of incremental budgeting with its reliance on past history and formulas. Data collected from board minutes document and verify the goal setting process used in district C. The board minutes verify the openness and inclusiveness of the process. Board meeting observations further verify the openness with which opportunities district for the business is conducted. public to speak Ample enhance inclusiveness of many viewpoints in decision-making. Printed materials are readily available to staff and public. observations official, verify the high visibility the assistant superintendent. of the the These business These observations speak to the uncertainties experienced by an in-formula school district. So far then, findings from interviews with participants and from documents and observations have been presented. Next 199 the findings from the participants, documents, and observations are compiled to present an analysis of findings of the district's budgeting process. Analysis of Findings So far, data and findings from participant groups and from documents and observations have been presented. section is a compilation of those findings. that district process, C makes expenditure, budgeting balance, This The findings show decisions about revenue, and implementation. Figure 4.3, page 200, is a representation of the findings. Figure revenue. local 4.3 shows that the first decision cluster is Findings show that district C receives revenue from property taxes, miscellaneous sources. state aid, indirect federal grants, The district is solidly in-formula; it receives approximately 45% of its revenue from local taxes and another 45% from state aid. The assistant superintendent said that amendment the October budget is more accurate in projecting revenues because the state aid act and enrollment is known. However, district records indicate that original revenue projections for 1991-92 were 94.64% accurate. The four year average for accuracy of projections is 92.7%. Figure process. determine 4.3 shows that the next decision cluster is Decisions about who is involved and the criteria to expenditures are made. developed in a bottom up fashion. District C's budget is Principals and department heads participate by projecting their needs on standard forms. 200 District C: Less W ealthy/ Certain REVENUES Local Taxes State Aid Indirect Fed. Grants Miscellaneous Decision-Makers PROCESS Clear lines of authority Known expectations Shared goals Highly visible business official Board in the background No active board committees High level of administrator trust High level of satisfaction Criteria Legal requirements History/Tradition Stakeholder expectations EXPENDITURES INSTRUCTION Basic Program Added Needs Adult Ed Benefits SUPPORT Pupil Instructional General Admin School Admin Business Maint & Oper Transportation Central Services Benefits Community Services Capital Outlay Other BALANCE Borrows for cash flow Tries to stretch dollars May make cuts Waits for more information Seeks more funds Re-instates cuts — j. Revises budget j. _ IMPLEMENTATION Implement budget Figure 4.3 Budgeting Model fo r District C FUND BALANCE 201 They involve teachers and other staff in purchasing and in projecting building or department needs. The superintendent decides on a building allocation. and department assistant heads assign superintendent dollars meets to with line each assistant Principals items. The principal and department head. They review the allocations and negotiate. More be funds may administrators obtained have through flexibility in negotiations. using their The funds but sometimes the assistant superintendent questions purchases. Sometimes there are holds on spending. Decision-makers are satisfied with the process, although the elementary principals are less satisfied than the other administrators. Decision-makers in district C have a clear understanding of what is expected of them and clear lines of authority. Although budget, the the superintendent assistant has the ultimate superintendent the been delegated The assistant for the budgeting function. superintendent is highly by board members, and the public. in has responsibility trusted say other administrators, The assistant superintendent works closely with other administrators during the budgeting process. him. In matters of budget, other administrators report to The budgeting process has remained the same for many years and so have many of the people. In district background. their part C, the board of education is in the Members may make comments or ask questions, but in recommendations. budgeting The is board to has approve an administrator inactive committee 202 structure. District C has a highly visible business official. The assistant superintendent, who is the business official in district C, is the primary decision-maker in developing the budget. He makes all public budget presentations. The assistant superintendent sits at the board table during board meetings. He offers the bills for payment and gives financial updates. Decision-makers district C, the in district board adopts throughout the organization. cross-section of adopted annually, staff and C have shared goals. goals which are In assimilated Board goals are developed by a community members. Goals are and the superintendent and the committee which develops the goals give reports on goal achievement. These goals impact budgetary decisions. There is some evidence of sub-group goals regarding the fiscal management of the district and teacher involvement in the school improvement process. Figure 4.3 shows that the process decision includes the criteria used to make decisions. cluster The criteria in district C include legal requirements, the district's history and traditions, requirements and cause stakeholder's many budgetary expectations. constraints. Legal Special education laws require that handicapped students be provided with special classrooms, specialized schools. materials, and transportation to A move from county supported special education programs to district supported programs is putting a strain on the budget. Health and safety laws mandate that 203 buildings and equipment be maintained and that potentially hazardous conditions, such as asbestos, be eliminated. Labor law requires bargaining with employees for wages, benefits, and conditions of employment. Districts obligation to adopt a balanced budget. spent 79.72% of the budget on have a legal In 1991-92 district C salaries and benefits. Utilities and maintenance accounted for 4.6% of expenditures. Capital outlay accounted for 1.3%. Only 2.11% of the budget ($218,384) materials $154,630 was for spent on purchased regular K-12 services, classroom supplies, use. An and additional (1.49%) were spent on purchased services, supplies and materials for adult education classrooms. History and expectations help to decide how dollars will be spent once the legal requirements have been satisfied. In district C, there is heavy reliance on past expenditures to project future expenditures. The use of a line item budget usually means items Findings from that the same financial records continue indicate to be an funded. incremental budgeting pattern. Principals assign their allocations to line items and justify any changes. deviations Since principals must justify from line item appropriations, little incentive exists to eliminate or develop new line items. evidence, that however, traditional purchases, hands-on materials history dictates at there is movement There away is from such as workbooks to non-consumable, the elementary line item amounts, determining how the dollars are spent. level. evaluation While past is used in 204 Stakeholder Some staff expectations expectations bargaining. Some are also determine satisfied expectations are opportunities considered. A for cross expectations section of through are continuation or addition of programs. expenditures. collective satisfied by the In district C, there to be discussed educational community and is included in the PRIME committee which develops district goals, which are used in budgeting. Board workshops and public hearings provide opportunities for individuals and groups to be heard. Regular board meetings provide a forum for individuals to express their concerns and expectations, and the public takes advantage of those opportunities. While it is never possible to satisfy all stakeholder expectations, district C provides a very open forum in which to make those expectations known. Figure 4.3 shows that expenditure decisions must be made. Decision-makers use the criteria to develop the budget. Law requires that districts adopt a budget by June 30 for the fiscal year which begins July 1. take. Figure Law also stipulates the form this budget must 4.3 categories. Decisions-makers project expenditures for each of the categories listed in the model. lists the expenditure District C projected its expenditures with over 94.64% accuracy in 1991-92. the four year average for accuracy of expenditures is 94.5%. Figure 4.3 shows implement its budget. that District C cannot immediately It has no summer tax collection and cannot count on an August state aid payment, so that borrowing 205 to meet cash flow needs is necessary. Because the district relies so heavily on state aid, it must wait until passage of the state aid act to know its revenues with any certainty. District C makes exceed revenues. because Sometimes the cuts if it looks like expenditures will Personnel are not hired until late summer district district is C will not sure get the what needed it can afford. information by October; there will be no need to make cuts, so it will revise the budget and implement. Sometimes, as in the summer of 1993, district C makes cuts to balance the budget and seeks additional millage. If the millage is approved, the cuts are re-instated; the budget is revised and finally implemented. If the millage is not approved, the cuts stay; the budget is finalized and fully implemented. This section has presented the data and findings for district C. The next section of this chapter presented the data and findings for district D. District D This section on district D is organized in the following manner. First, a brief description of the district provides a setting for the data presentation. Interview participants are grouped for ease of data presentations. First, data and findings from principals and the special education director are presented. transportation Second, and data maintenance and findings directors are from the presented. 206 Third, data from a board member and a teacher are presented. Next, data and findings from central office administrators are presented. presented. Then data from documents and observations are This section concludes with the presentation of a budgeting model for district D which is a compilation of the findings. The Setting District D was selected as the least wealthy district with uncertainty of revenues. In 1992-93, according to Michigan Department of Education report R2743, the district ranked 546 out of 561 school districts in the state in combined local revenue (generated by local taxes) and state aid membership. In 1991-92 the district SEV was $260,372,842. There were 3,461 full time equivalent students. district an SEV per pupil of $74,796. 25.1225 mills. This gave the The district levied In 1991-92 district D received $2,680 per pupil in combined local taxes and membership aid. The low millage rate places the district at risk of being out-offormula if enrollment declines. District D is 375 square miles and is located in one of Michigan's tourist throughout the accessible to areas. district students. The in an schools effort Included to within are scattered make the them more district's boundaries are a state park and other state owned property. Almost all of the taxable property is residential. Many of the homes are vacation homes and the owners do not wish to pay 207 high property taxes on second homes, difficult time passing millage. companies and a K-Mart. so the district has a There are some utility District D had been the site of a large federal facility for which it received federal impact aid, but it closed recently. been re-located. As a result many families have Therefore, the district is experiencing loss of enrollment and loss of federal funds. Revenue uncertainty is a growing problem. According to the district's 1992 Annual Report, none of the schools are accredited by the North Central Association. Approximately education. 55% of graduating students seek The district dropout rate is 1.8%. In district D, 12 people were interviewed knowledge of and participation in title, these manager, the principal, school advanced people were special the middle principals, the school the district budgeting. superintendent, education about their director, principal, the business the high three transportation By school elementary director, the maintenance director, a board member, and a teacher identified as being active in the teachers' union. and findings for the principals The interview data and the special education director are presented first. The Principals and Special Education Director The principals and special education director said that budgeting begins sometime in April or May. All of these 208 participants agreed that the process being used to project the 1993-94 budget was far different from the process that had been used in the past. superintendent position. district who This change was attributed to the is completing his second year in this The former superintendent, who had been in the for 33 years, made many of the budget decisions; principals projected their needs for textbooks and supplies, and then each received an allocation. The new process, however, requires principals and directors to project salaries and benefits and other items which had always been someone else's responsibility. process. These participants are confused by the Interviews occurred during mid to late June, and the administrators were working through because projected expenditures far a budget exceeded revision projected revenues. Principal Patricia Principal Patricia said that she projects her budget by looking at the history of specific line items. that administrators administrative staff explain meeting, their and Patricia said building budgets then superintendent the meets with administrators on a one to one basis. at an Patricia said that additional funds can be obtained by meeting with the superintendent and providing a rationale. she is new to budgeting. knowledgeable, Patricia said that She said that as she becomes more she will be more comfortable in sharing the responsibility with her staff. Patricia's secretary monitors the needs. budget. Teachers express Then Patricia asks 209 teachers to check on materials, to provide alternatives, and to provide justification for their purchases. and holds back on spending. She is frugal Patricia said that "the board keeps a tight rein on the budget." This year, administrators are also budgeting for salaries and benefits because this is "something the superintendent needed." This year, administrators were told to trim their budgets, but they were not given any specific directions as to how that should occur. Patricia said that she is not sure why changes in budgeting occurred this year; she guesses included in it was something the superintendent wanted. Patricia decisions. is district-wide Copies of the budget go to everyone. budgeting According to Patricia, administrators explain how the budget affects their buildings. Patricia said the administrative staff is given information prior to board meetings. bidding for building items. and board committees Patricia is involved in She said that district committees jointly set spending priorities. Patricia said that the board finance committee has a lot of say. "They do the research and hash it over for months. It's a small town and board members need to be able to justify their decisions." Patricia is not aware of any district-wide formal planning activities. existed in the district Patricia said that SIP committees before PA occurs through the building SIP team. 25. Building planning Patricia said there are district goals, but they are "not used per se in budgeting." 210 Patricia said that financial uncertainty. the district is facing a lot of No one knows if the district will be in- or out-of-formula. In addition, district D has relied heavily on federal funds which may no longer be available. Patricia said that because of the uncertainties, the superintendent is unwilling to make commitments. Principal Donna Principal Donna said budgeting began in May. told she was responsible salaries and benefits. for "the whole thing" Donna develop the budget. activity. including In the past, administrators had been responsible for supplies and textbooks only. group Donna was Teachers help The process proceeds as a small SIP teams discuss discipline, copiers, and other needs. staffing, counselling, The expressed concerns become the criteria for deciding what to purchase. believes "the middle school philosophy reguires Donna different types of expenditures; however, programs at the high school and elementary schools dictate what school." In preparing the budget, numbers. Donna said budget happens at the middle Donna uses last year's decisions are reached at administrative staff meetings, but the superintendent doesn't really give any information. working in desperation." She said, "It is more like Administrators were asked to budget for salaries and benefits this year. Donna said that this is part of a move to zero based budgeting. She said that she sees ZBB "as part of a framework" but administrators were not given enough information. Once budgets were completed, they 211 were returned, and administrators were asked to reduce their budgets by 5 to 10%. Donna said that there is a lot of financial uncertainty right now. She said the district is dealing with a lot of unknowns, but she also "feels that maybe the superintendent could have a better handle on issues." Donna does not feel that she is involved in district budgeting decisions. She believes the entire administrative staff would appreciate more say. It is Donna's opinion that the superintendent believes he allows them input, but the administrators do not agree. Donna said the board takes over the administration of the buildings instead of being concerned with policy. priorities, beliefs. She many Donna said that of which said the the board come board from is sets their "mainly district-wide own personal interested in maintenance, physical education and facilities at the expense of program and staff development." According to Donna, the board tried strategic planning during the summer of 1992, but that has gone by the wayside. Donna said, "The Annual Report includes the goals of individual board members." Planning and goal setting occur at the building level through the school improvement process requirements. budgeting. and with the outcomes based education Building plans and goals have not been used in Donna said the biggest problems in budgeting are a lack of information, uncertainty, and district priorities. "No one thinks it out. It all depends on the board." 212 Principal Larry Principal Larry said that he does not involve staff budgeting but he shares financial information with in them. Larry said that central office bids out teaching supplies. Central office determines Larry's share of the supplies and gives him a figure to include in his budget. teachers prioritize spending requests, ordering procedure. items. Larry can move Larry said that and he gives them an dollars between line The budget is amended during the year, and he can file a request and documentation for more funds. When asked about the steps in budgeting, Larry replied that the three member board budget committee and the superintendent meet regularly. Larry said that the superintendent has moved the district to zero based budgeting. for 1993-94, Larry said that he submitted a budget but the superintendent told him to reduce his budget by 5 to 10% and to devise ways to save money. said, "The district is in limbo." drop, 70 people are being re-assigned. Larry Because of an enrollment Funding is unknown because the district does not know whether it will be in or out-of-formula. All requisitions are being held. Larry said the administration is kept very informed about revenues, expenditures, and the future. common knowledge. The board, administrators set funding priorities. Everyone's budget is superintendent, and Larry believes the secondary level gets a disproportionate amount of dollars for things such as an in-house suspension program and a full time athletic director. District-wide formal planning activities, 213 which are tied to the budgeting process, occur through the curriculum council and the board finance committee. The board does not adopt goals. Larry said there are no building level plans, but there are goals that are discussed at weekly meetings. Principal Kevin Principal Kevin develops the budget by looking at past history and adding more dollars. has to justify his requests. items. Kevin said that he rarely He can move dollars between line The superintendent allocates dollars on a per teacher per pupil basis. The teachers spend the money. Available dollars and past history determine purchasing criteria. In the past, Kevin was responsible for textbooks and supplies. For the 1993-94 year, however, administrators have been asked to budget for salaries, benefits, and others things that were never part of their budgets. Kevin said, "It means more responsibility but not necessarily more decisions." Kevin said that the district is involved in belt tightening, so he has been asked to revise his budget downward. Kevin said that there are meetings to develop district plans, but he thinks these meetings are superficial. said, "Decisions are made elsewhere." Kevin The district had a five year curriculum review plan, but now some materials are 11 years old. decision. The district is waiting for the state to make a District goals are part of board policy, and Kevin believes that board actions support those goals. Kevin said that the board takes too long to make curriculum decisions. 214 There is no district planning. Kevin said that decisions are made to purchase computers, and then the district decides what to do with them. Kevin said his building did have a SIP team, but the staff did not follow through with the planning when the board decided to close the building. Principal Stewart Principal Stewart said that in preparing his budget he used prior year information and added 15%. Administrators have been given more choice in developing the 1993-94 budget. Before administrators budgeted for supplies and textbooks; now they budget for all building expenses. Stewart said that the change is due to a new superintendent and a lack resources. Stewart said that the district has never had to make choices before. Because of lack of funds, administrators have been instructed to reduce their budgets. Stewart said teachers are involved only in spending the allocated dollars. Stewart decisions. is not The included curriculum in district-wide council committee set district priorities. committee meetings are open and the budgeting board finance Stewart said that board and anyone can give input. Stewart said that district-wide planning occurs only through PA 25 reguirements. He said the district has had goals for several years, including staying in the black. used in budgeting. The goals are Stewart said that building planning occurs through school improvement teams which have been in place for seven or published eight on years. the wall. He said his Although building's Stewart had goals said are that 21.5 teachers only spend the money, he said the building SIP team determines needs and starts the budgeting process. Special Education Director Denise Director Denise prepare her said budget. that They she use and the the superintendent last expenditures and add a percentage increase. three years' Like the other administrators, Denise expressed concerns about being asked to budget for salaries and other items that had not been included in the department budget. There was "no pre-instruction about how to do the new budgeting process we have been asked to do." Denise did not know the reason for the change other than it was something the superintendent wanted. Denise said that she does not include teachers in projecting expenditures; they get a flat dollar amount, and they purchase what they need. Denise said everyone is re-working their budgets by looking at a 5 to 10% cut. Denise is interested in finding out if the final budget will be the one she developed or if it will be someone else's. Denise said that she is not included in district budget decisions but knows the budget because administrative staff meetings. committee takes sets Denise said the board finance funding priorities. information from the it is discussed at The curriculum finance council committee and district-wide committees then sets the priorities. said there is no formal district level planning. other Denise Denise said that the district does not have goals, but the board does. Denise said the buildings have formal planning through the SIP 216 teams but she does not know if the planning gets tied to budgeting. Denise praised personnel and curriculum decisions the district has made, but she said, "The decisions are good for kids but costly. We can't keep going into fund equity." Denise said that the district is facing a lot of financial uncertainty, formula. especially not knowing if it is in or out-of- Denise said that the district is downsizing and making administrative cutbacks; remaining personnel are being asked to assume additional administrative duties. The Findings: A Summary of Principals and Special Education Director To summarize, principals and the director in district D are confused about their budgeting responsibilities. In the past, principals projected needs for textbooks and supplies and then each received an allocation. For 1993-94, however, principals asked salaries, someone and directors benefits else's and are being other items responsibility. which to had Principals budget always believe for been the process changed because of a lack of resources and because the new superintendent wants its that way. Principals believe that they have not been given adequate instructions about what to do and how the process is to work. say that the new process increases necessarily more decisions. These administrators responsibility but not Although these administrators referred to the new budgeting process as zero based budgeting, they said that to develop their budgets they review the past history of line items and add a percentage. Teachers have 217 some choice in what is purchased. Administrators are knowledgeable about the district budget as it is discussed at administrative staff meetings. The principals and the director indicated a high level of board involvement in budgeting. The board researches issues which delays personnel and program decisions. The board sets spending priorities which are based on their own values. The board "keeps tight reins on the budget," and administers the buildings. finance The board has an active committee structure. committee is the most active; it makes the The final spending decisions. These administrators said that some district and building planning occurs through the SIP teams. curriculum council engages in planning. about district goals. district goals. The district's There is confusion Two administrators said there are no One said "the board has goals." that there are district goals. Three said There is no evidence of shared goals. A lot of financial uncertainty exists. The district is not sure of its state aid status or its federal funding. budget needs to be revised in order to balance it. The There are holds on spending and on making commitments. So far, data and findings from interviews with principals and the special education director have been presented. data Next and findings from interviews with the transportation and maintenance directors are presented. 218 Transportation and Maintenance Directors Transportation Director Pete Director Pete said that he works with the superintendent to develop his budget. for athletic Pete said that he looks at contracts contests, scheduledbus mileage and gas prices. benefits. runs, field trips, He also budgets for salaries and Pete said that he is being included in budgeting for the first time. He likes having control of his budget. Pete knows everyone's budget and likes being included in the budgeting process. problems. Pete said that the district has financial He said that the district is in danger of going out-of-formula and "it is better to be in-formula." Pete said the district is downsizing due to the loss of federal dollars. Some transportation cuts have already been made. Pete is concerned because the district has a vehicle replacement plan, but he had vehicles. been asked to hold on ordering replacement "The dollars just are not there." Maintenance Director Al Director Al said that the old superintendent "ruled, " but the new district. superintendent wants a team concept across In fact, Al prefers to be called a team leader. the Al likes being included in decision-making; he likes budgeting. Al said that the former head of custodians supplies. Al said that he is getting supplies to the people, and they are working better now. Al, another team leader, and the superintendent developed the budget. looked at could not get the past year's numbers Al said that they and year to date 219 expenditures; then they adjusted downward. not part of administrative staff, Al said that he is so he is not involved in district budgeting. The Findings: A Summary of Transportation and Maintenance Directors Both directors are new to budgeting. problems with district finances. with the superintendent. lack of resources. Both are aware of They developed their budgets Both have had to make cuts due to a Both use past history in budgeting. They are pleased that they are allowed to make decisions in their particular areas. So far, data and findings from interviews principals and directors have been presented. with the Next data and findings from interviews with the board member and the teacher are presented. Board Member and Teacher Board Member Sandy Board member Sandy said that the superintendent and finance committee project revenues, and the superintendent, finance committee, and the principals project expenditures. According to Sandy, those projections are very close. said that in the past, Sandy five year projections were done, but with all the other district problems, the superintendent has not had time to do them. funding criteria. is affordable. Sandy said board policy determines The criteria are what is important and what Needs are brought to the board. Sandy said 220 that the superintendent is in charge of budgeting along with the finance committee. Sandy said the business manager, who is also a part-time principal, teaching staff provides keeps track of bills. information. public has a role if they choose. The Sandy said that the She said that usually the public does not get involved, but "[they] tell you after the fact if they disagree." Sandy said the board has several projected budgets presented during the year. budget hearing occurs "nothing is new. it on the table." By the time the We are always laying Sandy said the finance committee takes care of the fine points. It "does the hashing out for the board." Sandy said this committee has become more active recently because a of the new superintendent, the loss of large government facility, and the uncertainties the district faces. Sandy said that district planning activities occur within the curriculum committees. Sandy said that these plans have to include financial issues; if the district wants a computer program, it has to plan for it and ask if the district can afford it. Sandy said that the board adopts goals that are part of board policy. In addition, Sandy said that board members write down what they would like to see. consensus is built, and the individual board member goals. address financial issues. superintendent She said a compiles the Sandy said that some goals Sandy said there is no formal policy or goal regarding fund balance but it is generally understood that fund balance is needed as a buffer. Sandy said there are definitely individual or group goals. Sandy 221 cited the example of local church groups objecting to a unit which included literature on religions in the gifted and talented program. Sandy said that the board evaluates programs before they are funded. research, The and board compares council findings. talks its about them, findings does with "We are also very nosy." the its own curriculum Sandy said there is no re-consideration of budgeting decisions. There are holds on spending sometimes because the district is not always sure when state and federal aid will be received. Sandy said that the district usually has to borrow to meet cash flow needs. Sandy said the district has been affected by the closing of a large government facility in the district, by cuts in state aid, and by property tax changes. Teacher George George, teachers' a teacher union, identified as being that superintendent said the active in the projects revenues, and the central office administration, the director of instruction, George said generally and teachers we are the principals "like to not." say we George projections are very accurate. project are does expenditures. [involved], not believe but budget George is not aware of any difficulties the district may have in making its projections. George said that the board sets spending criteria and only the board knows what the public and staff are criteria are. deliberately George kept said that the uninformed about 222 finances, especially during contract talks. George said, "The superintendent is very secretive." When asked about roles, George said that the superintendent puts the individuals parts together to come up with the big picture, but "the superintendent has a lack of understanding of the big picture." about what the business manger George hasn't "a clue" does. George said that sometimes the staff is asked for recommendations, particularly for computers. recently. George said the board has become more active He said the board had been told there was no money, but the budget committee checked, and the money was there. Now the board is investigating rather than accepting what they are told. George said, "The board is being bombarded by individuals [wanting to spend the money]." George said that the board has goals; he does not know what they are or who sets them. goals. George said that there definitely are sub-group He cited the all day kindergarten program which was "thrown in" without a lot of consideration just because some teachers wanted it. George is not aware of any program evaluation. said there decisions. are times when the board has George re-considered He said the board changed its mind regarding some asbestos work. George said there are holds on spending. The last one was in March when the district was not sure how much money was left. George said that everyone talks about problems because the federal facility closed, but as a teacher 223 he has not noticed any changes. He still has the same number of kids. The Findings: A Summary of Board Member and Teacher The board problems. member is aware the district's financial Revenue uncertainty exists due to the closing of the federal facility and changes in state aid and property taxation. The district invokes spending holds because it does not know when federal and state aid will be received. The superintendent used to do revenue and expenditure projections, but other problems are more pressing now. The union member, on the other hand, does not know of any problems that affect budget projections. closing of the He has federal not seen facility. changes He does due not to the believe projections are accurate. The increased board is active in budgeting. its activity because of The board the new superintendent, district uncertainties, and lack of administrator trust. board finance committee is especially active. manager is not part of budgeting. has The The business The union "hasn't a clue" what he does; the board member says that he pays the bills. The superintendent has most of the budgeting responsibility, but the finance committee actively projects, sets the criteria, and approves spending. There is evidence of lack of administrator trust. board researches on its own. superintendent hides The The teacher believes that the information and does not have a good grasp of the finances of the district. 224 Both are aware of district goals. board member goals are compiled. Additional individual The union member knows there are goals but does not know what they are or who sets them. Sometimes there are problems implementing the budget. Uncertainty of the district's financial situation and delays in receiving payments from the state and federal government necessitate placing holds on spending and forces the district to borrow. So far, data and findings from interviews with principals, the directors, a board member, and a teacher have been presented. Next, data and findings from interviews with the central office administrators are presented. Central Office Administrators Superintendent Keith Superintendent Keith said that the bulk of local dollars comes from residential property. He said high unemployment and an aging population make requesting additional millage unlikely. Keith impact because aid said a that large located in the district, but the district government receives facility had it closed in 1992. dollars are equivalent to seven or eight mills. federal been Federal Keith said that the federal government has promised to continue giving the district 90% of the aid it has been receiving for an additional three years. Then the dollars will stop. However, the federal government has been active in closing many of its facilities, especially military bases, and Keith is not sure 225 that the federal government can keep its promise. According to Keith, enrollment dropped by 45% since the facility closed. Keith said, membership. "The district Being is at the out-of-formula cutoff would point mean for less real said that dollars." Keith said that he projects revenues. He everyone across the organization including the superintendent, the business manager, teachers, the bookkeeper, the principals, and custodians, project expenditures. the Keith said that as a personal preference he involves more people in the process than the former superintendent did. Keith said the district is beginning to use zero based budgeting, whereas the former superintendent allocation. gave a per pupil per building Keith bases projections on enrollment, expected revenues, known costs such as salaries and fringe benefits, and class size limitations. Keith said program is evaluated but it is "not as sharp as it could be. It is not formalized. The criteria is [sic] not there." Keith said the preliminary budget is revised a couple of times before it is adopted. Last year's budget is rolled over to satisfy the legal requirement of adopting a budget by June 30. hearing The budget is accurate. held. is then Keith amended said that in the this fall when a budget is more He said the budget is amended three to five more times a year for minor adjustments and the inclusion of major projects that have been approved. does not re-consider its Keith said that the board decisions. He said revenue 226 projections have projections have been not very been accurate, accurate. but expenditure Keith said that traditionally the superintendent gives an annual report to the citizens in which he evaluates the accuracy of projections. There are no multi-year revenue and expenditure projections. Keith described his budgeting role as "facilitator" and "watchdog." Keith "does the numbers" and watches the items purchased. He said that as superintendent he is ultimately responsible for the budget. Keith said that the business manager has brought a fresh viewpoint. "has helped both him and me to grow." The business manager According to Keith, the board of education has a role but not a big one. He said certain members have their own interests, beliefs, strengths and knowledge base. recommendations. Keith said that the board accepts However, Keith said the finance committee is a powerful group; it acts as a sounding board. The finance committee "not only says do we have the money but also is it [the expenditure] valued." committee, determine Keith said that he, the finance building administrators, funding criteria. formal budgeting role. and self-managed teams Keith said the public has no He said that the budget hearing is a formality; there are usually no questions or comments. Keith said there is no formal planning at this time. Keith said that the board adopts goals annually; published in the minutes and printed in the they are local paper. According to Keith the goals are reached by consensus at a work session. Keith regrets not using a facilitator for the 227 project as "older board members had trouble affirming their goals." According to Keith, the session confrontation with the press and the public. goals are linked to budgeting. became a Keith said that Keith said his budgeting goal is to have a fund balance equal to 25% of the years' operating costs. The board's goal is to maximize fund balance. Keith said that there are sub-group goals but not at a significant level. Keith said that as a new superintendent he has a lot to learn. Keith would like to have administrators and board members develop collective goals. Then, Keith would like to have the goals tied to budgeting. Business Manager Doug Business manager, Doug said that he is not sure what his job responsibilities are. part time principal. He is part time business manger and According to Doug, the district has not always had a business person. The superintendent has been responsible for finances while other administrators have been responsible for instruction/curriculum and personnel. Doug said that when the business manager position was re-created last fall, the job was mostly to clean up old bills and get the day to day operation going. working on a new job But Doug said the board is description. Doug said the superintendent makes the decisions, but the finance committee carries a lot of weight. He said that the finance committee has become more involvement since the new superintendent came. 228 Doug said the project revenues. superintendent and a clerical worker He said many revenue uncertainties exist which make projecting revenues difficult. The State Aid Act has not been passed; the district is close to being out-of­ formula if the 1993-94 act does not change substantially from the 1992-93 act. The district relies heavily on federal impact aid, which it receives in lieu of property taxes for a federal facility that had operated in the district until last year. Doug said the impact aid law has been passed but it has not yet gone through the appropriations committee. is also unknown. Enrollment The closing of the government facility has caused enrollment to drop. Doug said that the local economy keeps the district from asking for additional millage or a Headlee Override. Doug said that the district will probably have to borrow to meet cash flow needs. Doug said that the superintendent projects expenditures on an ongoing basis. The principals became involved for the 1993-94 year in May. Doug said there are questions of who did what in the budgeting process. The other superintendent spent about 80% of his time on finances; the new superintendent has a different approach. Doug said projections are based on past history. Doug said that downsizing, due to enrollment loss, has created problems projecting expenditures. Doug said that for reductions 1993-94 spending; are going to be 10-15% last year there was a 20% reduction. district will budget. there in He said the need to use its fund equity to balance the When asked about the criteria used to decide what 229 will be funded, he responded, for kids.'" "They always say 'What's good If there is program evaluation, "it is on a very limited basis." Doug said that board members have goals and priorities many of which are personal and dependent on their own interests. When asked about formal planning activities, Doug said, "The board talks about it and philosophizes. I am not aware of any meeting or study session where planning was the topic." Doug said that PA 25 and accreditation has forced some the district to do some planning. district goals. goals, and According to Doug, there are He said that individual board members submit someone with a computer compiles outcome is a compilation of individual goals." them. "The Doug said although a lot of the goals address financial issues, more of them are program oriented. Doug believes that individual or sub-group goals bias financial decisions. athletic program and also said that Doug pointed to the the high school gets things first. The Findings: A Summary Central Office Administrators Central office administrators said that uncertainties facing the district make it difficult to project revenues. If the membership formula in the State Aid Act does not change, the district will be out of formula and lose real dollars. Federal aid, which is equal to seven or eight mills, may be lost. The economy and demographics of the community make asking for a millage increase unlikely. In spite of these 230 uncertainties, revenues are projected with more accuracy than expenditures. Central office administrators agree that responsibility for budgetary decision-making has changed. this is a preference of the superintendent. is a bottom up development of the budget. budget had been developed in a top The new procedure In prior years, the down superintendent assigning allocations. Both agree that manner with the Confusion exists over what roles and responsibilities individuals are to have in the budgeting process. The board of education is active in budgetary decision-making. Their decisions are often based on personal preferences. The board finance committee is "powerful" as it decides on the worthiness of expenditures and on the availability of dollars. Central office administrators agree that there is no formal district planning activities; there are goals. Board goals are a compilation of individual members' goals. Some board members had trouble defending their own goals. The meeting at which the goals were discussed confrontation with the public and the press. ended in a The goals are not shared throughout the organization. According to central office administrators, the June 30 budget cannot be implemented. expenditures exceed revenues. Cuts need to be made because Further, the district will have to borrow money to meet cash flow needs. Uncertainties exist over not only how much money will come into the district but also when those dollars will arrive. 231 So far, a brief description of the district and interview data and findings have been presented. Next, the data and findings from documents and observations are presented. Document and Observation Data Data on Revenue District 19 9 2 financial documents, such as Form B and the Financial totaled Report, show $13,378,360. sources: local categorical in 1991-92 Revenues tax aid, that levy, 24%; miscellaneous revenue came 50.84%; indirect district from state federal (investment interest, the revenues following membership grants, and 3.16%; adult education tuition, etc.), 4.12%; direct federal grants, 17.87%. Records from 1988-1992, show that over that four year period, revenues increased until 1991-92 when they decreased by approximately $500,000. For these same four years, the percentage of revenues coming from the local tax levy has increased slightly while the percentage of miscellaneous revenues has decreased slightly. Detailed data on revenues can be found in Appendix D. The district receives direct federal grants which require a special application process. Often before appropriations for these grants is approved, school district administrators negotiate and/or negotiating lobby usually Washington D.C. for requires approval. Such administrators lobbying to travel and to to meet with representatives and senators. District documents show that the district was able to project its revenues, on the originally adopted rollover budget, with 232 95.48% accuracy. Records show that over a four year period, revenues were projected with 94.7% accuracy. Data on Expenditures District financial documents show that in 1991-92 expenditures totaled $14,276,008. Table 4.4, page 233, lists the expenditures by both function and object. Records show that over a four year period, expenditures increased steadily. Only two categories, capital outlay and transfers, varied by more than 1%. District categorized by object. made in the documents also show expenditures Table 4.4 shows that expenditures were following object categories: salaries and benefits, 80.64%; purchased services, 8.70%; and supplies and materials, 10.66. Within the purchased service and supply category, 3.77% of expenditures were used for maintenance and operations supplies and services (utilities, telephones, paper towels, cleaning supplies, etc.) Only 2.25% of expenditures were used for purchased services and supplies in regular K-12 classrooms. Principals and control a maximum of only 2.25% of the total budget. Even though expenditures exceeded revenues, District D ended the 1991-92 fiscal year with a fund balance that equaled about 12.8% of its revenues. balance has been a trend in district D. expenditures can be found in Appendix D. the district was able to project The use of fund Detailed data on Documents show that its expenditures original June rollover budget with 98.77% accuracy. show that over a four year period, expenditures with 97.1% accuracy. on the Records district D projects its 233 Table 4.4 District D Expenditures 1991-92 EXPENDITURES BY FUNCTION INSTRUCTION Basic K - 1 2 Programs Added Needs - vocational, special education, etc. Adult Education Benefits for Instructional Personnel SUPPORT Pupil Support Services - counselling, health services Instructional Services - library, media General Administration - central office and board of education School Administration Business Services Operations and Maintenance Transportation Central Services - data processing, etc. Benefits for Support Personnel Community Service - day care center, latch key Capital Outlay Other - athletics, lunch program 40.14% 10.04% 2.35% 8.52% 2.06% 1.20% 2.91% 5.22% 2.58% 8.31% 6.76% 0.00% 4.60% 0.00% 0.35% 4.96% 100.00% EXPENDITURES BY OBJECT Salaries & Benefits Purchased Services Supplies and Materials 80.64% 8.70% 10.66% 100 .00 % % of budget spent on purchased services & supplies Basic Programs Added Needs 2.25% 1.89% 4.14% 234 Satisfying legal requirements is one of the criterion on which expenditures are based. The format the budget takes for board approval and the format for reporting expenditures and revenues are dictated by Michigan law. District D begins its projection of expenditures by using a line item budget which is then condensed to meet legal requirements. D must fulfill audited, which benefits the is legal a cost accounted expenditures. collective requirement to for the of District having its books district. approximately Salaries 81% of and total The district is legally required to engage in bargaining with its employees. The resulting contracts set wages, benefits, and conditions of employment. Teacher contracts have clauses restricting the numbers of students that can be placed in classrooms, thereby dictating the size of the teaching staff. Special education laws require that students with special needs be placed in special classrooms. Often the students must be transported to special schools or to programs offered in only one school, increasing transportation costs. Health and thereby safety laws require the district to maintain its buildings to meet MIOSHA standards. Legislation on asbestos, underground tanks, and lead in drinking water has placed increased burdens on the district. In addition, PA 25 is mandating that certain personnel and program standards be met, all at a cost to the district. 235 Data on Board Policy and Minutes A review of board policy and board minutes (July, 1988May, 1993) reveals that the board has two sets of goals. District D has goals that are part of board policy. school board goals and educational goals. There are The school board goals charge the board with the responsibility of reflecting the opinion of the district and with the responsibility of looking to the future "more clearly than is required of the average citizen." three parts: Opportunity, The educational goals are divided into Citizenship and Morality, Democracy and Equal and Student Learning. Goal four within the Democracy and Equal Opportunity section is called "Allocation of Financial Resources." make the state and This goal calls upon the district to federal governments aware responsibilities to provide adequate funds. of their The district is to make the local communities aware of their responsibility to raise additional Further, the monies funds within to the provide quality system will fairly and equitably on the basis of need. be education. distributed These goals were adopted sometime prior to 1988. Board minutes indicate that a second set of board goals exists. In June individual goals. 1992, board members submitted their In July a special board meeting was held for the purpose of informally discussing goals and strategic planning. The "new" board goals are a compilation of the individual goals. Not surprisingly, the compilation of the individual goals contains contradictions. For example, one 236 board member wants to maintain careful budgeting including decreasing administrative costs. Another member, however, would like to establish a coordinated gifted program for all students which "would entail a director or department head." Board minutes reveal that the board and its committees are very active. There are several instances included in board minutes when questions regarding administrative issues were researched and then resolved by board members rather than by administrators. There are at least two instances regarding questions about bus stops. Rather than referring the problem to the superintendent to refer to the transportation director, board members did their own research, Department of Education, and made called the Michigan a decision. In 1992, according to board minutes, the superintendent was commended for his option paper on administrative and supervisory re­ assignments; Committee. the paper was referred to the Board Personnel Almost every board decision is first referred to a committee, such as curriculum or personnel, then to the finance committee, then finally to the entire board. Board Meeting Observations The agenda amendment and for the meeting included a 1992-93 budget the adoption of the superintendent gave the presentations. 1993-94 budget. The The business manager was present but did not have an active role in the meeting. He sat with the audience. The presentation of the budget amendment dwelled on the revenue side and included very little information about expenditures. After adopting the amended 237 budget, the board approved rolling that budget over for the new year. The superintendent "tradition" in the district. explained that this was a The 1993-94 budget was adopted with the understanding that cuts needed to be made and that the budget would not be implemented until it was revised. The board for also approved proceeding with the paperwork borrowing to meet cash flow needs. The board was highly visible. The board treasurer announced that the finance committee would sit down with the superintendent and decide by what percentage all areas of the newly adopted budget will be cut. The board curriculum committee was upset because the district curriculum committee (composed of teachers and administrators) was meeting and not including the board committee. The board decided that its committee could not meet until after the July organizational meeting because the probably change. of the new all composition of its committee would The board set times for public discussions day kindergarten program. Board members cautioned each other that no more than three of them could show up at attendance. these meetings. About 30 people were in The majority of the audience was staff, and no one asked any questions. The Findings: The Documents and Observations purpose observations is in to interview process. collecting verify the data data from documents collected through and the Numerical data allow the researcher to look at the district's financial condition. Form B reports, 238 Financial Reports, and board minutes document decisions that were reached. Data collected on revenues verify the in-formula status of the district. The data further verify the sources of revenue, the uncertainties that accompany that revenue, the accuracy expenditures of revenue document projections. the use of Data the and collected revenue. The on data provided verification and insight into the criteria that are used in making expenditure decisions. The data show that revenues increased steadily with the exception of 1991-92. Expenditures increased steadily. In three of the four years fund balance was needed to balance the budget. variance in the expenditure categories is The lack of indicative of incremental budgeting with its reliance on past history and formulas. Data collected from board minutes document and verify the existence of two sets of goals in district D. The board minutes verify that at least one set of goals are individual board member goals that are not shared across the organization. Board meeting observations verify the high visibility of the board of education and its committees. manager is in the background. The business The board treasurer's plan to cut the budget by an across the board percentage is counter to the process the superintendent is using with staff. So far then, findings from the interviews with participants and from documents and observations have been 239 presented. Next, the findings from the participants and documents are compiled to present an analysis of findings of the district's budgeting process. Analysis of Findings So far, data and findings from participant groups and from documents and observations have been presented. section of a compilation of those findings. This The findings show that district D makes budgeting decisions about revenue, process, expenditure, balance, and implementation. Figure 4.4, page 240, is a representation of the findings. Figure revenue. local 4.4 shows that the first decision cluster is Findings show that district D receives revenues from property taxes, state aid, indirect federal direct federal funds, and miscellaneous sources. grants, The district is in-formula, so it receives about 50% of its revenue from local sources and about 22% of its revenue from state aid. district D, total direct federal revenues. Direct application procedures. lobbying with In funds account for about 21% of federal grants require special They often require negotiating and legislators in Washington. Approved applications must then wait for an appropriation. The process for to obtaining the direct federal funds leads revenue uncertainty because the district is well into the fiscal year before it knows what funding it will receive. district D does not know how long it will eligible for these federal funds. Further continue to be Revenue uncertainty also 240 District D: Less W ealthy/ Uncertain REVENUES Local Taxes State Aid Indirect Fed. Grants Miscellaneous Direct Fed. Funds Decision-Makers PROCESS No clear lines of authority Unknown expectations Divergent goals Business official in background Board highly visible Active board committees Low level of administrator trust Varying levels of satisfaction Criteria Legal requirements History/Tradition Stakeholder expectations EXPENDITURES INSTRUCTION Basic Program Added Needs Adult Ed Benefits SUPPORT Pupil Instructional General Admin School Admin Business Maint & Oper Transportation Central Services Benefits Community Services Capital Outlay Other BALANCE Borrows for cash flow Unwilling to make commitments May make cuts Waits for more information Revises budget IMPLEMENTATION Implement budget Figure 4.4 Budgeting Model fo r District D FUND BALANCE 241 exists because as the enrollment declines, the district gets closer to being out-of-formula. The district was able to projects its revenues with 95.48% accuracy in 1991-92. four year average for Revenue uncertainty, accuracy of projections is The 94.5%. however, keeps the district from fully implementing its budget. Figure 4.4 shows that the next decision cluster is process. Decisions about who is involved and the criteria to determine expenditures are made. D do not know what process. The is business Decision-makers in district expected of them manager does not in the budgeting know what he is supposed to be doing and is waiting for the board to write a job description. budgeting and In the past, principals the superintendent did the received allocations. Recently administrators have been asked to budget for salaries, and benefits and other items that someone else took care of. No one is sure who that someone else was. Principals are confused by recent changes and believe that they need more information and training to budget. The lack of known expectations causes dissatisfaction with the process. District D lacks clear lines of authority. In district D there are many decision-makers, often working at odds with each other. Even though the superintendent and his administrative team are working through a budget amendment, the board finance committee and the superintendent are to meet to make across the board cuts. Board members investigate issues rather that come before them than relying on 242 administrators to solve problems. Board members are administering the district. The board of active education committee projecting, is highly visible structure. setting The criteria, board and is and has an involved in approving spending. District decisions are not reached without passing through at least one board committee. background. The business official is in the The superintendent conducts financial workshops and budget hearings. There is a lack of trust in administrators. Board involvement has increased because the superintendent is new. The board does investigate not issues believe what administrators on their own. There say; they is evidence that people in the district believe that the superintendent does not entirely understand district finances. In district Recent board D, goals member's goals. decision-makers are have a compilation divergent of goals. individual board The goals sometimes contradict each other. Individual or sub-group goals often determine expenditures. Not everyone shares the superintendent's goal is to involve more people concept. in decision-making and to institute a team The board is still operating under old procedures. Figure 4.4 shows that the process decision includes the criteria used to make decisions. cluster In district D, the criteria for spending decisions are legal reguirements, the district's expectations. history Legal and traditions, reguirements cause and stakeholder' many budgetary 243 constraints. Special education laws require that handicapped students be provided with special classrooms, materials, and transportation to specialized schools. Health and safety laws mandate that buildings and equipment be maintained and that potentially hazardous conditions, eliminated. Laws such as Public Act 25 mandate requirements that have financial costs. employees for wages, such as asbestos, be Labor law requires bargaining with benefits and conditions of employment. Districts have a legal obligation to adopt a balanced budget in a specified format. In 1991-92, district D spent 81% of the budget on salaries and benefits. A little less than 4% was spent on utilities and maintenance. History and expectations help to decide how the dollars will be spent once the legal requirement have been satisfied. In district D, there is a heavy reliance on past expenditures to project future expenditures. Findings from financial records indicate an incremental budgeting pattern. However, for 1993-94, the need to downsize and reduce expenditures is forcing district expenditures. D to re-examine some of its past However, across the board cuts are also being discussed. Stakeholder' Some staff expectations also determine expenditures. expectations bargaining. Some are satisfied expectations are continuation or addition of programs. through collective satisfied by the In district D, there are not many opportunities for expectations to be discussed and considered. Findings indicate that board members sitting 244 in board committee meetings reach decisions. expectations are sometimes being met, Individual but there is little evidence that the community is part of decision-making. Figure 4.4 shows that expenditure decisions must be made. Decision-makers use the criteria to develop the budget. Law requires that districts adopt a budget by June 30 for the fiscal year which begins July 1. form this budget must take. categories. Law also stipulates the Figure 4.4 lists the expenditure Decision-makers project expenditures for each of the categories listed in the model. District D projected its expenditures with 98.8% accuracy in 1991-92. The four year average for accuracy of expenditures is 97%. Figure 4.4 shows that district D does not immediately implement its budget. In fact, it adopts a rollover budget in June and adopts a more accurate one in the fall. exercises several options. information is available. District D It may simply wait until more It may find itself, as in 1993, in the position of having to make cuts. The district borrows to meet cash flow needs because it does not know when the federal and state aid dollars will arrive. When more information is known, the budget is revised and implemented. In district D, then, comes from local taxes. aid. approximately 50% of the revenue Approximately 25% comes from state Its fluctuations in enrollment and its low millage rate place it close to the cutoff point for being an in-formula district and make it a revenue uncertain district. Large amounts of federal funds help to increase its wealth. There 245 is a belief that revenues cannot be projected with certainty until the fall. authority. Many Decision-makers do not have clear lines of Decision-maker expectations are not fully known. divergent and individual goals official is not highly visible. exist. least legal some decisions. requirement, stakeholder business The board is highly visible and has a very active committee structure. consider The past Decision-makers spending history, expectations when making and at budgeting Individual goals sometimes determine expenditures. The board approves a rollover budget by June 30. is not fully implemented. The budget The district may make cuts or it may wait until more information becomes available. is necessary to meet cash flow needs. Borrowing When more information becomes available, the budget is revised and implemented. This section has presented the data and findings district D. for The next sections of this chapter presents an across district analysis of the findings. Across District Analysis The purpose of this study was to describe and explain the differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. To accomplish this purpose, four school districts were selected which represent a range of wealth and varying certainty of wealth. of Although the amount of district wealth and certainty that wealth varies, each district must make budgeting 246 decisions about revenue, process, expenditure, balance, and implementation. The purpose of this chapter is to present the data and findings as they relate to budgeting in four Michigan school districts. The previous four sections of this chapter presented the data and findings from each of the four selected districts. comparison This of final the section findings. is Figure an 4.5, across page district 247, composite of the findings from the individual districts. is a This section is organized so that comparisons are made in each of the decision clusters. Then some conclusions regarding the comparisons are drawn. Revenue Figure 4.5 shows that all four districts receive revenue from a local tax levy, state aid, indirect federal grants, and miscellaneous sources. Figure 4.5 further shows that the districts that were identified as having uncertain revenues, districts B and D, receive direct federal funds. Table 4.5, page 248, compares district revenues. Table 4.5 shows that district A, with its high SEV per pupil, is well out of the state aid membership formula. Ninety-four percent of the revenues come from local sources. Since the district knows its SEV and its mill district is certain of the majority of its revenues. rate, the There is very little reliance on state and federal funds which are the areas where uncertainties lie. 247 District A: W ealthy/ Certain District D: Less Wealthy/ Uncertain District B: W ealthy/ Uncertain District C: Less W ealthy\ Certain / / / REVENUES Local Taxes State Aid Indirect Fed. Grants Miscellaneous Local Taxes State Aid Indirect Fed. Grants Miscellaneous Direct Fed. Funds PROCESS EXPENDITURES Decision-Makers Decision-Makers Clear lines of authority Known expectations Shared goals Highly visible business official Board in the background No active board committees High level of administrator trust High level of satisfaction No clear lines of authority Unknown expectations Divergent goals Business official in background Board highly visible Active board committees Low level of administrator trust Varying levels of satisfaction INSTRUCTION Basic Program Added Needs Adult Ed Benefits Criteria Legal requirements History/Tradition Stakeholder expectations SUPPORT Pupil Instructional General Admin School Admin Business Maint & Oper FUND BALANCE Transportation Central Services Benefits Community Services Capital Outlay Other D BALANCE Borrows for cash flow Tries to stretch dollars May make cuts Waits for more information Borrows for cash flow Unwilling to make commitments May make cuts Waits for more information ■ Seeks more funds Revises budget Re-instates cuts Revises budget 1 j Adopts wait and see attitude ] I Waits for more information I IMPLEMENTATION Implement budget Figure 4.5 Com posite Budgeting Model 248 Table 4.5 Revenue Comparison 1991-92 District A District B District C District D $458,594,710 3,170 $144,667 35.2188 $5,095 $224,812,520 2,352 $95,584 43.00 $4,365 $142,006,704 2,561 $55,450 34.1284 $3,561 $260,372,842 3,481 $74,798 26.1225 $2,680 Total District Revenues $17,236,476 $13,034,336 $10,449,479 $13,378,360 Total Revenue/per pupil $5,437 $5,542 $4,080 $3,843 93.70% 0.85% 0.32% 5.13% 0.00% 74.17% 8.95% 4.23% 5.30% 7.35% 46.38% 43.55% 2.89% 7.18% 0.00% 50.84% 24.00% 3.16% 4.13% 17.87% 100.00% 100.00% 100.00% 100.00% 96.79% 87.92% 94.64% 95.48% SEV Membership SEV/per pupil Mills levied GMA REVENUES: Local Levy State Aid Indirect Fed Grants Miscellaneous Direct Fed Funds Accuracy of Revenue Projection 249 Table 4.5 shows that district B, has a much lower SEV and fewer pupils than district A, but it levies 7.8 more mills. Because of the way the state aid formula works, district B receives state aid, revenues. but it accounts for only 8.95% of its District B is barely an in-formula district, which makes its revenues uncertain. A change in SEV or enrollment can easily change the status of district B's eligibility for state aid. As the findings from district B showed, a settlement with a major taxpayer retroactively put district B out-of-formula and the district had to repay the state aid. Findings further showed that district B has a long and continuing history of settlements and abatements that have led to revenue uncertainty. its revenues. direct Federal funds account for 11.58% of Because of the processes involved in obtaining federal funds, they are particularly uncertain. Federal dollars combined with miscellaneous revenue, however, give district B more wealth in terms of dollars per pupil than district A. District B projected its revenues with less accuracy that the other districts due to the uncertainties surrounding the revenues. Table 4.5 shows that district C is solidly in-formula. District C revenues are relatively certain. the local levy and state aid account for a little over 90% of its revenues. The fact that the State Aid Act is usually not passed until after the beginning of the fiscal year means that district C is less revenues. able than district Nevertheless, A to accurately project its district C knows that it will get 250 state aid increased and it each also year, knows so that district state C aid can has make steadily reasonably accurate revenue projections. Table 4.5 shows that district D is in-formula. It has a higher SEV per pupil than district C, but its low mill rate means fewer dollars per pupil. District D relies heavily on direct federal funds. In fact, direct federal funds provide the additional district with findings show, these direct an $700 per pupil. As the district D will soon become ineligible for funds because the federal facility that was located there has closed. The facility's closure has also meant a drop in enrollment. District D may become a poor out- of-formula district because its millage rate is so low. The district has been fairly accurate in projecting revenues in the past; however, as the uncertainties grow, revenue C have revenue projection is becoming more difficult. As Table certainty. 4.5 shows, District A's districts A certainty comes complete reliance on local revenues. and from its almost District C's certainty comes from its reliance on the combination of local and state aid funding. Districts B and D both have revenue uncertainty because SEV and/or enrollment changes can easily change their eligibility for state membership aid. In both district B and D, reliance on federal funds greatly increases the dollars per student they have available. dollars district. also increases the But, the reliance on the federal revenue uncertainty in the Table 4.5 further shows that districts A, C, and D 251 are able to project their revenues with about the same accuracy. District B projected its revenues with much less accuracy. In 1991-92 all of districts, except B, knew their state aid membership status. District B was uncertain of its membership status when projecting revenues in June of 1991. Process Figure 4.5 shows that process includes decision-makers and criteria for basing decisions. Figure 4.5 shows that differences in decision-makers exist across the districts. However, Figure 4.5 also shows that the characteristics of decision-makers in the revenue certain districts, A and C, are alike. Figure 4.5 further shows that the characteristics of decision-makers in the revenue uncertain districts, B and D, are alike. Findings show that in both districts A and C, decision­ makers have principals clear lines aware of needs of authority. Teachers make and submit purchasing reguests. Principals make the central office administration aware of their needs. Central office administrators have specific areas of responsibility in the budgeting process. In district A, central office administrators work as a team. In district C, the assistant superintendent is delegated responsibility for budgeting; the superintendent is not involved. In both districts A and C, a prepared budget is submitted to the board of education for its approval. In both districts A and C, the board respects the lines between policy and administration. 252 Findings show that in both districts B and D, decision­ makers do not have clear lines of authority. principals aware of needs Principals receive an allocation district B, principals and and Teachers make submit purchasing requests. from central directors work office. with In different central office administrators when reviewing allocations or requesting more funds. The finance director relieves people of responsibilities even if they do not report to him. People with basically the same jobs and status have different titles. Directors of programs are responsible for only part of the budget while someone else is responsible for the rest. district D, principals superintendent. approves the development district B, and directors with the In both districts B and D, the board not only budget but also through the board's the work In finance is actively involved committee committee is in its structure. involved in In budget development and reports budget information to the rest of the board. In both districts B and D, the board does not respect the lines between policy and administration. Findings show that in districts A and C decision-makers know what is expected of them. budgeting. bottom up. There are set procedures for In both A and C, the budget is developed from the Lower level administrators in both districts submit their building needs to central office about six months before the budget needs to be approved. these administrators administrators that meet are with the delegated In both districts, central the office budgeting 253 responsibility. In district A, administrators just review line items; in district C, they review and negotiate. In both districts, principals and directors are responsible for budget administration. New budgeting. is There administrators are in-serviced an understanding in district in A that administrators do not overspend their budgets and likewise, their budgets do not get changed. are more likely to be questioned. In district C, purchases District C's lack of wealth leads to more scrutiny of expenditures. Findings show that in both districts B and D, decision­ makers do not have a clear understanding of what is expected of them. In both districts, procedures or time lines. down. are no set budgeting Budgeting proceeds from the top Lower level administrators receive an allocation which they assign to line items. year. there Those allocations come late in the In both districts B and D, building and department budget numbers were still unknown in late June. budgeting are not trained in the process. Newcomers to In district B, some administrators are allowed to overspend their budgets, while others have responsibilities taken away. District D did have set procedures prior to budgeting for the 1993-94 year. the past, the budget was developed from Principals were responsible for spending. the down. For 1993-94, a new process was imposed by the new superintendent. and no expectations were given. top In No training No one in district D has a clear idea of how budgeting should proceed. 254 Findings show that decision-makers in districts A and C have shared goals. In both districts, the board adopts annual goals which are assimilated throughout the district. districts, educational goals are developed by community. Periodic a cross reports In both section of the on the progress toward goal achievement are given at public meetings. is little evidence of individual or sub-group goals. There Findings show that building goals are considered in making purchasing decisions. District A also has a five year strategic plan which helps to link the goals to budgeting. Findings show that decision-makers in districts B and D have divergent goals. a regular basis. Neither district adopts annual goals on Findings show evidence of individual goals. In district D, what are called board goals are a compilation of individual board members' goals. Some are contradictory. The superintendent's goal to involve many people in decision­ making throughout the organization is not shared by everyone. The board decision that the finance committee would meet with the superintendent to implement across the board cuts runs directly counter to the superintendent's goal. In district B, the board member's goal to institute strategic planning is not shared by all board members. Figure 4.5 shows that differences exist in the role of the board official. of education and in the In districts A and C, role of the business the boards of education respect the lines between policy and administration. While the boards do not shirk their responsibility to review budgets 255 and to ask questions, administrative job. they believe that and C, the business official the is an The boards act as committees of the whole and do not have a committee structure. districts, budgeting business In both districts A is highly visible. official makes the In these public budget presentations, offers bills for payment, and reports regularly on the financial condition of the district. In districts B and D the board of education is highly visible while the business official is in the background. In both districts B and D, the board has a committee structure; the finance committee is particularly active. In district B, the finance committee is concerned mostly with developing the budget and being kept informed of budgeting problems. the committee's board. active. It is responsibility to report back to the full In district D, the finance committee is even more It is not only part of budget development but also part of budget implementation. In district D, recommendations from other committees are referred to the finance committee for approval. The finance committee decides whether or not the budget supports the purchase. The findings show that district D's finance committee has a major role in determining funding criteria. In both districts, the business official sits in the audience at board meetings. The superintendent makes the public financial presentations. The board treasurer reports on the financial condition of the districts and offers the bills for payment. 256 Findings show that there are differences in the level of administrator trust. In districts A and C, administrators are more highly trusted than those in districts B and D. In both districts A and C there is no evidence of distrust in school district finances. There is a firm belief that budget numbers are correct and nothing is being hidden. Contributing to this belief is the openness of the budgeting process. In both districts financial information is readily available to both staff and the public. (Even though some administrators in district C said they did not know the district budget, they receive the same information that board members and citizen subscribers do.) In both districts, the board trusts administrators to do their jobs. In districts administrators. B and D, findings show less trust in In district B, findings showed evidence of doubt that information coming from central office is correct. People are told that there is no money, yet board members' pet projects are funded. Findings also show that in district B financial information is not shared in group situations. The budget is not discussed at administrative staff meetings. The finance committee meets with the finance director, but the individual members of the committee also meet separately with him. There are few opportunities for the budget to be discussed in situations where large numbers of people can hear the same finances. information and reach agreement about district 257 Findings also show a lack of trust in administrators in district D. Evidence exists that there is a belief that the superintendent does not understand the district finances. The high the level of board involvement diminishes trust in administration. Board members do not rely on administrators to make recommendations. committees do their Individual board members own research and come and board to their own conclusions. Findings also show that decision-makers in districts A and C enjoy higher levels of satisfaction than in districts B and D. There is no evidence that any participant in district A or district C is unhappy with the budgeting process. There is evidence that some would like more money or, in district C, a little more flexibility in spending dollars, but participants in districts A and C are not dissatisfied with the process. participant In districts B and D, however, is dissatisfied with the almost every budgeting process. Dissatisfaction in districts B and D is caused by lack of timely information, lack of involvement in the process, lack of autonomy, and lack of instructions on how to budget. district B, central office administrators are In completely satisfied with the budgeting process. Figure 4.5 shows that the criteria for making decisions are also part of process. The criteria used in budgeting are generally the same across all of the districts. however, some differences. All four spending history to project the future. districts There are, use past The heavy reliance on 258 the past to project budget. the future results in an incremental The individual district findings show that revenues increased steadily and so did expenditures. In several instances fund balance was used because expenditures exceeded revenues. The districts spent approximately the same percentages for both function and object categories over the four years studied. patterns indicate Even though the resulting expenditure an incremental budget, occurring in three of the four districts. A and C, purchases are being evaluated ability to satisfy goals. evaluation is In both districts in terms of their In district D, expenditures are being evaluated because the district is downsizing and needs to reduce its budget. All four districts share the same legal obligations to bargain with employees, to provide special programs and transportation for special education students, and to provide safe and healthy buildings. District A and B have both had to expend funds for tax abatements and for the legal costs to fight tax abatements. District B must expend funds for a special program that is a settlement of a lawsuit. District C has been forced to assume responsibility for some special education students that had once been part of a county program. Only district D seems to have escaped additional legal obligations. All four districts also satisfy stakeholder expectations. In districts B and D the findings show that board members' expectations are the criteria on which some spending decisions 259 are based. Districts A and C provide a more open approach to budgeting and goal setting which enhances the chances that more expectations will be considered. Expenditure So far, then, across district findings have been presented for the revenue and process decision clusters. attention will be turned to the expenditure cluster. Now Figure 4.5 shows the expenditure categories for which districts must budget. This budget format is required by Michigan law. comparisons because not everyone classifies their expenditures in the same way. For example, are difficult to make, however, Some Form B reports for districts C and D do not show any salary expenditures for business services. The assistant superintendent and his business office staff are placed in the general administration category. The business office staff in district D is also under general administration. Also, there is often confusion in coding expenditures for maintenance and operations and capital outlay. An expenditure comparison, page 260. the four Table 4.6, may be found on This table shows 1991-92 expenditures for each of districts by function and by object. The high percentage of expenditures for added needs in districts B and D is a result of the indirect federal funds they receive. District C's high percentage for added needs is a result of a large vocational and alternative education program. wealthy districts spend less on pupil counselors, social workers, nurses, etc. support The less services - District B spends a 260 Table 4.6 Expenditure Comparison EXPENDITURES BY FUNCTION 1991-92 INSTRUCTION Basic Program Added Needs Adult Education Benefits SUPPORT Pupil Instruction General Administration School Administration Business Operations & Maintenance Transportation Central Services Benefits Community Service Capital Outlay Other District A District B District C District D 41.82% 2.62% 0.15% 8.36% 34.08% 11.18% 0.28% 8.26% 36.98% 6.76% 9.01% 9.13% 40.14% 10.04% 2.35% 8.52% 6.74% 1.89% 2.22% 5.44% 3.45% 12.60% 3.55% 1.65% 6.44% 0.21% 1.51% 1.35% 4.51% 6.02% 1.87% 4.62% 3.39% 12.68% 1.48% 0.38% 6.38% 0.09% 3.30% 1.48% 2.54% 1.85% 2.87% 5.18% 1.98% 8.51% 3.97% 0.41% 4.30% 0.55% 1.39% 4.57% 2.06% 1.20% 2.91% 5.22% 2.58% 8.31% 6.76% 0.00% 4.60% 0.00% 0.35% 4.96% 100.00% 100.00% 100.00% 100.00% EXPENDITURES BY OBJECT District A District B District C District D Salaries & Benefits Purchased Services Supplies and Materials % of budget spent on purchased services & supplies Basic Program Added Needs 82.70% 8.41% 8.89% 79.91% 7.22% 12.87% 79.72% 8.67% 11.61% 80.64% 8.70% 10.66% 100.00% 100.00% 100.00% 100.00% District A District B District C District D 3.02% 0.66% 0.96% 1.29% 2.11% 0.56% 2.25% 1.89% 3.68% 2.25% 2.67% 4.14% 261 lot more on instructional support services. This is one of the administrative areas that was centralized positions were created. and new The less wealthy districts spend less of their budgets on maintenance and operations. District B spends less on transportation than the other districts; it is the only district that does not provide transportation for regular K-12 students. District D spends the largest percentage on transportation; the district is over 300 square miles. The less wealthy districts spend a greater percentage on transfers (athletics, lunch programs, bookstore operations) than the wealthier districts. Table 4.6 shows that object expenditures are very close across the districts. services and comparison. However, the amount spent on purchased supplies for classrooms is an interesting The least wealthy district spends the greatest percentage on the things that students use in the classroom while one of the wealthier districts spends the least. In 1991-92 all of the districts ended the year with a fund balance. District C, the less wealthy but certain district, was the only district to add to its fund balance. No district was in fiscal stress. Balance and Implementation Figure 4.5 shows that the last two decision clusters are balance and implementation. certainty of wealth and Figure 4.5 shows us that with its its ability to project revenues, district A can adopt a balanced budget in June that can be 262 immediately implemented. adopts a budget but Figure 4.5 shows us that district B waits information is available. to implement it until more District B's wealth gives it some buffer against uncertainty, but the reliance on federal funds that are not approved until August or later forces it into a "wait and see" attitude. After all, district B must legally maintain a program that is funded to a large extent by federal dollars. If the federal dollars do not materialize, then cuts in other areas will be necessary. Figure 4.5 further shows us that district C, the less wealthy but certain, may exercise a number of options. Before district C can implement the budget it must borrow to meet cash flow needs. District C is always trying to stretch dollars to make them go as far as they can. If the June financial situation is favorable, district C may just wait for confirmation of revenue projections. In October, when enrollment and state aid is certain, it adopts a more accurate budget and implements it. If the June financial situation is unfavorable, may district additional millage. instated; millage the budget fails, the C make cuts; it may ask for If the millage passes, the cuts are re­ is revised cuts become and implemented. permanent; the If the budget is revised and implemented. Figure 4.5 shows that district D must also borrow to meet cash flow situation needs. determines Like district whether it C, the simply information or whether it also makes cuts. June waits financial for more District D is 263 concerned about not only state aid but also the amount of direct federal funding. Like district B, it must wait until late summer or fall before that the amount is known. of the demographics of district millage is not an option. adjustments must budget in June, cluster, D, If finances be made. District so no matter what it must asking revise the budget for Because additional do not materialize, D adopted a rollover happens in the balance according to the more accurate information and then implement. The purpose of the study was to describe and explain differences in budgetary decision-making in school districts of varying wealth and varying certainty of wealth. This section has presented across district findings about budgetary decision-making in districts of varying wealth and varying certainty of wealth. budgetary There is little evidence of variance in decision-making in districts of varying wealth. There is evidence of differences in budgetary decision-making in districts of varying certainty of wealth. The most significant differences occur in the process decision cluster. Those differences are in organizational matters that affect the budgeting process and in matters of decision-maker trust and satisfaction. CHAPTER V FINDINGS AND CONCLUSIONS The researcher's purpose in this dissertation has been to describe and explain the differences in budgetary decision­ making in school districts certainty of wealth. of varying wealth and varying More specifically, the purpose was to investigate the relationships between wealth and certainty of wealth and decision-making and budgeting processes. The investigation was divided into the budgeting processes in four different school districts, each representing combination of wealth and certainty of wealth. a different Finally, the four school districts were compared and the results of that comparison were disclosed. The previous chapters presented a description of the problem, a review of the related literature and research, an explanation of methodology, and a presentation and analysis of the data generated in the study. This chapter reviews the original research guestions and their conclusions. Further, 1982, Next, the general findings are summarized. the works of Wildavsky 1990b), Simon (1957, (1975, 19976, 1979), 1982), Rubin (1980, Lindblom (1959; 1979), and Cohen, March and Olsen (1972) are reviewed. 264 The 265 results of their work discussed. study findings of this study are Reflections on this study are offered and a new theory is offered. the and the are Finally, the findings and limitations of used to generate suggestions for further research. Reviewing the Research Questions Prior to beginning this study, the argument was made that school districts of varying wealth and varying certainty of wealth would follow the same decision-making patterns that other organizations of varying wealth and varying certainty of wealth follow. organizations One of those conclusions was that wealthier use rational decision-making and budgeting. Organizations of increasing wealth use incremental decision­ making and budgeting. Less wealthy organizations and those experiencing declining wealth use garbage can decision-making and budgeting. districts The data showed that had experienced all of the increasing wealth. selected Only school district D, the least wealthy and least certain district, was projecting a decline in wealth; however, the revenues are so uncertain that the district cannot predict when the revenue loss will occur. The criteria which were used to assess decision-making in other organizations were used questions to guide the study. written. to develop six research Conclusions (pp. 17-21) were Those conclusions are now reviewed. 266 JL_ Are there differences organizational goals in in linking school decisions districts of to varying wealth and varying certainty of wealth? The data showed that there are differences in linking organizational goals to organizational decision-making. the school adopted districts goals organization. with that are certainty of wealth assimilated have Only board throughout the In both districts the goals are developed by a cross-section of the educational community. The data showed that goals are linked to budgeting in that they influence purchasing decisions. However, the data also show that the districts rely on criteria other than goals, such as past history and legal requirements, to develop a budget. One may reasonably argue that the districts with certainty of wealth lie somewhere between rational and incremental decision-making and budgeting. The data showed that the districts with uncertainty of wealth have divergent or ambiguous goals. The data showed that board members' individual goals particularly influence budgeting decisions. The less wealthy district with uncertain wealth has two different sets of goals, both of which were developed by the board of education. One set of goals is a compilation of individual goals, and they are contradictory. The data show that both of these districts rely heavily on past history and legal requirements to develop the budget. The more wealthy but uncertain district is more able to overcome goal conflict because it has more dollars available 267 to satisfy individual goals. The more wealthy but uncertain district is more likely to use incremental decision-making to avoid conflict. engages in The less wealthy and uncertain district also incremental decision-making; however, indicated that at the time of this study, about process existed. the data divergent goals Two sets of decision-makers existed, the administration and the board, with differing views about how the budget should decision-making. 2. be revised. This is garbage can The tentative conclusion is supported. Are there differences in planning in school districts of varying wealth and varying certainty of wealth? The data showed that there are differences in planning. Only the more wealthy and more certain school district engages in long term planning. The plan was developed by a cross- section of the educational community. The plan sets forth the process for achieving the district goals. provide evidence budgeting. planning that None of activities, certain district the the plan is directly other districts although the The data do not more engage wealthy linked in to formal and less (B) and the less wealthy and more certain district (C) are talking about it. The data showed different budgeting process. levels of planning for the The data showed that the more wealthy and more certain district plans for staffing, enrollment changes, capital outlay expenses. Both districts with certain revenues have time lines and procedures which are followed. The data 268 showed that this type of planning was not present districts conclusion with that planning and budgeting. uncertain the revenues. wealthier therefore more The district rational data in the support engages in the more decision-making and The data also support the tentative conclusion that the other districts engage in incremental budgeting and decision-making. Planning is not essential in incremental decision-making and budgeting because only small changes occur in the status quo. 3. Are there differences in evaluating previous organizational decisions in school districts of varying wealth and varying certainty of wealth? The data history showed that to project all of the districts expenditures. However, the used past data also showed that there are some differences in evaluating previous decisions. In two districts, the districts with certainty of wealth, the data showed that evaluation occurs at the building levels in terms of what is purchased. In these two districts, for example, the more traditional purchases of workbooks have been replaced by other changing curriculum. types of materials that support a The data showed that in the more wealthy and certain district some cost-effectiveness evaluation was occurring in certain isolated areas. The data showed that the most potential for evaluation was occurring in the less wealthy districts. The lack of wealth was forcing reductions, and programs and services were 269 being reviewed. However, in the less wealthy and less certain district, the decision was made to implement across the board cuts. In the less wealthy and more certain district, the data showed that in the past across the board cuts usually occurred. The data support the tentative conclusion regarding use of evaluation. therefore, The wealthier district evaluates more and is, more rational in its budgeting. The other districts engage in less evaluation and make small changes, such as across the board increases and cuts, and use incremental decision-making. 4. Are there differences in openness and inclusiveness in decision-making processes in school districts of varying wealth and varying certainty of wealth? The conclusion regarding openness and inclusiveness is supported. The data show that the wealthier organization has a completely open and inclusive budgeting process. People all across the organization are involved in the decision-making. The entire budget is reviewed with the administrative staff and with the public and board. wealthy and certain decision-making. The process used in the more district is indicative The data show that the of rational less wealthy but certain district engages in incremental decision-making. The process in the less wealthy and certain district is relatively open and inclusive, but the data show that the entire budget is not reviewed with the administrative staff. Each 270 administrator meets with the superintendent to negotiate his or her budget. included in information. However, budgeting data do show that the public decisions and receives is budgeting The data show that the more wealthy but less certain district also engages in incremental decision-making. Its process, however, is less open and less inclusive. Lower level administrators are given allocations, but there is some evidence that administrators can negotiate for more. The data show low public involvement but high board of education involvement. Data further show that budgeting decisions are sometimes reached to satisfy individual board members. Data show that the less wealthy and less certain district engages in garbage-can superintendent decision-making. in the district The with data show that less wealth and the less certainty of wealth had instituted new budgeting procedures a few weeks before the data were collected. The new procedure was an attempt to involve more people in the decision-making and to make budgeting a bottom up process. collected from education's a board actions superintendent's plan. meeting are not indicates However, that consistent data board with of the The data also show that the public is not involved in decision-making. The board of education's active finance committee has a large role in making budgeting decisions. Data show that discussion of issues occurs during committee meetings and not when the board meets as a whole. The board acts on the committees' recommendations with little if any public discussion. Data also indicate two different 271 sets of decision-makers trying to resolve the same budgeting issue. 5_i_ Are there differences in time usage in decision-making in school district of varying wealth and varying certainty of wealth? The data show that there are differences in time usage across the districts. the more wealthy and more certain district would use time in a rational manner. has The data support the conclusion that The more wealthy and more certain district time lines and procedures that streamline process. The data show that the budget is the budgeting approved and implemented without need to re-consider decisions. The data support the conclusion that the wealthier district with less certainty engages in incremental decision­ making. Although the district does not have set time lines or set procedures for budgeting, the data show that the budget that is adopted will be implemented. The data support the conclusion that less wealthy districts would engage in garbage can decision-making on the criterion of time. the Both districts adopt a budget in June with understanding that a more accurate budget will be presented in the fall when state aid and enrollment is known. The less wealthy and more certain district adopts a budget with a few unknowns. Once more information is obtained, the budget is implemented. The less wealthy and less certain district operates further into the garbage can. It rolls over 272 the current budget with the understanding that it is not accurate. In the less wealthy and less certain district, two different sets of decision-makers expenditures in the same budget. were working to reduce Once information is known, and the budget is revised, there are still no guarantees of complete implementation as the board finance committee reviews many requests for expenditures. 6. Are there differences in the influence of the environment outside of the organization on the decision-making process in school districts of varying wealth and varying certainty of wealth? The tentative conclusion regarding the influence of the environment was supported. The more wealthy and more certain district has shown more of the characteristics of rational decision-making and budgeting than the other districts. This district has planned and set goals and has recognized the uncertainties that it cannot control. The district has been open and inclusive in its budgeting process. The district's wealth has allowed it to buffer itself from tax abatements and legislation that is designed to take from the rich and give to the poor. The more wealthy but less certain district engages in a more incremental pattern of decision-making and budgeting. Its wealth, too, has provided a buffer from tax abatements and assessment problems. A legal decision has caused the district to develop a new program. Ironically, federal funds are not 273 only providing partial financial support for the program but also are contributing to its less certainty of wealth. The less wealthy but more certain district also shows an incremental pattern of decision-making and budgeting. This district was especially hard hit by the State Aid Act of 199293 which changed the membership formula so that prior year enrollment was used. As a growth district, it lost revenues. Although the district is not wealthy, it did have a fund balance which allowed it to maintain the status quo. However, for 1993-94, cuts or additional millage are needed. The less wealthy and less certain district has become the most vulnerable to the environment. A decision reached at the federal level of government has upset the status quo of the district. The predicted loss of about 20% of its revenues has put the district into a garbage-can pattern of decision-making and budgeting. Figure 5.1, page 274, is a chart conclusions to the six research questions. summarizing the The left column of the chart lists the characteristics associated with rational, incremental, and garbage can decision-making. The chart clearly shows that district A, with its wealth and certainty of wealth, engages in rational decision-making. All of the districts engage in incremental decision-making to the extent that they use line item budgets, rely heavily on past history, and show little deviation from the status quo. The chart further shows that both district B and district C engage in incremental decision-making and also show characteristics of 274 Characteristic/District A RATIONAL Shared goals Goals linked to decisions Substantive planning Procedural planning Evaluation of decisions Open process Inclusive process Knowledge, skills, information Ease in implementation Less vulnerable to environment INCREMENTAL Reliance on past history Line item budget Little deviation from status quo Across the board increases/cuts Negotiation; striking bargains Decisions based on self-interest Alternative decisions neglected Some vulnerability to environment GARBAGE CAN Divergent/Ambiguous goals Lack of useful information Different sets of decision-makers Re-consideration of decisions Problems implementing decisions Trial and error procedures Very vulnerable to environment B X X X X X X X X X X X X X c D X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Legend: X indicates that the data showed evidence of the existence of this characteristic. District A - wealthy and certain District B - wealthy and uncertain District C - less wealthy and certain District D - less wealthy and uncertain Figure 5.1 Districts' Decision-Making Characteristics 275 other types of decision-making. District B, with its revenue uncertainty, displays some of the characteristics of garbage can decision-making. It has no goals, changing decision­ makers, and problems implementing decisions. District C, with its revenue certainty, displays many of the characteristics of rational decision-making. procedural planning, It and some does have evaluation District C's process is open and inclusive. shared of goals, decisions. The chart shows that district D engages in garbage can decision-making with a few characteristics of incremental decision-making. General Findings The first four sections of the presentation of data provided data and findings regarding the budgeting process used in each of the four selected districts. The fifth section presented findings from an across district analysis. The findings revealed that all of the districts make budgeting decisions about revenue, process, implementation. It was found expenditure, balance, that all districts and receive revenues from the same local, state and federal sources. The amounts each receives from those sources varies according to its wealth. It was found that districts with less certainty of wealth receive additional large amounts of federal funds. The districts rely heavily on these funds which only adds to the uncertainty. The findings revealed that within the process cluster, the criteria used for making budgeting decisions do not vary 276 significantly. The findings revealed that all districts rely on past history to project the future. which impact districts. the budget do not vary Legal obligations significantly across The legal obligation to bargain with employees for salaries and benefits accounts for approximately 80% of the budget in all of the districts. Wealthier districts affected by tax abatement decisions. are considered. The findings are Stakeholder expectations revealed that in the less certain districts, members of the board of education are more likely to have their individual expectations funded. The findings revealed that the districts with more certainty of wealth are more likely to evaluate past expenditures. The findings revealed the most significant differences across the districts in the characteristics of the decision­ makers. It was discovered that decision-makers in districts with more certainty of wealth have clear lines of authority, known expectations, and shared goals. open and more inclusive. The public is included in setting goals and in budgeting decisions. meets as a committee The process is more of the The board of education whole so that information is publicly shared with everyone. financial The findings also revealed that the business official is highly visible in the process. administrator It was also found that there is a high level of trust and decision-maker satisfaction in districts with certainty of wealth. The findings revealed that decision-makers in districts with less certainty of wealth do not have clear lines of 277 authority or known expectations. The districts with less certainty of wealth do not have organizational goals; however, individual goals exist and influence the budgeting process. The process is less open and less inclusive. The findings showed no public involvement in the budgeting process. The boards of education in districts with less certainty of wealth are highly visible, and they have active committees. In both districts, the board finance committee helps to develop the budget and to make spending decisions. The finance committee is charged with the duty to report back to the board. The committee the structure inhibits openness and leads to conclusion that decisions are not reached in public. The findings also revealed that the business official is in the background. It was also found that there is less administrator trust and less decision-maker satisfaction in districts with uncertainty of wealth. Findings reveal that there is little difference in the way school districts spend their money. State law stipulates the manner in which budgets must be adopted and final revenues and expenditures reported, so all of the budgets look alike. Approximately the same percentages are spent in each function and object category. of transportation regular K-12 Differences were discovered in the areas because students, one district does while another district square miles and buses almost every student. not bus any is over 300 Findings also revealed that those districts that receive more federal funds incur a greater percentage of expenditures in the added needs 278 category. This finding would be in keeping with the intent of the indirect federal funding process. Findings revealed differences in the balance cluster. The more wealthy and more certain district makes few decisions about balancing budget. The less implementation revenues. the budget. certain as they It implements districts await more take its more information original steps about to their The more wealthy but uncertain district usually just waits and doesn't fully implement. The districts with less wealth borrows to meet cash flow needs before they begin to implement the new budget. The less wealthy and less certain district is likely to make cuts and/or implement less of its adopted budget. It does not make too many commitments to spend early in the year, because it does not adopt its "real" The budget until fall. June financial situation dictates the steps in balance that the district with less wealth but more certainty of wealth takes. If the financial situation is good, the district just waits to fully implement until it knows for sure exactly what the revenues are. Its lack of wealth keeps it from taking the chance of implementing too soon. If the financial outlook is not good in June, it makes cuts and/or asks for additional millage prior to fully implementing its budget. The Conclusion There is decision-making little in evidence districts of of variance varying in wealth. budgetary Budget 279 implementation is most affected by a lack of wealth. districts with needs. less wealth must borrow to meet Those cash flow The district with less wealth but certainty of wealth is more likely to wait to fully implement the budget until it is absolutely certain of its revenues. There is evidence of differences in budgetary decision­ making in districts of varying certainty of wealth. The most significant differences occur in the process cluster. Those differences are in the organizational matters that affect the budgeting process and in the matters of decision-maker trust and satisfaction. The organizational matters in districts with wealth certainty of that affect budgeting are the presence of shared goals, the openness and inclusiveness of the process, the planning, authority and expectations. the understanding of lines of In addition, decision-makers in districts with certainty of wealth enjoy high levels of trust and high levels of satisfaction with the budgeting process. The conclusion from the findings of this study is that certainty of wealth is more important budgetary decision-making processes to than school district is the amount of wealth. Reflections on the Literature Now that the research questions have been answered and a conclusion offered, attention will literature that informed this study. with national level governments be returned to the Wildavsky's work (1975) inspired this study. He 280 devised the two by two matrix predictability of wealth. researcher with the which relates wealth to Rubin's work (1990) provided the decision clusters which were used to organize budgeting decisions. Rubin's (1980, 1982) work with municipal governments and universities provided further insight into the relationships of wealth, predictability of wealth and budgetary decision-making. also informed this study. Decision-making theory The work of Simon (1957, 1976, 1982), Lindblom (1959, 1979), and Cohen et al. (1972) provided the researcher with the a framework to examine decision-making processes. These organization's researchers resource level found and links between decision-making. the Many similarities exist between the findings of these researchers and the findings of this study. Rubin (1980, 1982) provided evidence that wealthier organizations with certain resources do little prioritizing as each budgeting reguest is judged on its own merit, a bottom up development of the budget, budgetary system. an openness in the entire Rubin's findings are consistent with the findings in District A, district. and the more wealthy and more certain Administrators request their needs and do not need to justify them. The superintendent said that they try to honor all requests. The budget is developed from the bottom up; principals and directors project needs; central office reviews and approves; the board of education gives the final approval. The process is open as the entire budget reviewed many times with staff, the board and the public. is 281 Wildavsky (1975, 1979) and Rubin (1980, 1982) found that wealthier organizations engaged in more planning activities and more often linked organizational goals to resources. This finding is consistent with the findings in District A, the wealthier district and revenue certain district. only district which engages in long term planning. It is the District A's comprehensive plan includes a vision for the district, goals and objectives, and a plan to achieve them. The plan, like the budget, is developed from the bottom up with input from a cross section of staff and community. The goals are linked to budgeting, particularly at the building level. This finding in District A is also consistent with the findings of Simon (1982) in his theories Simon observed that rational of rational decision-making. organization decision-making includes having a shared purpose or objective. Organizations achieve their objectives through substantive and procedural planning. Substantive planning involves decisions about values, methods to attain the values, and the knowledge and skills needed to make decisions. Procedural planning involves designing ways to direct knowledge and skills so that day-today decisions are made to conform with the substantive plan. In district A, the strategic plan is the substantive plan. The budgeting process, with its time lines, budget book, and bottom up development of the budget, provides the procedural plan so that day to day decisions conform with the substantive plan. 282 Rubin (1980, 1982) and Wildavsky (1975) provided evidence that uncertain resources produces little planning and no long term projects. They found that the less able the organization was to predict its wealth, making process became. the more chaotic the decision­ Budgets are approved implemented until the dollars become available. matrix showed that rich and uncertain incremental or repetitive budgeting, but not Wildavsky's organizations use and poor and uncertain organizations use repetitive budgeting. These findings are consistent with the findings in Districts B and D. District B, the wealthier district with uncertain revenues, does not engage in planning or goal setting. The budget is not fully implemented until revenues are more certain. engages in incremental budgeting. The district It begins budgeting by rolling over the previous year's budget and making adjustments for salaries and benefits, and adding percentages for inflation to other line items. The findings in the studies of incremental decision-making are consistent with the findings in District B. There are no major changes in the budget from year as there is reliance on past history. Programs are added, such as the alternative education program, that can be easily cut if they do not work out or the funding is not available. Decisions are often reached based on the self- interests of those involved. Board members sometimes make budgetary decisions that bring them power prestige. (re-election) or 283 The findings of Rubin (1980,1982) and Wildavsky (1975) about the effects of revenue uncertainty are also consistent with the findings in District D, the wealthy and less certainty of wealth. have long range plans. district with less District D does not It engages in repetitive budgeting. The original adopted budget is only useful in serving a legal requirement. As more budget is revised. information becomes in their consistent ambiguous. research with the Different on The findings of Cohen et garbage-can findings of decision-making District decision-makers conflict about the budgeting process. D. exist, the administrative staff. meet many Goals and there are are is Conflict in district D exists over who will make budgeting decisions: makers the Because of the uncertainty of funding the budget cannot be fully implemented. al. available, the board or The separate groups of decision­ times while they attempt to resolve the problem of balancing the budget. The findings in District C are consistent with the findings of the researchers in that its uncertainty of wealth causes problems with full budget implementation. there are degrees of uncertainty, processes do not become chaotic. goals and there is evidence budgeting. so its However, decision-making It has shared organizational that the goals are linked to The budget is developed in a bottom up manner. The budgeting process is open and inclusive. The findings reveal a district that falls between rational budgeting and decision-making and incremental decision-making. Its lack of 284 wealth does not allow it flexibility in making expenditure decisions. is also Even though the wealth is somewhat uncertain, it steadily incremental increasing. budgeting and The end result decision-making is that occurs an but with hints of rational budgeting and decision-making emerging. Further Reflections While the theories that informed this study provided a base to study budgetary decision-making in districts of varying wealth and varying certainty of wealth, they do not completely explain the findings of this study. This study began with an interest in the differences in wealthy and poor school districts. The issue that makes the front page of newspapers and is the topic of school finance reform is disparity in wealth. There is a belief that if all school districts had the same number of dollars per student, schools would be better. This study showed, however, that even though the districts range from relatively wealthy to poor, there is little variation in the way districts spend their funds. Approximately 80% of the budget is spent on salaries and fringe benefits. operations and legal By the time maintenance and requirements are accounted for, only approximately 4% of the budget is discretionary money. One may reasonably ask, then, if expenditures are so similar what difference districts? does it make how decisions are made in school The answer is that it is within this 4% of the budget where the greatest potential for reform and change 285 exists. The study showed that in districts A and C the greatest evaluation of expenditures was occurring as decision­ makers selected materials consistent with their beliefs about proper curriculum materials to improve student achievement as reflected in their goals and objectives. If we are to believe that decisions are based on "what is good for kids," then we must see evidence that these decisions are based on some criteria that link expenditures to goals and objectives. This type of evaluation occurs only in rational decision-making. Although the data do not support the conclusion that the type of decision-making affects a district's expenditures, it does affect the organization's processes. study was limited to budgetary The scope of this decision-making, but organizations make decisions in other areas as well. For example, school districts make decisions about the curriculum that will be offered. They make personnel decisions both in hiring and at the negotiations table. This researcher believes that the type of decision-making used for budgeting is indicative of that used throughout the organization for all decisions. This decisions should knowledge, skills, researcher be based on strongly plans, and information. believes goals, that all evaluation, Garbage can decision­ making occurs in the absence of these characteristics. It is a very time consuming, wasteful process. This study showed that certainty of wealth is a far more important concept in determining how school districts function as organizations than is the concept of wealth. The findings 286 show that districts with revenue certainty engage in more rational decision-making than those with revenue uncertainty. The districts with uncertainty show more characteristics of garbage can decision-making. A key concept in rational decision-making is the availability of knowledge, skills, and information which allow procedural planning to occur. Revenue uncertainty creates a vacuum in information, money, and strong leadership. The districts with uncertainty were not only lacking in information but also in people who could the information, skills, and strong leadership. condition leads to garbage can decision-making. but uncertain district had provide conflicting This The wealthy and uncertain information and weak leadership, but it had enough money to continue to make some decisions. Thepoor and uncertain district had nothing except conflicting, uncertain information and many people who thought they knew the answers. Michigan school districts increased uncertainty of wealth. are facing conditions of Even the wealthiest school districts face large tax abatements by industries within their borders. negative Further, revenues categorical significantly provisions, FICA. out-of-formula such as the school recapture funds. The State in last few years. all the school Aid districts of Act state has Because districts pay for expenses have aid changed of its such as In addition, changes in the membership formula caused great uncertainty for in-formula districts as the switch was made from using current year enrollment to prior year 287 enrollment. Significant changes in adult education funding have further increased revenue uncertainties. Michigan school districts find themselves in a dilemma. As they are faced with increasing revenue uncertainties, they are also faced with increased expectations. is mandating that school differently than requirements for district teams. they districts have and in the Michigan's PA 25 conduct past. building There school are improvement The requirement places increased demands on teachers, for which they service time. are asking additional compensation or in- PA 25 requires building and district planning and goal setting. The study showed that revenue uncertainty results in divergent goals and no planning. the business development of an outcomes based alternative student evaluation methods. in-service and additional dollars. PA 25 requires curriculum and Both of these require Further requirements for accreditation for all schools have staffing implications with concurrent financial implications. So, districts face increased demands and less certainty of revenues. This affects study school showed district that revenue uncertainty organizational processes. greatly The findings showed that there is less planning and less goal setting in districts with uncertain revenues. The findings also showed that the organizational processes were less open and inclusive. The uncertainty affects the climate within the organization and the personnel relations. Administrators and what they say about finances are less trusted in districts 288 with uncertain wealthroles. Further, organization. Board members assume administrative the uncertainty filters down into the Through the interviewing process, it was found that principals in the revenue uncertain districts are far more concerned about uncertainties than are the principals in the revenue revenue certain districts. uncertain The administrators districts were more in the consistently dissatisfied with the district budgeting process. So, we find that uncertainty can undercut the entire district. As a final reflection, the findings and conclusions of this study emphasize that school finance reform measures need to address not only the issue of equal dollars for students but also the issue of revenue certainty. It appears that increased involvement at the state level has led to increasing uncertainty for all districts. As lawmakers and policy makers grabble with decisions about how education will be financed and at what revenue level, they certainty. increasingly must If dependent on also consider school districts state collected the are and issue to of become distributed funds rather than local property taxes, it is important that state level decisions about the level of funding and distribution of those funds be made well in advance of the beginning of a new fiscal year. Without this information, school districts will be forced to operate in a vacuum. The vacuum results in garbage can decision-making and leads to confusion in leadership administrators. and distrust in school district This researcher fears that school districts 289 regardless of the level of funding will operate more in the garbage can uncertainty finance than at becomes reform, must a more rational the norm. School begin with earlier level if reform, revenue including and more certain decisions at the legislative and policy maker level. Suggestions and Recommendations The researcher discovered limitations in the previous studies of organizational decision-making. While many of the previous agencies, studies involved governmental little research on budgetary decision-making has been completed in school districts. The research in this study was just a very small beginning. One suggestion for research, continue to study budgetary decision-making then, is to in school districts. School districts in Michigan are making progress in the area of curriculum reform that impacts the budgeting process. School districts are required to measure educational outcomes in non-traditional ways, and to adopt goals and objectives and plans to achieve them. Another area of suggested research is to examine the effects that the mandates of PA 25 have on budgetary decision-making. look at bottom line Also, researchers have tended to numbers budgeting has occurred. and It is assume that incremental a fact of life in school districts that the more money they get, the more they will spend. If they run out, they will ask for more millage and usually (eventually) get it. This researcher believes that 290 budgeting at the building level should be the topic of more research. The principal of a building may get an annual 3% increase for teaching supplies, but is he/she evaluating the expenditure of those funds in terms of goals, plans, and what produces desired educational outcomes? Finally, an unexpected finding of this study was that the districts with uncertainty of wealth had boards of education that were very involved in budgetary decision-making business officials that were less visible. evidence of less administrator trust. and There was also Further research is suggested in the possible interaction between the certainty of wealth and the roles of administrators and board members. The state of Michigan and many other states struggling with the issues of school finance reform. are It is the researcher's theory that certainty of wealth has more impact on budgetary decision-making than the amount of wealth. There is strong evidence in the introduction of this study to support the use of property taxes, sources of revenue, to fund one of the most stable education. However, if the legislators and policy makers decide that other forms of taxes are better, it is this researcher's hope that school districts will be assured a certain level of funding which will be known well in advance so that the organizational processes of school district can proceed in a rational manner. APPENDIX A 291 DISTRICT A 'S FINANCIAL DATA Table A. 1 District Profile 1988-89 381,536,310 3,023 $126,211 33.77 SEV MEMBERSHIP SEV/PP MILLS LEVIED REVENUE: LOCAL LEVY MEMBERSHIP AID $12,884,481 Subtotal Subtotal p/p CATEGORICALS RECAPTURE OTHER LOCAL FEDERAL GRANTS OTHER REVENUE TOTAL REVENUE $14,967,305 REVENUE P/P % 87.20% 0.00% 1.75% 9.21% 0.77% 2.18% 100.00% $365,182 ($141,536) $1,285,122 $140,286 $464,736 $16,513,389 $15,129,890 1991-92 458,594,710 3,170 $144,667 35.2188 % 87.96% 0.00% 7.78% 0.85% 2.81% 100.00% $5,436 $365,746 ($274,209) $1,334,295 $141,828 $503,014 $17,200,564 % 93.70% 0.00% $16,151,155 $5,095 $15,129,890 $4,898 1.35% $16,151,155 0.53% 7.76% 0.82% 2.92% 100.00% $390,110 ($243,685) $577,861 $54,752 $306,283 $17,236,476 0 85% 3.35% 0.32% 1.78% 100.00% $5,437 $5,568 $6,146,158 $349,940 $19,380 $1,404,462 41.33% 2.35% 0.13% 9.44% $6,638,948 $425,935 $22,011 $1,336,107 42.19% 2.71% 0.14% 8.49% $7,034,869 $443,981 $21,863 $1,407,755 42.14% 2.66% 0.13% 8.43% $7,381,982 $462,614 $26,079 $1,474,745 41.82% 2.62% 0.15% 8.36% $1,021,317 $255,954 $299,680 $775,038 $477,404 $2,213,378 $479,992 $209,340 $900,277 $24,877 $65,849 $227,187 6.87% 1.72% 2.02% 5.21% 3.21% 14.88% 3.23% 1.41 % 6.05% 0.17% 0.44% 1.53% $954,359 $289,019 $340,317 $826,252 $537,676 $2,232,396 $520,476 $218,955 $1,032,773 $32,846 $99,148 $230,340 6.06% 1.84% 2.16% 5.25% 3.42% 14.19% 3.31% 1.39% 6.56% 0.21% 0.63% 1.46% $1,104,993 $313,654 $363,439 $894,312 $507,269 $2,251,868 $662,535 $246,115 $1,016,073 $36,874 $135,869 $251,217 6.62% 1.88% 2.18% 5.36% 3.04% 13.49% 3.97% 1.47% 6.09% 0.22% 0.81% 1.50% $1,188,998 $334,237 $392,150 $959,834 $609,258 $2,223,310 $626,672 $292,837 $1,133,451 $37,918 $267,082 $239,161 6.74% 1.89% 2.22% 5.44% 3.45% 12.60% 3.55% 1.66% 6.42% 0.21% 1.51% 1.35% $14,870,233 100.00% $15,737,558 100.00% $16,692,686 100.00% $17,650,328 100.00% EXPEND P/P REV/EXP ENDING FUND BALANCE Source of raw data: $14,399,599 $14,399,599 $4,740 $4,951 EXPENDITURES: INSTRUCTION BASIC PROGRAM ADDED NEEDS ADULT ED BENEFITS SUPPORT SERV PUPIL INSTRUCTION GENERAL ADMIN SCHOOL ADMIN BUSINESS OPER & MNTNC TRANSPRTION CENTRAL SERV SS OTHER COMMUNITY SERV CAPITAL OUTLAY TRANSFERS TOTAL EXPEND % 86.08% 0.00% $12,884,481 $4,262 $407,632 ($145,384) $1,378,007 $115,883 $326,686 1990-91 426,069,270 3,089 $137,931 35.5104 1989-90 406,286,290 3,038 $133,735 35.442 Form B. $4,919 $5,180 $5,404 $97,072 $775,831 $507,878 $781,971 $1,557,802 $2,065,680 Financial Reports. Fourth Friday reports. $5,568 ($413,852) $1,651,828 292 Table A.2 1988-1992 Expenditures 1988-89 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce T ransportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL 1989-90 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL Salaries & Benefits % of Total $5,712,794 $271,037 $16,531 $1,404,462 $7,404,824 38.42% 1.82% 0.11% 9.44% 49.80% $72,824 $3,300 $600 $0 $76,724 0.49% 0.02% 0.00% 0.00% 0.52% $360,540 $75,603 $2,249 $0 $438,392 2.42% 0.51% 0.02% 0.00% 2.95% $6,146,158 $349,940 $19,380 $1,404,462 $7,919,940 41.33% 2.35% 0.13% 9.44% 53.26% $1,012,666 $237,732 $238,672 $762,241 $208,720 $921,397 $389,804 $80,978 $898,263 $15,267 $0 $0 $4,765,740 6.81% 1.60% 1.61% 5.13% 1.40% 6.20% 2.62% 0.54% 6.04% 0.10% 0.00% 0.00% 32.05% $1,833 $14,719 $10,082 $7,236 $164,049 $1,127,712 $31,535 $111,879 $0 $105 $0 $0 $1,469,150 0.01% 0.10% 0.07% 0.05% 1.10% 7.58% 0.21% 0.75% 0.00% 0.00% 0.00% 0.00% 9.88% $6,818 $3,503 $50,926 $5,561 $104,635 $164,269 $58,653 $16,483 $2,014 $9,505 $65,849 $227,187 $715,403 0.05% 0.02% 0.34% 0.04% 0.70% 1.10% 0.39% 0.11% 0.01% 0.06% 0.44% 1.53% 4.81 % $1,021,317 $255,954 $299,680 $775,038 $477,404 $2,213,378 $479,992 $209,340 $900,277 $24,877 $65,849 $227,187 $6,950,293 6.87% 1.72% 2.02% 5.21% 3.21% 14.88% 3.23% 1.41 % 6.05% 0.17% 0.44% 1.53% 46.74% $12,170,564 81.85% $1,545,874 10.40% $1,153,795 7.76% $14,870,233 100.00% Salaries & Benefits % of Total Purchased Services % of Total Total % of Total Expend $6,144,893 $282,463 $17,528 $1,336,107 $7,780,991 39.05% 1.79% 0.11% 8.49% 49.44% $82,519 $2,947 $57 $0 $85,523 0.52% 0.02% 0.00% 0.00% 0.54% $411,536 $140,525 $4,426 $0 $556,487 2.61% 0.89% 0.03% 0.00% 3.54% $6,638,948 $425,935 $22,011 $1,336,107 $8,423,001 42.19% 2.71 % 0.14% 8.49% 53.52% $942,675 $261,223 $259,041 $811,098 $230,966 $961,496 $418,672 $96,921 $1,029,907 $18,872 $0 $0 $5,030,871 5.99% 1.66% 1.65% 5.15% 1.47%' 6.11%' 2.66% 0.62% 6.54% 0.12% 0.00% 0.00% 31.97% $4,033 $17,264 $22,139 $8,833 $175,716 $1,020,381 $34,883 $96,604 $0 $121 $0 $0 $1,379,974 0.03% 0.11% 0.14% 0.06% 1.12% 6.48% 0.22% 0.61% 0.00% 0.00% 0.00% 0.00% 8.77% $7,651 $10,532 $59,137 $6,321 $130,994 $250,519 $66,921 $25,430 $2,866 $13,853 $99,148 $230,340 $903,712 0.05% 0.07% 0.38% 0.04% 0.83% 1.59% 0.43% 0.16% 0.02% 0.09% 0.63% 1.46% 5.74% $954,359 $289,019 $340,317 $826,252 $537,676 $2,232,396 $520,476 $218,955 $1,032,773 $32,846 $99,148 $230,340 $7,314,557 6.06% 1.84% 2.16% 5.25% 3.42% 14.19% 3.31% 1.39% 6.56% 0.21 % 0.63% 1.46% 46.48% $12,811,862 81.41% $1,465,497 9.31% $1,460,199 9.28% $15,737,558 100.00% Purchased Services % of Total Supplies & Materials Supplies & Materials % of Total % of Total Total % of Total Expend 293 Table A.2 (cont'd) 1990-91 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL 1991-92 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL Source of raw data: Salaries & Benefits % of Total $6,474,539 $303,056 $17,394 $1,407,755 $8,202,744 38.79% 1.82% 0.10% 8.43% 49.14% $88,842 $5,023 $966 $0 $94,831 $1,086,594 $283,272 $275,527 $873,547 $251,810 $1,012,587 $464,767 $104,408 $1,017,608 $23,560 $0 $0 $5,393,680 6.51 % 1.70% 1.65% 5.23% 1.51% 6.07% 2.78% 0.63% 6.10% 0.14% 0.00% 0.00% 32.31% $13,596,424 Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend $471,488 $135,902 $3,503 $0 $610,893 2.82% 0.81% 0.02% 0.00% 3.66% $7,034,869 $443,981 $21,863 $1,407,755 $8,908,468 42.14% 2.66% 0.13% 8.43% 53.37% $8,220 $23,405 $20,227 $9,194 $193,930 $956,876 $31,496 $109,167 $0 $378 $0 $0 $1,352,893 $10,179 0.05% $6,977 0.14% $67,685 0.12% 0.06% $11,571 $61,529 1.16% $282,405 5.73% $166,272 0.19% $31,059 0.65% $1,481 0.00% $11,401 0.00% $135,869 0.00% $251,217 0.00% 8.10% $1,037,645 0.06% 0.04% 0.41% 0.07% 0.37% 1.69% 1.00% 0.19% 0.01% 0.07% 0.81% 1.50% 6.22% $1,104,993 $313,654 $363,439 $894,312 $507,269 $2,251,868 $662,535 $244,634 $1,019,089 $35,339 $135,869 $251,217 $7,784,218 6.62% 1.88% 2.18% 5.36% 3.04% 13.49% 3.97% 1.47% 6.11% 0.21% 0.81% 1.50% 46.63% 81.45% $1,447,724 8.67% $1,648,538 9.88% $16,692,686 100.00% Salaries & Benefits % of Total Purchased Services Total % of Total Expend $6,848,574 $346,223 $19,795 $1,474,745 $8,689,337 38.80% 1.96% 0.11% 8.36% 49.23% $76,773 $2,534 $1,298 $0 $80,605 0.43% 0.01 % 0.01% 0.00% 0.46% $456,635 $113,857 $4,986 $0 $575,478 2.59% 0.65% 0.03% 0.00% 3.26% $7,381,982 $462,614 $26,079 $1,474,745 $9,345,420 41.82% 2.62% 0.15% 8.36% 52,95% $1,174,409 $309,386 $293,851 $944,029 $265,644 $1,121,176 $522,986 $112,221 $1,134,931 $29,578 $0 $0 $5,908,211 6.65% 1.75% 1.66% 5.35% 1.51 % 6.35% 2.96% 0.64% 6.43% 0.17% 0.00% 0.00% 33.47% $7,179 $18,643 $15,915 $7,977 $199,168 $969,237 $31,925 $152,802 $0 $611 $0 $0 $1,403,457 0.04% 0.11% 0.09% 0.05% 1.13% 5.49% 0.18% 0.87% 0.00% 0.00% 0.00% 0.00% 7.95% $7,410 $6,208 $82,384 $7,828 $144,446 $132,897 $71,761 $26,652 $1,162 $6,249 $267,082 $239,161 $993,240 0.04% 0.04% 0.47% 0.04% 0.82% 0.75% 0.41% 0.15% 0.01 % 0.04% 1.51% 1.35% 5.63% $1,188,998 $334,237 $392,150 $959,834 $609,258 $2,223,310 $626,672 $291,675 $1,136,093 $36,438 $267,082 $239,161 $8,304,908 6.74% 1.89% 2.22% 5.44% 3.45% 12.60% 3.55% 1.65% 6.44% 0.21% 1.51% 1.35% 47.05% $14,597,548 82.70%. $1,484,062 8.41% $1,568,718 8.89% $17,650,328 100.00% Form B 0.53% 0.03% 0.01% 0.00% 0.57% % of Total Supplies & Materials % of Total 294 Table A.3 Budget to Actual Comparison BUDGET ACTUAL 1988-89 REVENUE $14,269,500 $14,967,305 95.34% EXPENDITURE $14,300,000 $14,870,233 96.27% $16,513,389 98.27% 1989-90 REVENUE $16,211,000 % OF ACCURACY EXPENDITURE $16,275,000 $15,737,558 96.58% 1990-1991 REVENUE $17,119,000 $17,200,564 99.53% EXPENDITURE $17,154,000 $16,692,686 97.24% 1991-1992 REVENUE $17,790,000 $17,236,476 96.79% $1,779,000 $17,650,328 99.21% EXPENDITURE Source of raw data: Board Minutes, Form B APPENDIX B 295 DISTRICT B ’S FINANCIAL DATA Table B.1 District Profile 1988-89 217,556,580 2,425 $89,714 43.00 SEV MEMBERSHIP SEV/PP MILLS LEVIED REVENUE: LOCAL LEVY MEMBERSHIP AID $9,354,933 $0 Subtotal Subtotal p/p CATEGORICALS RECAPTURE INDIRECT FEDERAL DIRECT FEDERAL OTHER REVENUE TOTAL REVENUE REVENUE P/P 1989-90 221,807,331 2,322 $95,524 43.00 84.64% 0.00% $9,354,933 $3,858 $753,893 $0 $458,090 $485,113 $0 $11,052,029 $9,537,715 $0 1990-91 227,339,550 2,259 $100,637 43.00 85.29% 0.00% $9,537,715 $4,108 6.82% 4.14% 4.39% 0.00% $728,578 $0 $444,669 $471,131 $0 100.00% $11,182,093 $4,558 $9,775,601 $0 1991-92 224,812,520 2,352 $95,584 43.00 82.91% 0.00% $9,775,601 $4,327 6.52% 3.98% 4.21% 0.00% $627,429 $0 $803,541 $540,918 $42,439 100.00% $11,789,928 $4,816 $9,666,938 $600,000 74.17% 4.60% $10,266,938 $4,365 5.32% 6.82% 4.59% 0.36% $567,497 $0 $551,231 $957,706 $690,964 4.23% 7.35% 5.30% 100.00% $13,034,336 100.00% $5,219 4.35% $5,542 EXPENDITURES: INSTRUCTION BASIC PROGRAM ADDED NEEDS ADULT ED BENEFITS SUPPORT SERV PUPIL INSTRUCTION GENERAL ADMIN SCHOOL ADMIN BUSINESS OPER & MNTNC TRANSPRTION CENTRAL SERV SS OTHER COMMUNITY SERV CAPITAL OUTLAY TRANSFERS $3,892,122 $726,028 $32,141 $787,520 40.23% 7.50% 0.33% 8.14% $3,983,537 $1,021,667 $29,458 $897,593 37.22% 9.55% 0.28% 8.39% $4,546,021 $1,021,598 $30,899 $941,073 38.54% 8.66% 0.26% 7.98% $4,648,442 $1,524,568 $37,890 $1,126,164 34.08% 11.18% 0.28% 8.26% $507,534 $198,659 $334,361 $546,121 $205,814 $1,297,371 $175,089 $49,386 $669,773 $2,069 $52,083 $199,466 5.25% 2.05% 3.46% 5.64% 2.13% 13.41% 1.81% 0.51% 6.92% 0.02% 0.54% 2.06% $515,798 $304,303 $290,588 $565,694 $266,006 $1,658,445 $161,037 $50,783 $679,180 $602 $117,754 $159,865 4.82% 2.84% 2.72% 5.29% 2.49% 15.50% 1.50% 0.47% 6.35% 0.01% 1.10% 1.49% $655,313 $474,880 $244,179 $613,668 $459,428 $1,529,798 $171,812 $46,877 $800,551 $2,297 $102,982 $153,611 5.56% 4.03% 2.07% 5.20% 3.90% 12.97% 1.46% 0.40% 6.79% 0.02% 0.87% 1.30% $615,266 $820,637 $255,405 $629,931 $462,277 $1,728,926 $201,993 $51,158 $870,664 $12,177 $450,510 $203,000 4.51 % 6.02% 1.87% 4.62% 3.39% 12.68% 1.48% 0.38% 6.38% 0.09% 3.30% 1.49% TOTAL EXPEND $9,675,537 100.00% $10,702,310 100.00% $11,794,987 100.00% $13,639,008 100.00% EXPEND P/P $3,990 $4,609 REV/EXP $1,376,492 $479,783 ENDING FUND BALANCE $1,510,049 $1,989,832 Source of raw data: Form B. Financial Reports. Fourth Friday $5,221 ($5,059) $1,984,773 reports. $5,799 ($604,672) $1,380,101 296 Table B . 2 1988-1992 Expenditures 1988-89 Salaries & Benefits % of Total Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $3,712,835 $662,348 $12,635 $787,520 $5,175,338 38.37% 6.85% 0.13% 8.14% 53.49% $2,686 $42,948 $19,506 $0 $65,140 0.03% 0.44% 0.20% 0.00% 0.67% $176,601 $20,732 $0 $0 $197,333 1.83% 0.21% 0.00% 0.00% 2.04% $3,892,122 $726,028 $32,141 $787,520 $5,437,811 40.23% 7.50% 0.33% 8.14% 56.20% $491,517 $178,949 $162,085 $496,848 $112,031 $699,286 $0 $0 $669,773 $0 $0 $0 $2,810,489 5.08% 1.85% 1.68% 5.14% 1.16% 7.23% 0.00% 0.00% 6.92% 0.00% 0.00% 0.00% 29.05% $5,772 $6,391 $83,703 $36,832 $89,830 $548,850 $174,481 $45,154 $0 $116 $0 $0 $991,129 0.06% 0.07% 0.87% 0.38% 0.93% 5.67% 1.80% 0.47% 0.00% 0.00% 0.00% 0.00% 10.24% $10,245 $13,319 $88,573 $12,441 $3,953 $49,235 $608 $4,232 $0 $1,953 $52,083 $199,466 $436,108 0.11% 0.14% 0.92% 0.13% 0.04% 0.51% 0.01 % 0.04% 0.00% 0.02% 0.54% 2.06% 4.51% $507,534 $198,659 $334,361 $546,121 $205,814 $1,297,371 $175,089 $49,386 $669,773 $2,069 $52,083 $199,466 $4,237,726 5.25% 2.05% 3.46% 5.64% 2.13% 13.41% 1.81% 0.51 % 6.92% 0.02% 0.54% 2.06% 43.80% GRAND TOTAL $7,985,827 82.54% $1,056,269 10.92% $633,441 6.55% $9,675,537 100.00% Salaries & Benefits % of Total Purchased Sen/ices % of Total $3,850,092 $962,852 $12,656 $897,593 $5,723,193 35.97% 9.00% 0.12% 8.39% 53.48% $4,988 $8,631 $16,198 $0 $29,817 0.05% 0.08% 0.15% 0.00% 0.28% $128,457 $50,184 $604 $0 $179,245 1.20% 0.47% 0.01% 0.00% 1.67% $3,983,537 $1,021,667 $29,458 $897,593 $5,932,255 37.22% 9.55% 0.28% 8.39% 55.43% $490,131 $272,639 $162,702 $509,759 $143,672 $771,938 $0 $0 $679,180 $0 $0 $0 $3,030,021 4.58% 2.55% 1.52% 4.76% 1.34% 7.21% 0.00% 0.00% 6.35% 0.00% 0.00% 0.00% 28.31% $6,501 $6,771 $109,670 $28,342 $115,022 $829,420 $160,086 $45,241 $0 $582 $0 $0 $1,301,635 0.06% 0.06% 1.02% 0.26% 1.07% 7.75% 1.50% 0.42% 0.00% 0.01 % 0.00% 0.00% 12.16% $19,166 $24,893 $18,216 $27,593 $7,312 $57,087 $951 $5,542 $0 $20 $117,754 $159,865 $438,399 0.18% 0.23% 0.17% 0.26% 0.07% 0.53% 0.01% 0.05% 0.00% 0.00% 1.10% 1.49% 4.10% $515,798 $304,303 $290,588 $565,694 $266,006 $1,658,445 $161,037 $50,783 $679,180 $602 $117,754 $159,865 $4,770,055 4.82% 2.84% 2.72% 5.29% 2.49% 15,50% 1.50% 0.47% 6.35% 0.01% 1.10% 1.49% 44.57% $8,753,214 81.79% $1,331,452 12.44% $617,644 5.77% $10,702,310 100.00% 1989-90 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL Supplies & Materials % of Total Total % of Total Expend 297 Table B.2 (cont'd) 1990-91 Salaries & Benefits % of Total Purchased Services Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $4,357,700 $977,676 $0 $941,073 $6,276,449 36.95% 8.29% 0.00% 7.98% 53.21% $3,831 $7,669 $15,899 $0 $27,399 $621,487 $400,532 $159,146 $540,208 $154,158 $829,457 $0 $0 $800,551 $0 $0 $0 $3,505,539 5.27% 3.40% 1.35% 4.58% 1.31% 7.03% 0.00% 0.00% 6.79% 0.00% 0.00% 0.00% 29.72% GRAND TOTAL $9,781,988 82.93% Salaries & Benefits % of Total $4,517,265 $1,348,843 $0 $1,126,164 $6,992,272 33.12% 9.89% 0.00% 8.26% 51.27% $6,747 $33,014 $19,385 $0 $59,146 $584,140 $673,522 $154,544 $551,192 $181,422 $880,689 $0 $0 $870,664 $10,410 $0 $0 $3,906,583 4.28% 4.94% 1.13% 4.04% 1.33% 6.46% 0.00% 0.00% 6.38% 0.08% 0.00% 0,00%. 28.64% $10,898,855 79.91% 1991-92 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL Source of raw data: Form B % of Total Supplies & Materials % of Total Total % of Total Expend $184,490 $36,253 $15,000 $0 $235,743 1.56% 0.31% 0.13% 0.00% 2.00% $4,546,021 $1,021,598 $30,899 $941,073 $6,539,591 38.54% 8.66% 0.26% 7.98% 55.44% $7,956 $14,963 $81,292 $40,025 $121,171 $263,877 $170,815 $31,677 $0 $250 $0 $0 $732,026 0.07% $25,870 0.13% $59,385 0.69% $3,741 0.34% $33,435 $184,099 1.03% 2.24% $436,464 1.45% $997 0.27% $15,200 $0 0.00% 0.00% $2,047 0.00% $102,982 $153,611 0.00% 6.21% $1,017,831 0.22% 0.50% 0.03% 0.28% 1.56% 3.70% 0.01% 0.13% 0.00% 0.02% 0.87% 1.30% 8.63% $655,313 $474,880 $244,179 $613,668 $459,428 $1,529,798 $171,812 $46,877 $800,551 $2,297 $102,982 $153,611 $5,255,396 5.56% 4.03% 2.07% 5.20% 3.90% 12.97% 1.46% 0.40% 6.79% 0.02% 0.87% 1.30% 44.56% $759,425 6.44% $1,253,574 10.63% $11,794,987 100.00% Total % of Total Expend Purchased Services 0.03% 0.07% 0.13% 0.00% 0.23% % of Total Supplies & Materials % of Total $124,430 $142,711 $18,505 $0 $285,646 0.91% 1.05% 0.14% 0.00% 2.09% $4,648,442 $1,524,568 $37,890 $1,126,164 $7,337,064 34.08% 11.18% 0.28% 8.26% 53.79% $6,899 $37,734 $86,630 $42,847 $126,239 $377,529 $201,435 $46,746 $0 $0 $0 $0 $926,059 $24,227 0.05% $109,381 0.28% $14,231 0.64% 0.31% $35,892 0.93% $154,616 $470,708 2.77% 1.48% $558 0.34% $4,412 $0 0.00% $1,767 0.00% $450,510 0.00% $203,000 0.00% 6.79% $1,469,302 0.18% 0.80% 0.10% 0.26% 1.13% 3.45% 0.00% 0.03% 0.00% 0.01% 3.30% 1.49% 10.77% $615,266 $820,637 $255,405 $629,931 $462,277 $1,728,926 $201,993 $51,158 $870,664 $12,177 $450,510 $203,000 $6,301,944 4.51 % 6.02% 1.87% 4.62% 3.39% 12.68% 1.48% 0.38% 6.38% 0.09% 3.30% 1.49% 46.21% $985,205 7.22% $1,754,948 12.87% $13,639,008 100.00% 0.05% 0.24% 0.14% 0.00% 0.43% Table B.3 Budget to Actual Comparison BUDGET ACTUAL % OF ACCURACY 1988-89 REVENUE $8,681,102 $11,052,029 78.55% EXPENDITURE $8,606,652 $9,675,537 88.95% 1989-90 REVENUE $10,926,472 $11,182,093 97.71% EXPENDITURE $10,922,042 $10,702,310 97.95% 1990-1991 REVENUE $11,454,257 $11,789,928 97.15% EXPENDITURE $11,557,267 $11,794,987 97.98% 1991-1992 REVENUE $11,446,609 $13,034,337 87.92% EXPENDITURE $13,116,676 $13,639,008 96.17% Source of raw data: Board Minutes, Form B APPENDIX C 299 DISTRICT C'S FINANCIAL DATA Table C.1 District Profile 1988-89 104,772,882 2,054 $51,009 34.87 SEV MEMBERSHIP SEV/PP MILLS LEVIED REVENUE: LOCAL LEVY MEMBERSHIP AID $3,653,430 $2,613,342 Subtotal Subtotal p/p CATEGORICALS RECAPTURE OTHER LOCAL FEDERAL GRANTS OTHER REVENUE TOTAL REVENUE REVENUE P/P EXPEND P/P % 50.57% 36.18% $6,266,772 $3,051 $261,133 $0 $377,190 $168,852 $149,858 $7,223,805 $3,994,915 $2,686,615 1990-91 128,499,514 2,427 $52,946 34.3692 % 52.21% 35.11% 3.611% 5.22% 2.34% 2.07% $283,056 $0 $287,698 $227,343 $171,835 100.00% $7,651,462 $4,416,425 $3,774,932 1991-92 142,006,704 2,561 $55,450 34.1284 % 47.35% 40.47% $8,191,357 $3,375 $6,681,530 $3,220 $3,517 EXPENDITURES: INSTRUCTION BASIC PROGRAM ADDED NEEDS ADULT ED BENEFITS SUPPORT SERV PUPIL INSTRUCTION GENERAL ADMIN SCHOOL ADMIN BUSINESS OPER & MNTNC TRANSPRTION CENTRAL SERV SS OTHER COMMUNITY SERV CAPITAL OUTLAY TRANSFERS TOTAL EXPEND 1989-90 115,292,710 2,075 $55,563 34,6502 3.70% 2.99% 3.76% 2.97% 2.25% 100.00% $9,327,295 2.65% 3.21% 2.61% 3.37% $276,882 $0 $307,345 $302,170 $442,635 2.94% 2.89% 4.24% 100.00% $10,449,479 100.00% $3,843 $4,080 $2,821,021 $501,658 $282,368 $587,004 38.99% 6.93% 3.90% 8.11% $3,060,881 $523,714 $324,661 $716,266 40.25% 6.89% 4.27% 9.42% $3,399,970 $570,307 $703,935 $817,597 37.60% 6.31% 7.78 % 9.04% $3,823,595 $699,057 $931,072 $944,030 36.98% 6.76% 9.01% 9.13% $206,026 $139,299 $224,384 $419,241 $129,190 $767,653 $307,440 $28,281 $310,746 $43,679 $148,526 $318,715 2.85% 1.93% 3.10% 5.79% 1.79% 10.61% 4.25% 0.39% 4.29% 0.60% 2.05% 4.41 % $218,727 $168,594 $232,623 $452,560 $105,742 $784,479 $348,171 $27,837 $380,755 $44,926 $53,078 $160,843 2.88% 2.22% 3.06% 5.95% 1.39% 10.32% 4.58% 0.37% 5.01% 0.59% 0.70% 2.12% $237,031 $156,243 $260,278 $497,948 $101,217 $859,171 $390,855 $31,413 $389,743 $46,661 $166,455 $414,502 2.62% 1.73% 2.88% 5.51% 1.12% 9.50% 4.32% 0.35% 4.31% 0.52% 1.84% 4.58% $262,824 $191,431 $296,655 $535,174 $204,457 $880,014 $410,126 $42,446 $444,241 $56,584 $143,977 $473,251 2.54% 1.85% 2.87% 5.18% 1.98% 8.51% 3.97% 0.41% 4.30% 0.55% 1.39% 4.58% $7,235,231 100.00% $7,603,857 100.00% $9,043,326 100.00% $10,338,934 100.00% $3,523 $3,665 $3,726 $4,037 REV/EXP ($11.426) $47,605 $283,969 $110,545 ENDING FUND BALANCE $323,521 $371,127 $655,096 $765,641 Source of raw data: % 46.38% 40.90% $9,120,447 $3,561 $278,747 $0 $299,066 $243,358 $314,767 $3,687 $4,846,462 $4,273,985 Form B. Financial Reports. Fourth Friday reports. 300 Table C. 2 1988-1992 Expenditures 1988-89 Salaries & Benefits % of Total Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Sen/ Capital Outlay Outgoing Transfers Total Support $2,689,780 $439,229 $218,151 $587,004 $3,934,164 37.18% 6.07% 3.02% 3.11% 54.38% $2,893 $26,231 $35,790 $0 $64,914 0.04% 0.36% 0.49% 0.00% 0.90% $128,348 $36,198 $28,427 $0 $192,973 1.77% 0.50% 0.39% 0.00% 2.67% $2,821,021 $501,658 $282,368 $587,004 $4,192,051 38.99% 6.93% 3.90% 8.11% 57.94% $187,620 $110,322 $179,348 $385,877 $0 $300,548 $241,904 $0 $310,746 $11,094 $0 $0 $1,727,459 2.59% 1.52% 2.48% 5.33% 0.00% 4.15% 3.34% 0.00% 4.29% 0.15% 0.00% 0.00% 23.88% $10,369 $5,168 $35,152 $15,992 $36,677 $459,052 $17,996 $27,338 $0 $4,679 $0 $0 $612,423 0.14% 0.07% 0.49% 0.22% 0.51% 6.34% 0.25% 0.38% 0.00% 0.06% 0.00% 0.00% 8.46% $8,037 $23,809 $9,884 $17,372 $92,513 $8,053 $47,540 $943 $0 $27,906 $148,526 $318,715 $703,298 0.11% 0.33% 0.14% 0.24% 1.28% 0.11% 0.66% 0.01% 0.00% 0.39% 2.05% 4.41 % 9.72% $206,026 $139,299 $224,384 $419,241 $129,190 $767,653 $307,440 $28,281 $310,746 $43,679 $148,526 $318,715 $3,043,180 2.85% 1.93% 3.10% 5.79% 1.79% 10.61% 4.25% 0.39% 4.29% 0.60% 2.05% 4.41% 42.06% GRAND TOTAL $5,661,623 78.25% $677,337 9.36% $896,271 12.39% $7,235,231 100.00% Salaries & Benefits % of Total Total % of Total Expend 1989-90 Purchased Services % of Total Supplies & Materials % of Total Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $2,928,292 $466,192 $256,704 $716,266 $4,367,454 38.51% 6.13% 3.38% 9.42% 57.44% $2,735 $28,315 $35,536 $0 $66,586 0.04% 0.37% 0.47% 0.00% 0.88% $129,854 $29,207 $32,421 $0 $191,482 1.71% 0.38% 0.43% 0.00% 2.52% $3,060,881 $523,714 $324,661 $716,266 $4,625,522 40.25% 6.89% 4.27% 9.42% 60.83% $198,464 $138,472 $188,138 $410,890 $0 $335,212 $256,471 $0 $380,755 $12,821 $0 $0 $1,921,223 2.61% 1.82% 2.47% 5.40% 0.00% 4.41% 3.37% 0.00% 5.01% 0.17% 0.00% 0.00% 25.27% $13,075 $3,133 $31,453 $20,815 $33,641 $441,770 $12,121 $27,837 $0 $8,218 $0 $0 $592,063 0.17% 0.04% 0.41% 0.27% 0.44% 5.81 % 0.16% 0.37% 0.00% 0.11% 0.00% 0.00% 7.79% $7,188 $26,989 $13,032 $20,855 $72,101 $7,497 $79,579 $0 $0 $23,887 $53,078 $160,843 $465,049 0.09% 0.35% 0.17% 0.27% 0.95% 0.10% 1.05% 0.00% 0.00% 0.31% 0.70% 2.12% 6.12% $218,727 $168,594 $232,623 $452,560 $105,742 $784,479 $348,171 $27,837 $380,755 $44,926 $53,078 $160,843 $2,978,335 2.88% 2.22% 3.06% 5.95% 1.39% 10.32% 4.58% 0.37% 5.01% 0.59% 0.70% 2.12% 39.17% GRAND TOTAL $6,288,677 82.70% $658,649 8.66% $656,531 8.63% $7,603,857 100.00% 301 Table C.2 (cont'd) 1990-91 Salaries & Benefits % of Total Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $3,243,937 $533,277 $572,890 $817,597 $5,167,701 35.87% 5.90% 6.33% 9.04% 57.14% $3,331 $8,650 $82,105 $0 $94,086 0.04% 0.10% 0.91% 0.00% 1.04% $152,702 $28,380 $48,940 $0 $230,022 1.69% 0.31% 0.54% 0.00% 2.54% $3,399,970 $570,307 $703,935 $817,597 $5,491,809 37.60% 6.31% 7.78% 9.04% 60.73% $202,593 $129,449 $210,512 $449,654 $0 $369,232 $291,634 $0 $389,743 $17,985 $0 $0 $2,060,802 2.24% 1.43% 2.33% 4.97% 0.00% 4.08% 3.22% 0.00% 4.31 % 0.20% 0.00% 0.00% 22.79% $25,532 $3,780 $30,698 $24,911 $42,099 $478,287 $4,982 $28,875 $0 $7,605 $0 $0 $646,769 0.28% 0.04% 0.34% 0.28% 0.47% 5.29% 0.06% 0.32% 0.00% 0.08% 0.00% 0.00% 7.15% $8,906 $23,014 $19,068 $23,383 $59,118 $11,652 $94,239 $2,538 $0 $21,071 $166,455 $414,502 $843,946 0.10% 0.25% 0.21% 0.26% 0.65% 0.13% 1.04% 0.03% 0.00% 0.23% 1.84% 4.58% 9.33% $237,031 $156,243 $260,278 $497,948 $101,217 $859,171 $390,855 $31,413 $389,743 $46,661 $166,455 $414,502 $3,551,517 2.62% 1.73% 2.88% 5.51% 1.12% 9.50% 4.32% 0.35% 4.31% 0.52% 1.84% 4.58% 39.27% GRAND TOTAL $7,228,503 79.93% $740,855 8.19% $1,073,968 11.88% $9,043,326 100.00% Salaries & Benefits % of Total 1991-92 Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce T ransportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $3,605,211 $640,674 $776,442 $944,030 $5,966,357 34.87% 6.20% 7.51% 9.13% 57.71% $5,399 $31,168 $74,647 $0 $111,214 0.05% 0.30% 0.72% 0.00% 1.08% $212,985 $27,215 $79,983 $0 $320,183 2.06% 0.26% 0.77% 0.00% 3.10% $3,823,595 $699,057 $931,072 $944,030 $6,397,754 36.98% 6.76% 9.01% 9.13% 61.88% $215,910 $154,710 $228,372 $485,201 $4,846 $404,665 $315,192 $0 $444,241 $22,447 $0 $0 $2,275,584 2.09% 1.50% 2.21% 4.69% 0.05% 3.91% 3.05% 0.00% 4.30% 0.22% 0.00% 0.00% 22.01% $31,460 $8,411 $48,482 $23,931 $156,510 $466,442 $4,193 $33,772 $0 $11,812 $0 $0 $785,013 0.30% 0.08% 0.47% 0.23% 1.51% 4.51% 0.04% 0.33% 0.00% 0.11% 0.00% 0.00% 7.59% $15,454 $28,310 $19,801 $26,042 $43,101 $8,907 $90,741 $8,674 $0 $22,325 $143,977 $473,251 $880,583 0.15% 0.27% 0.19% 0.25% 0.42% 0.09% 0.88% 0.08% 0.00% 0.22% 1.39% 4.58% 8.52% $262,824 $191,431 $296,655 $535,174 $204,457 $880,014 $410,126 $42,446 $444,241 $56,584 $143,977 $473,251 $3,941,180 2.54% 1.85% 2.87% 5.18% 1.98% 8.51% 3.97% 0.41% 4.30% 0.55% 1.39% 4.58% 38.12% GRAND TOTAL $8,241,941 79.72% $896,227 8.67% $1,200,766 11.61% $10,338,934 100.00% Source of raw data: Form B 302 Table C.3 Budget to Actual Comparison % OF ACCURACY BUDGET ACTUAL 1988-89 REVENUE $6,513,258 $7,223,805 90.16% EXPENDITURE $6,511,352 $7,235,231 90.00% 1989-90 REVENUE $7,514,910 $7,651,462 98.22% EXPENDITURE $7,635,613 $7,603,858 99.58% 1990-1991 REVENUE $8,248,951 $9,327,295 88.44% EXPENDITURE $8,295,849 $9,043,326 91.73% 1991-1992 REVENUE $9,889,083 $10,449,479 94.64% EXPENDITURE $9,989,958 $10,338,934 96.62% Source of raw data: Board Minutes, Form B APPENDIX D 303 DISTRICT D'S FINANCIAL DATA Table D.1 District Profile 1988-89 211,205,912 3,331 $63,406 26.2195 SEV MEMBERSHIP SEV/PP MILLS LEVIED REVENUE: LOCAL LEVY MEMBERSHIP AID $5,537,713 $1,901,752 Subtotal Subtotal p/p CATEGORICALS RECAPTURE INDIR FED GRANTS DIRECT FED GRANTS OTHER REVENUE TOTAL REVENUE REVENUE P/P EXPEND P/P REV/EXP ENDING FUND BALANCE Source of raw data: % 49.24% 16.91% $7,439,465 $2,233 $531,117 $0 $518,653 $2,182,168 $574,178 $11,245,581 $5,801,031 $2,127,652 1990-91 240,883,920 3,487 $69,081 26.1539 % 47.63% 17.47% $7,928,683 $2,399 4.72% 4.61% 19.40% 5.11% $620,235 $0 $547,287 $2,809,573 $274,848 100.00% $12,180,626 $3,376 EXPENDITURES: INSTRUCTION BASIC PROGRAM ADDED NEEDS ADULT ED BENEFITS SUPPORT SERV PUPIL INSTRUCTION GENERAL ADMIN SCHOOL ADMIN BUSINESS OPER & MNTNC TRANSPRTION CENTRAL SERV SS OTHER COMMUNITY SERV CAPITAL OUTLAY TRANSFERS TOTAL EXPEND 1989-90 221,160,147 3,305 $66,917 26.23 $6,300,054 $3,203,799 1991-92 260,372,842 3,481 $74,798 26.1225 % 45.19% 22.98% 4.49% 23.07% 2.26% $637,548 $0 $405,226 $2,696,829 $696,720 100.00% $13,940,176 $3,686 50.84% 18.89% $9,329,056 $2,680 $9,503,853 $2,726 5.09% % $6,801,590 $2,527,466 5.11% 2.91% 19.35% 5.00% $684,267 $0 $422,711 $2,390,833 $551,493 3.16% 17.87% 4.12% 100.00% $13,378,360 100 .0 0 % 4.57% $3,843 $3,998 $4,831,110 $1,175,961 $282,686 $881,568 40.33% 9.82% 2.36% 7.36% $5,138,289 $1,366,666 $315,773 $962,300 40.62% 10.80% 2.50% 7.61 % $5,404,378 $1,452,852 $301,472 $1,011,695 39.14% 10.52% 2.18% 7.33% $5,730,403 $1,433,833 $335,981 $1,216,731 40.14% 10.04% 2.35% 8.52% $262,003 $177,533 $321,286 $570,174 $204,168 $1,243,797 $1,212,909 $10,835 $391,607 $0 $66,697 $346,538 2.19% 1.48% 2.68% 4.76% 1.70% 10.38% 10.13% 0.09% 3.27% 0.00% 0.56% 2.89% $296,538 $188,496 $368,241 $616,178 $214,003 $1,241,111 $1,116,779 $8,697 $470,600 $0 $1,120 $346,296 2.34% 1.49% 2.91% 4.87% 1.69% 9.81% 8.83% 0.07% 3.72% 0.00% 0.01% 2.74% $271,616 $170,359 $401,132 $663,010 $317,162 $1,185,926 $938,997 $0 $545,216 $0 $451,427 $692,867 1.97% 1.23% 2.91% 4.80% 2.30% 8.59% 6.80% 0.00% 3.95% 0.00% 3.27% 5.02% $294,667 $171,549 $415,202 $744,945 $368,294 $1,186,195 $965,150 $0 $656,348 $0 $49,807 $706,903 2.06% 2.91% 5.22% 2.58% 8.31% 6.76% 0.00% 4.60% 0.00% 0.35% 4.95% $11,978,872 100.00% $12,651,087 100.00% $13,808,109 100.00% $14,276,008 100 .0 0 % $3,596 ($733,291) $2,942,779 $3,828 ($470,461) $2,472,318 Form B. Financial Reports. Fourth Friday reports. $3,960 $132,067 $2,604,385 $4,101 ($897,648) $1,706,737 1 .20 % 304 Table D. 2 1988-1992 Expenditures 1988-89 Salaries & Benefits % of Total Purchased Services % of Total Supplies & Materials % of Total Total % of Total Expend Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $4,439,676 $883,029 $163,123 $881,568 $6,367,396 37.06% 7.37% 1.36% 7.36% 53.16% $114,822 $132,429 $8,085 $0 $255,336 0.96% 1.11% 0.07% 0.00% 2.13% $276,612 $160,503 $111,478 $0 $548,593 2.31% 1.34% 0.93% 0.00% 4.58% $4,831,110 $1,175,961 $282,686 $881,568 $7,171,325 40.33% 9.82% 2.36% 7.36% 59.87% $259,206 $158,914 $230,592 $570,174 $0 $557,696 $558,961 $11,120 $391,607 $0 $0 $0 $2,738,270 2.16% 1.33% 1.92% 4.76% 0.00% 4.66% 4.67% 0,09% 3.27% 0.00% 0.00% 0.00% 22.86% $1,145 $0 $35,186 $0 $204,168 $666,171 $61,983 $0 $0 $0 $0 $0 $968,653 0.01% $1,652 $18,619 0.00% 0.29% $55,508 0.00% $0 1.70% $0 $19,930 5.56% 0.52% $591,965 0.00% ($285) 0.00% $0 $0 0.00% $66,697 0.00% 0.00% $346,538 8.09% $1,100,624 0.01 % 0.16% 0.46% 0.00% 0.00% 0.17% 4.94% -0.00% 0.00% 0.00% 0.56% 2.89% 9.19% $262,003 $177,533 $321,286 $570,174 $204,168 $1,243,797 $1,212,909 $10,835 $391,607 $0 $66,697 $346,538 $4,807,547 2.19% 1.48% 2.68% 4.76% 1.70% 10.38% 10.13% 0.09% 3.27% 0.00% 0.56% 2.89% 40.13% GRAND TOTAL $9,105,666 76.01% $1,223,989 10.22% $1,649,217 13.77% $11,978,872 100.00% Salaries & Benefits % of Total Purchased Services % of Total Total % of Total Expend 1989-90 Supplies & Materials % of Total Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce T ransportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support $4,790,621 $996,777 $173,511 $962,300 $6,923,209 37.87% 7. 88 % 1.37%, 7.61% 54.72% $97,071 $148,138 $8,113 $0 $253,322 0.77% 1.17% 0.06% 0.00% 2.00% $250,597 $221,751 $134,149 $0 $606,497 1.98% 1.75% 1.06% 0.00% 4.79% $5,138,289 $1,366,666 $315,773 $962,300 $7,783,028 40.62% 10.80% 2.50% 7.61% 61.52% $294,150 $168,661 $238,744 $616,178 $0 $575,684 $601,725 $8,697 $470,600 $0 $0 $0 $2,974,439 2.33% 1.33% 1.89% 4.87% 0.00% 4.55% 4.76% 0.07% 3.72% 0.00% 0.00% 0.00% 23.51% $887 $0 $40,811 $0 $214,003 $642,889 $67,013 $0 $0 $0 $0 $0 $965,603 0.01% 0.00% 0.32% 0.00% 1.69% 5.08% 0.53% 0.00% 0.00% 0.00% 0.00% 0.00% 7.63% $1,501 $19,835 $88,686 $0 $0 $22,538 $448,041 $0 $0 $0 $1,120 $346,296 $928,017 0.01% 0.16% 0.70% 0.00% 0.00% 0.18% 3.54% 0.00% 0.00% 0.00% 0.01% 2.74% 7.34% $296,538 $188,496 $368,241 $616,178 $214,003 $1,241,111 $1,116,779 $8,697 $470,600 $0 $1,120 $346,296 $4,868,059 2.34% 1.49% 2.91% 4.87% 1.69% 9.81% 8.83% 0.07% 3.72% 0.00% 0.01% 2.74% 38.48% GRAND TOTAL $9,897,648 78.24% $1,218,925 9.63% $1,534,514 12.13% $12,651,087 100.00% 305 Table D.2 (cont'd) 1990-91 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce Transportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL 1991-92 Instruction: Basic Programs Added Needs Adult Ed Benefits Total Instruction Support: Pupil Instruct Staff General Admin School Admin Business Oper & Mntnce T ransportation Central Benefits Community Serv Capital Outlay Outgoing Transfers Total Support GRAND TOTAL Source of raw data: Salaries & Benefits % of Total $5,045,010 $1,102,019 $160,654 $1,011,695 $7,319,378 36.54% 7.98% 1.16% 7.33% 53.01% $86,216 $208,107 $8,140 $0 $302,463 0.62% 1.51% 0.06% 0.00% 2.19% $273,152 $142,726 $132,678 $0 $548,556 1.98% 1.03% 0.96% 0.00% 3.97% $5,404,378 $1,452,852 $301,472 $1,011,695 $8,170,397 39.14% 10.52% 2.18% 7.33% 59.17% $268,659 $169,710 $287,990 $663,010 $0 $595,657 $666,102 $0 $545,216 $0 $0 $0 $3,196,344 1.95% 1.23% 2.09% 4.80% 0.00% 4.31 % 4.82% 0.00% 3.95% 0.00% 0.00% 0.00% 23.15% $465 $0 $47,709 $0 $317,162 $515,634 $60,493 $0 $0 $0 $0 $0 $941,463 0.00% $2,492 0.00% $649 0.35% $65,433 0.00% $0 2.30% $0 3.73% $74,635 0.44% $212,402 0.00% $0 0.00% $0 0.00% $0 0.00% $451,427 0.00% $692,867 6.82% $1,499,905 0.02% 0.00% 0.47% 0.00% 0.00% 0.54% 1.54% 0.00% 0.00% 0.00% 3.27% 5.02% 10.86% $271,616 $170,359 $401,132 $663,010 $317,162 $1,185,926 $938,997 $0 $545,216 $0 $451,427 $692,867 $5,637,712 1.97% 1.23% 2.91% 4.80% 2.30% 8.59% 6.80% 0.00% 3.95% 0.00% 3.27% 5.02% 40.83% $10,515,722 76.16% $1,243,926 9.01 % $2,048,461 14.84% $13,808,109 100.00% Salaries & Benefits % of Total Purchased Services Total % of Total Expend $5,408,568 $1,163,230 $189,241 $1,216,731 $7,977,770 37.89% 8.15% 1.33% 8.52% 55.88% $104,641 $204,533 $11,435 $0 $320,609 0.73% 1.43% 0.08% 0.00% 2.25% $217,144 $66,070 $135,355 $0 $418,569 1.52% 0.46% 0.95% 0.00% 2.93% $5,730,353 $1,433,833 $336,031 $1,216,731 $8,716,948 40.14% 10.04% 2.35% 8.52% 61.06% $292,320 $171,549 $301,927 $744,945 $0 $648,260 $719,392 $0 $656,348 $0 $0 $0 $3,534,741 2.05% 1.20% 2.11% 5.22% 0.00% 4.54% 5.04% 0.00% 4.60% 0.00% 0.00% 0.00% 24.76% $417 $0 $49,064 $0 $368,294 $450,768 $53,044 $0 $0 $0 $0 $0 $921,587 0.00% $1,930 0.00% $0 0.34% $64,211 0.00% $0 2.58% $0 3.16% $87,167 0.37% $192,714 0.00% $0 0.00% $0 0.00% $0 0.00% $49,807 0.00% $706,903 6.46% $1,102,732 0.01% 0.00% 0.45% 0.00% 0.00% 0.61% 1.35% 0.00% 0.00% 0.00% 0.35% 4.95% 7.72% $294,667 $171,549 $415,202 $744,945 $368,294 $1,186,195 $965,150 $0 $656,348 $0 $49,807 $706,903 $5,559,060 2.06% 1.20% 2.91% 5.22% 2.58% 8.31% 6.76% 0.00% 4.60% 0.00% 0.35% 4.95% 38.94% $11,512,511 80.64% $1,242,196 8.70% $1,521,301 10.66% $14,276,008 100.00% Form B Purchased Services % of Total % of Total Supplies & Materials Supplies 8 Materials % of Total % of Total Total % of Total Expend 306 Table D.3 Budget to Actual Comparison BUDGET ACTUAL % OF ACCURACY 1988-89 REVENUE $11,283,836 $11,245,581 99,66% EXPENDITURE $11,428,706 $11,978,872 95.41% 1989-90 REVENUE $11,601,707 $12,180,626 95.25% EXPENDITURE $12,452,669 $12,651,087 98.43% 1990-1991 REVENUE $12,305,593 $13,940,176 88.27% EXPENDITURE $13,155,258 $13,748,908 95.68% 1991-1992 REVENUE $13,983,569 $13,378,360 95.48% EXPENDITURE $14,100,915 $14,276,008 98.77% Source of raw data: Board Minutes, Form B APPENDIX E 307 INTERVIEW QUESTIONS Superintendents, Asst. Superintendents, Business Officials: 1. What are the district's sources of revenue? Local Taxes State Aid - Membership Categoricals Federal Funds Other - Business Grants Fiscal Agent 2. What are the sources of problems in projecting revenues? SEV Millage Rates MTT/ Abatements State Legal Requirements - Headlee, etc. 3. In past few years, how accurately has the district been able to project its revenues? Does anyone evaluate the accuracy of budget projections with actual revenues? 4. In the proposed/adopted budget for 1993-94, how accurate do you believe the revenue projection will be? 5. Has it become easier or more difficult to project revenues in the last 3 -5 years? Why is this so? 6. Does the district do multi-year revenue projections? 7. Who is involved in projecting revenues? 8. Are there any plans for asking for increased millage or a Headlee Override? 9. When does the process for projecting expenditures begin? Are there specific time lines set? 10. Who is involved in projecting expenditures? 11. What kinds of information is used? 12. Are programs evaluated on a regular basis before they are funded again? 308 13. Does the district engage in program budgeting, zero-based budgeting, cost benefit analysis? 14. Can budgets/expenditures be presented formats, for example by building, by administrative responsibility? 15. Briefly expenditures? describe the major steps in different program, by in projecting 16. Are there any new budget items and items that are being increased for 1993-94? Why are these increases occurring? 17. Are there any budget items being deleted or reduced for 1993-94? Why? 18. In the proposed/adopted budget for 1993-94, how accurate do you believe the expenditure projection is? Does anyone evaluate the accuracy of budget projections and actual expenditures? 19. Has it become easier or more difficult over the last 5 years to project expenditures? Why? 20. Has district control over expenditures increased decreased over the last five years? In what ways? 21. or Does the district do multi-year expenditure projections? 22. For 1993-94, do projected expenditures exceed revenues? Will fund balance be used to make up the difference? 23. Does the district, the board, and/or the administration have a philosophy, a goal, or a position on how much the district fund balance should be? Why is that? 24. What criteria is used for deciding what will be funded and at what level? 25. Who sets that criteria? 26. Does the district engage in any type of formal planning activities? 27. Do these plans address financial or budgetary issues? 28. Does the district adopt goals and/or objectives? published? Are they Are these goals linked to the budgeting process? 309 29. Do you ever feel that individual or interfere with the organization's goals? sub-group goals 30. What is your role in the budgeting process? Revenue Expenditure Balance Process Implementing 31. What is the role of the assistant superintendent? Revenue Expenditure Balance Process Implementing 32. What is the role of the business official? Revenue Expenditure Balance Process Implementing 33. What is the role of the board of education? Revenue Expenditure Balance Process Implementing 34. Does the public become involved in the budgeting process? 35. Does the district have budget workshops? Budget hearings? Are budgets made available to the public? What information is in them? 36. Are these workshops and or hearings well attended by the public? 37. Does the public ask questions or make comments? kinds of questions/comments do they make? 38. Are raised? there any particular issues that are What frequently 39. Is there a chance for public comments to be taken into consideration prior to adoption of the budget? 40. Are there times when budgeting decisions have needed to be re-considered? Why? 310 41. How many times a year does the district formally amend the budget? 42. What are the usual reasons for a budget amendment? 43. In the past five years, did any major events occur that caused a major change in the budget? Was fund equity available to cover the event or did the district need to adjust the budget downward and/or re­ order its priorities? What criteria was used to adjust the budget? 44. Are administrators allowed flexibility to change their budgets without a formal amendment by the board? 45. Have there been times when budgets cannot be implemented or there are holds on spending? What are these reasons? 46. Does the district have to borrow to meet cash flow needs? 47. Has the budgeting process changed over the last 3-5 years? In what ways? What are the reasons for these changes? 48. Is there anything about the budgeting process you would like to see changed? Principals & Department Heads: 1. When do you begin budgeting for a new year? A. Are there time lines set? By whom? B. Are they followed? 2. What A. B. C. D. E. F. G. H. 3. What kinds of information do you use to budget? Do you feel you have enough information? 4. Who sets the parameters for budgeting for your building? What are they? 5. Who decides how much your building budget will be? are your areas of responsibility for budgeting? Supplies Textbooks Professional Development Teaching staff Support staff Utilities Maintenance of building and grounds Equipment purchase and repair 311 6. Describe the major steps you use for budgeting in your building/department. 7. Who do you involve in budgeting for your building? 8. What criteria do you use for deciding what to include in your budget and at what level to fund those items? 9. What justification do you have to give central office for your budget? 10. What happens if you exceed your building budget? 11. What is the process for requesting more fundsduring school year if you run into a budget problem? 12. the Are you included in district-wide budgeting decisions? In what ways? 13. Do you know the budgets of other administrators and/or buildings? 14. set? 15. How are district-wide priorities for funding programs What priorities are being used for 1993-94? 16. Are there any items being cut or reduced from for 1993-94? What are they? thebudget 17. Are there any items being added or increased for 1993-94? What are they? 18. What justification is being given for these changes? 19. Do you have ways of getting resources for your building other than through general fund, i.e., PTO, student fund raisers? 20. Does the district engage in any formal planning activities? If yes, are these used in the budgeting process? 21. Does your building engage in any formal planning activities? If yes, are these used in the budgeting process? 22. Does the district adopt goals and/or objectives? If yes, are these used in the budgeting process? 23. Does your building or you individually adopt goals and/or objectives? If yes, are these used in the budgeting process? 312 24. What are the biggest problems you encounter in budgeting? 25. Has the process changed within the past five years? are the reasons for the changes? What 26. If you could change the budgeting process in your district what would you change? 27. Are there any particular financial or budgeting issues that are sources of persistent discussion and debate in your district? If yes, what are those issues? Do you view the discussion as positive or negative? How does this discussion impact the budgeting process? 28. How will the outcome of Proposal A affect your building budget? Board Members and Union Members: 1. Who projects revenues for the District? 2. Are you aware of any plans to increase revenue? 3. Who projects expenditures for the district? 4. How accurate are revenue and expenditure projections? 5. What criteria is used to decide what the expenditures will be and what will be funded? 6. Who is involved in setting that criteria? 7. How would you describe the Superintendent's managing the resources of the district? 8. How would you describe the business manager's role? 9. How would you describe the role of the staff? role in 10. Does the public have a role in the budgeting process/ 11. What is the board's role? Workshops Study Sessions Committees 12. Are there multi-year revenue and expenditure projections? 313 13. Does the board and/or administration have a policy or goal regarding fund balance? What is it? Do you agree with it? Why is fund balance important to the district? 14. Does the district engage in formal planning activities? Who is involved? 15 . Do these plans include financial issues? 16. Does the board adopt goals? Who is involved? When are they adopted? How often? 17. Do any of these goals relate to financial issues? 18 . Do you ever believe that individual or sub-group goals interfere with the goals of the organization? 19 . Do you believe that the staff and the general public is kept well informed about finances? In what ways? 20. Are budgets, including public and employees? 21. Does the board ever make budgetary decisions that need to be re-considered (e.g. cutting transportation)? 22 . amended budgets, available to Are you aware of any times when a budget has been approved but there are holds on spending and/or ordering? What are the reasons? 23. Does the board evaluate programs or the way dollars have been used in the past before approving a new budget? 24. During the last five years, what are some of the problems the district has encountered in projecting revenues and expenditures? LIST OF REFERENCES LIST OF REFERENCES Barber, J. D. (1968). Complexity, synopticism, incrementalism, and the real questions. In R. T. Golembiewski (Ed.), Public budgeting & finance: Readings in theory & practice (pp. 262-272). Itasca, Illinois: F. E. Peacock Publishers, Inc. Becker, S. W. & Green, D. Jr. (1968). 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Planning for higher education. 18(2) 9-23. Schmidtlein, F. & Milton, T. H. Milton. (1988-89). College & university planning: Perspectives from a nation-wide study. Planning for Higher Education. 17(3) 1-19. Shannon, G. S. (1988). The business administrator and the negotiated order. Paper presented at the annual meeting of the American Educational Research Association. New Orleans, LA. April 5-9. ED 297 449. Simon, H. A. (1957). Models of man: Social and rational. New York: John Wiley & Sons, Inc. Simon, H. A. (1976). Administrative behavior. Third Edition. New York: The Free Press. Macmillan Publishing Co., Inc. Simon, H. A. (1982). Models of bounded rationality. Vol. 2, Behavioral economics and business organization. Cambridge, Massachusetts: The MIT Press. Singleton, D. W . , Smith, B. A. & Cleaveland, J. R. (1980). Zero-based budgeting in Wilmington, Delaware" in C. H. Levine (Ed.) Managincf fiscal stress (pp. 179-193). Chatham, New Jersey: Chatham House Publishers. 318 Smithies, A. (1968). Conceptual framework for the program budget. In R. T. Golembiewski (Ed.). Public budgeting & finance: Readings in theory & practice (pp. 250-252). Itasca, Illinois: F. E. Peacock Publishers, Inc. Wildavsky, A. (1975). Budgeting: budgetary processes. Boston: A comparative theory of Little & Brown. Wildavsky, A. (1979). The politics of the budgetary process. (3rd. Edition). Boston: Little & Brown. Yin, R. K. (1989). Case study research, design and method. Newberry Park, California: Sage Publications, Inc. Unpublished reports and documents District A. (July, 1988 - May, 1993). District A. (1988). Fourth Friday report. District A. (1989). Financial report. District A. (1989). Form B . District A. (1989). Fourth Friday report. District A. (1990). Financial report. District A. (1990). Form B . District A. (1990). Fourth Friday report. District A. excellence for Board minutes. (1990). Strategic plan school district A. District A. (1991) . Financial report. District A. (1991) . Form B. District A. (1991). Fourth Friday report. District A. (1992) . Board policy. District A. (1992) . Financial report. District A. (1992 ) . Form B. District A. (1992). A profile of progress. District B. (July, 1988 - May, 1993). District B. (No date). Board policy. for educational Annual report Board minutes. 319 District B. (1988). Fourth Friday report. District B. (1989). Financial report. District B. (1989) . Form B. District B. (1989) . Fourth Friday report. District B. (1990) . Financial report. District B. (1990) . Form B . District B. (1990) . Fourth Friday report. District B. (1991). Financial report. District B. (1991) . Form B. District B. (1991). Fourth Fridav report. District B. (1992 ). Annual report. District B. (1992) . Financial report. District B. (1992) . Form B. District C. (No date). Board policy. District C. July, 1988 - May, 1993). District C. (1988). Fourth Friday report. District C. (1989) . Financial report. District C. (1989) . Form B . District C. (1989) . Fourth Friday report. District C. (1990). Financial report. District C. (1990) . Form B. District C. (1990) . Fourth Friday report. District C. (1991) . Financial report. District c. (1991) . Form B. District c. (1991). Fourth Fridav report. District c. (1992) . Annual educational report. District c. (1992) . Financial report. Board minutes. 320 District C. (1992). District D. (No date). Board policy. District D. July, 1988 - May, 1993). District D. (1988) . Fourth Fridav report. District D. (1989) . Financial report. District D. (1989) . Form B . District D. (1989) . Fourth Fridav report. District D. (1990) . Financial report. District D. (1990). Form B. District D. (1990). Fourth Fridav report. District D. (1991) . Financial report. District D. (1991). Form B. District D. (1991) . Fourth Friday report. District D. (1992) . Annual report. District D. (1992). Financial report. District D. (1992) . Form B . Form B. Michigan Department of Education. Board (1992).