SCHOOL FINANCE BUDGET REDUCTION PLAN AND JUSTIFICATION - Essay Example

? SCHOOL FINANCE BUDGET REDUCTION PLAN AND JUSTIFICATION Introduction The principal of all high schools in the suburbs of a large are aware about a significant budget crisis looming throughout the state. According to the Superintendent, the state Department of Education has significantly reduced budget allocation due to the crisis as a result of which the district high school budget committee has been directed to cut their annual budget by 20% from its annual maintenance and operations and 30% from its soft capital budget for the fiscal. It is the duty of the principal to go back to their respective campuses and then collaborate with their school leadership teams in order to develop a comprehensive plan regarding how to accomplish such budgetary reductions from their existing operating budget. The objective of the study is to plan the budget cut from given information and justify the items chosen to remove or reduce from the school budget in order to meet the district requirements. Budget Reduction Plan The most challenging task of budget cut is to determine the primary sources of revenues and expenditure and then to allocate scarce resources according to requirements. It is general that in a high school, the majority of school budget is allocated towards the benefits and compensations of their staff. In such a scenario it is very important to keep in mind that any significant reduction in the compensation of core teachers and most important staff might lead to de-motivation of staffs and unrest in the campuses. In order to avoid such disputes, the rest of the budget allocations have to be re-planned and prioritized in such a manner so as to help the districts meet goals and standards of the students’ academic performance (Williamson, 2011, pp.1-5). The annual budget is a statement of expenditures and revenues that are likely in a high school during the fiscal. It has to be determined at a prior stage whether the school would have enough funds to pay for the necessary activities by ensuring optimum resource allocation matching school priorities. The budget has to be realistic in the sense that all items of reduction have to be justified to respective departments when cuts will be introduced. All minute details must be highlighted such as any probable error in estimating teaching staff requirements in case any staff leaves the school. Also, it must be ensured that all regulatory and statutory requirements have been complied with. A realistic school budget will ensure financial stability by lowering financial crisis risk during the year; educational excellence by hiring the best teachers available at attractive packages; and reputation and image of school reflected from the relationship between the authority, pupils, and staffs. The first stage of budget reduction plan is to identify the primary sources of revenues and expenditures (Hechinger Institute, 2011, pp.1-9). Identification of Primary Sources of Revenues The expenditures of a high school are generally divided into three categories namely, salaries and employee benefits, materials and supplies and capital expenditures. In addition, the states also collect expenditure data of school by transportation, operations, debt service and maintenance. It is important to note that the schools hire instructional staffs, custodians, and cafeteria workers in addition to licensed staff members such as administration and teaching staffs, librarian, counselors, etc. Thus, the biggest expenditures in a school are consumed by the personnel. During the 1950s, the teachers’ constituted almost 74% of total school staff and the numbers have been reducing since then as the percentage of instructional staff has been increasing. In the 20th century the percentage of teachers dropped by almost 33% and they have been replaced by instructional aides. The teachers’ salaries are compensated by most districts under single salary schedule where teachers are compensated on the basis of their educational level and total years of experience in teaching profession (Serwach and et.al, 2009, pp.2-11). The building level allocation depends on the management policy and the size of the school district. Since it is given that the high school is situated in the suburbs of a large city, it is apparent that the allocations would be significant. However it is also important to note that more centralized allocations are easier to manage from the point of view of the districts and also provide economies of scale due to leverage in point of purchase. Conversely, the decentralized budget requires more levels control and hence more expenditures. Other primary sources of revenues include bonds (yields assured return of principal and interest), Federal grants (non-interest bearing and not central government’s subsidized aids), State grants (generally utilized in infrastructure development of the school), tax credits and student enrollment fees. Identification of Source of Each Revenue Stream The maintenance and operations expenditures are financed by the state government from property tax on per-student basis. The bonds are levies voted on behalf of the community and are funded by secondary property tax. The federal grants are a student financial aid that intends to help students pay their educational expenses including hostel charges, tuition fees, books, and so on. The central government’s subsidized funding cannot be considered as grants since grants are refer to specific student programs. An example of financial aid in form of grants could be a scholarship earned a by meritorious student. The American Opportunity Tax Credit of American Recovery and Reinvestment Act of 2009 allow tax refunds or credits under section 1004. According to the provisions of the act, up to 40% credit is eligible for refunds. The act encourages community services and increasing college affordability. The budget cut should ensure optimum resource allocation that matches the school’s priorities. Unplanned expenditures of over or under spending might affect the development plans of the school and that the required reductions in expenditures are justified and in line with the districts’ requirements. To make the budget error free, it is also important to identify the primary items whose expenses are important for the development of school and also those expenditures that are already paid. Such items that are already paid include capital expenditures on purchase of furniture and desks, technology equipment, text books, instructional equipments. Primary Uses of Each Source and their Limitations The maintenance and operations budget is used to pay salaries to teaching staffs and other administrative staffs or purchase consumable instructional supplies. The soft capital budget is used to fund capital expenditures or purchases of the school’s fixed assets including furniture and desks, technology equipments, athletic equipments, instructional equipments, books, and so on. The budget has been classified into maintenance and operations and soft capital budget because the soft capital funds are long term activity oriented and hence cannot be used for payment salaries. Similarly, the maintenance and operations surplus cannot be used to fund capital expenditures which would lead to working capital deficit. Prioritizing Items for Budget Cut All items which are less important or which can be removed from the budget without affecting the development of the school should be identified and prioritized. The objective is to cut the maintenance and operations budget by 20% and also to cut the soft capital budget by 30%. To achieve these two objectives and meet district requirements the estimated expenditures of budget items has to be re-allocated accordingly. The items of Maintenance and Operations whose percentage allocation of total budget can be reduced are prioritized and justified as follows: (i) Consumable supplies – These are perishable goods and have no future value like fixed assets and hence spending on consumer goods should be cut. (ii) Extra duty stipend – They can be postponed at times of crisis. (iii) Purchased activities – Should be limited only to items of necessity. The items of Soft Capital Budget whose percentage allocation of total budget can be reduced are prioritized and justified as follows: (i) Athletic equipment – The staff and students should be communicated about the situation in detail and will be asked to cooperate with the school’s budget cut plans to comply with districts regulations. (ii) Text books – Should be replaced by cheaper online text books also known as the e-book version of text books. (iii) Furniture – Should be limited only to replacement of important assets and new purchases should be limited to necessity. Conclusion and Recommendation The items identified and prioritized for reduction in the budget are justified on the ground that reduction in planned expenditures on these items will help the school to comply with the district requirements keeping the budget cut realistic and also not affecting the developmental plans of the school. In order to carry out the budget reduction plan smoothly without any disputes or oppositions, all stakeholders (teaching/non-teaching staffs, pupils, guardians, contributors, etc.) of the school should be informed about the plan and developments. For inter-departmental communication an official memorandum would be sent to the respective departments detailing the scenario and to communicate the plan to pupils and their parents and official mail would be sent to their respective address. Such transparent initiative will ensure effective execution of the budget cutting process. The plan will be implemented in a step by step procedure that starts first by identifying the primary revenue streams and expenditures following which less important items would be prioritized descending order of their necessity. The items that have been chosen to reduce the Maintenance and Operations budget by 20% and Soft Capital Budget by 30% do not impact the long term strategic goals of the school which is to offer high standards of learning. The budget plan also ensures that technology and educability is not compromised from the expenditure cut. The plan also embraces district’s vision of high standards of learning by providing students online studying environment and reducing expenses on traditional text books. References Hechinger Institute. (2011). Making Sense of the Dollars: Reporting on Higher Education Budget cuts. Retrieved from http://hechinger.tc.columbia.edu/primers/Making%20Sense%20of%20the%20Dollars%20Brief%2011-2008.pdf. Serwach, J. J., Flood, M., Rechnitzer, S. and Stasinski, A. (2009). Budget Crisis and Higher Education: Can Leadership Make a Difference?. Retrieved from http://www.academia.edu/389331/Budget_Crises_and_Higher_Education_Can_Leadership_Make_a_Difference. Williamson, R. (2011). Dealing with Budget Cuts. Retrieved from http://gearup.ous.edu/sites/default/files/Research-Briefs/ResearchBriefBudgetReductions.pdf. Read More