The Burlington School District has a whopping budget of more than $50 million, and the $9 million in it's cash reserves is nothing to sneeze at either, so why the need to cut spending by $600,000 in fiscal year 2019?

The answer to that — and most questions regarding school spending — comes from two aspects of school finance: spending authority and categorical funds.

Each year, Iowa school districts calculate their spending authority, or the maximum amount that can be spent by a district, by multiplying the previous year's certified enrollment by the cost per pupil, which is set each year by the Legislature when it decides how much allowable growth to give public schools.

But that doesn't necessarily mean more money.

"Last year, the state gave 1.1 percent (allowable growth), but because we had declining enrollment, we actually had negative new money, which means we didn't get 1 percent (increase). The amount of money we truly received is negative, which means we have less revenues," said Greg Reynolds, Burlington School District business director.

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Burlington's certified enrollment for the 2017-18 school year is 4,262 — down about 160 students from the previous school year — and the anticipated per pupil amount for the 2018-2019 school year is $6,731. This means a regular program cost of about $28.7 million, plus about another $1 million from the 101 percent budget guarantee, which is funded through property taxes. Budget guarantees are granted to districts that experience significant drops in enrollment. They're good for one year, with the intent being to give districts a one-year buffer to adjust their spending.

The calculation also must account for supplemental weighting, three levels of which are assigned to students with special needs — including special education, at-risk students and English language learners (ELL) — based on necessity, but those numbers won't be available until the district certifies its budget in April.

"That's what dictates how much districts can spend," Reynolds said. "If you exceed that, you're in violation of the law, whereas going negative on cash is not a violation."

As curriculum director Sharon Dentlinger put it, "It's kind of reverse from what you do with your personal finances."

"You can make more than your credit card (limit)," she said. "But you can only spend what's on your credit card. So I can have lots of cash, but that doesn't matter. All I can spend is what's on my credit card."

It is illegal for school districts to exceed that spending authority. Doing so would result in an intensive audit and corrections on the part of the school district. Failure to take corrective action could result in the district's closure.

Unspent spending authority rolls over each year into the district's unspent balance, which for Burlington is about $19 million.

The actual cash the district has, or the cash reserve, is about $9 million. Of that cash reserve, about $1.9 million is designated for categorical expenses.

The rest is set aside for emergency expenses, such as if there were a government shutdown, and other rainy day costs. This money can be replenished by raising property taxes, but using it for recurring and increasing costs can drain it quickly. What's more, that takes a toll on the spending authority.

If the district needs to cover more expenses than what's allowed by the spending authority, it can submit an allowable growth application after its annual budget is certified to the School Budget Review Committee, but that's only for categorical expenses within the general fund, such as drop-out prevention, at-risk and ELL.

In 2017, for example, the Burlington School District was granted authority to spend an additional $53,509 to cover costs in excess of weightings and other resources in order to provide additional instruction for limited English proficient students during the 2016-17 school year.

Where the money comes from

A combination of state aid dollars and property tax funds are used to feed the general fund. The uniform property tax levy for school districts is set at $5.40 per $1,000 taxable valuation. Districts with higher property values, such as Okoboji in northwest Iowa, contribute more than districts with low property tax values, like Burlington. State aid then supplements 87.5 percent of the total amount.

"The state pays up to 87 1/2 percent minus what this base levy covers," Reynolds said. "The remaining 12 1/2 percent is normally property tax, but because we are so 'property tax poor,' the state does give us some additional tax relief."

Last year, the district received about $1 million in property tax relief. 

"Even if I can raise taxes and generate twice that amount of money, it doesn't matter. I can only spend that 'X' number of dollars," said Dentlinger, Burlington's curriculum director. "Even if I have extra money, I can't spend it. I can only spend the amount that comes from the formula."

Property tax also feeds the management and physical plant and equipment levy.

Because of how levies are funded, Reynolds explained, the state controls about 60 percent of school property tax levies. The school board controls about 36 percent, and voters control about 4 percent, such as with the 67 cent per $1,000 valuation physical plant and equipment levy.

Where the money goes

A 10-page worksheet exists for school districts to determine how much money should be spent where each year.

General fund dollars are used to pay for employee wages and benefits, curriculum costs, supplies, purchased services and daily operational costs, such as utilities and fuel.

There are, however, categorical funds within the general fund, such as at-risk, drop-out prevention, gifted and talented programming, special education, teacher and administrator mentoring and professional development.

The district must submit expense reports to the state for review each year to make sure money is being spent where it should be.

"We do an at-risk report, and so all of the monies that we put in that at-risk report have to be dedicated to the criteria they set for at-risk, so we can only use it for at-risk purposes," Dentlinger said.

Iowa Code mandates school districts have additional funds to pay for other operational costs, including the trust fund, management, enterprise, Secure and Advanced Vision for Education (SAVE), PPEL and debt service funds.

The $1.9 million management levy, for example, is designated for general liability insurance, unemployment and early retirement benefits.

Another is the physical plant and equipment levy. The $1 million in this levy can be spent only on capital projects, such as construction, purchase and remodeling, as well as equipment. 

There's also trust and agency funds, which are designated gifts given to the district for specific purposes and projects, such as the $15,000 that was donated to the district to use for the South Ninth Street homes students are remodeling.

The student activity fund — money for which comes from admission costs, activity fees, student dues, fundraising and extracurricular activity revenue — can be used only to support school activities.

The debt service fund, which is funded through SAVE receipts, is designated for payment of principal and interest.

SAVE money comes from the statewide penny sales tax and is designated for capital projects.