By Jennifer Wohlleb
Many responsibilities of a school board member revolve around financial issues. In a clinic session called Dollars and Decisions, attendees at KSBA’s annual conference got a primer on everything from setting a tax rate to how to ask questions of the superintendent and finance director.
“In some districts, board members spend a great deal of time going through line item by line item on their financial reports and budgeting process,” said Marion County Schools Superintendent Chuck Hamilton, who led the session. “That takes a great deal of time for you as an individual and from your director and superintendent. You have a whole lot of other roles to be taking on. If you hire the right people in your districts and you have some faith in what they're doing, then your scope can be a lot less detailed.”
He cautioned board members to hold those people accountable, “and that means some transparent reporting in open board meetings. It also means having conversations in the office with those people,” he said.
He said those office visits are a great venue for building relationships and for questions.
“What you need to have the finance officer do is, when they do their monthly report to you – which is statutorily required — they can build into their report the questions that you're asking because it's important that the public see that you’re actively involved,” he said. “But what you don’t want to do is wait until you get into your board meeting, your finance officer starts giving the monthly report and you start asking some very pointed questions about a particular invoice that went through, or someone questioning why you're buying stuff from Advanced Auto instead of O'Reilly's and somebody's upset that you're not using their business. In an open meeting with no preparation, that’s probably not the right time to ask that question, but that doesn’t mean that the question doesn't need to be asked. You just need to do it with your finance officer or superintendent ahead of time and let them build it into the report.”
Budgets are another area for board member education. Hamilton said while the state may require districts have a 2 percent contingency fund, he recommends having at least 5 percent to avoid potential problems.
“The 2 percent will not take care of you,” he said. “It will not hold you over because you will not be able to maintain an appropriate cash flow in the summer to meet all of your bids. Two percent won't allow that, 3 percent might do it for you, 5 percent will.”
Hamilton said he shoots for an 8 percent contingency, but in response to an audience member’s question, said going much higher is not appropriate.
"You can get to a place where you have overplayed your role of a good steward of your district finances and built a contingency that's not reasonable," he said. "What do I mean by not reasonable? The money that you generate through state and local revenues is intended for the support of the education of the students who are in your system today. So if you are not spending those funds to support their educational needs, then there's the potential that you're being negligent in your duties there. So you’re looking for that happy balance."
He also cautioned board members to keep an eye out for "budget leaks."
"Those are things that sneak up on you that you're not consciously watching," Hamilton said. "Here's an example: you have student in elementary school who has special needs who has an aide who works with him. Your elementary runs through grade 5. That student transitions into middle school for grade 6 and that aide stays at the elementary school and doesn't move because they were allocated through an SBDM. The kid may not have a need for an aide in middle school and they decide it's no longer necessary … I can tell you, as a principal, I'm not going to point it out to you that I have an extra body in my building. I'm going to leave that up to you to discover. I have extra help. If you're going to give it to me, I'm going to take it and use it."
Board members also received a brief tutorial on setting district tax rates.
"You're going to be asked to determine a tax rate come fall and what you will get from the state is options for your tax rate," Hamilton said. "And when you see that for the first time, you’re going to assume that you only have three options and that's not true."
He explained the difference between the three options the state provides: the rate that enables the district to generate up to 4 percent more tax revenues than it did the previous year, excluding new property; the compensating rate, which basically generates the same revenue as the previous year, except for new property; and then a Subsection 1 rate – which is named after the part of the regulation it's found in – which is somewhere between the other two rates.
"Your superintendent will generally recommend you one of those three," Hamilton said. "You don’t have to do that; you can actually take anything in between."