Fiscal Year 2017-2018

ArizonaSchoolFinance SummaryManual

A tool developed to assist you in understanding

the school budget — where the money comes from and where it goes

www.aasbo.org

Permission is granted to reproduce any portionandallportionsofthe2017-2018School FinanceManualprovidedthatcreditisgiventothe ArizonaAssociationofSchoolBusinessOficialfor theproductionofthismanual.

The Arizona Association of School Business Oficials (AASBO) is pleased to provide this document so that you may better understand the ever-changing world of school finance. This document will assist you in assembling and deciphering the various elements of a school district budget as well as being a resource for other related budgetary issues.This manual is only one resource available to you in your quest to under-
stand school finance.This document, as well

BusinessAdministrationdegreeofferedbyOttawaUniversity.

Two certificate credentials, School Business Specialist and SchoolBusinessOficial,arecurrentlybeingofferedtoAASBO members.Forfurtherinformationontheseprograms,contact theDirectorofEducationProgramsoranAASBOstaffmember. AASBO is an organization that is dependent upon the service
of its members. The creation of an update of

as other related information, is available to youviatheAASBOwebsite.TheAASBOweb site (www.aasbo.org) contains numerous links to other related organizations that contain helpful information in the area of school finance. Attempts have been made to weave in the unusual changes that have occurred in response to the budget chal-lenges being seen at the state level. Users of
this manual should continue to check with

“Ifyoushouldhave anyquestions, ideas,orsugges-tions,pleasefeel freetocontactthe AASBOstaffat
602-253-5576.”

theSchoolFinanceManualwasaccomplished by the combined efforts of the membership andAASBOstaff.

A special thanks goes to all those contrib-uting to the update of this year’s manual. If you should have any questions, ideas, or suggestions, please feel free to contact the AASBO staff at 602-253-5576. They
will be more than willing to assist you.

the Department of Education, the Auditor General and the AASBOwebsiteandbimonthlymeetingstoassuretheyhave the most recent data and to determine if the Legislature has madeanymid-yearchangestotheschoolfinanceformula.For those who desire a learning experience typically associated with a classroom environment, including qualified instruc-tors and interaction with peers, consider enrolling in one of the AASBO Educational Programs. Subject areas include: accounting, budgeting, purchasing, food service, transpor-tation, facility management, human resources and school law. Advanced classes are offered in the areas of purchasing, budget and finance, and maintenance and operations. An internship program offering opportunities to work with mentorsisavailabletostudentswhohavecompletedclasses ineachdiscipline.IncooperationwithCentralArizonaCollege (CAC),participationintheseclassescanleadtoanAssociates
ofArtsDegree(2yeardegreeprogram)fromtheCommunity

-2017-18AASBOBoardofDirectors www.aasbo.org

A special thanks goes to Shari Zara and Lyle Friesen - from the Arizona Department of Education, Annette Moreno from Pendergast Elementary School District, Karin Smith from Heinfeld & Meech, and Jeremy Calles from Tolleson Union High School District for providing technical assis-tance in reviewing and updating this FY2017-2018 edition
of the AASBO School Finance Manual.

College System of Arizona. In addition, the credits earned through CAC may be transferred into the Bachelor of Arts in

Arizona School Finance Summary Manual

Arizona School Finance Summary Manual

This document is divided into four (4) sections to aid in your understanding of school finance. These sections are as follows:

I. Overview

II. Budget Formula Construction

III. Where Formula Dollars Come From IV. How Budgets Are Categorized

Although the information in this document is representative of many public school districts in the State of Arizona, it will not portray all. Additional information may be obtained from the following locations.

Arizona Department of Education 1535 West Jefferson Avenue Phoenix, AZ 85007
(602) 542-5393 1 (800) 352-4558 www.azed.gov

Arizona Auditor General 2910 N. 44th Street, Ste. 410 Phoenix, AZ 85018
(602) 553-0333 www.azauditor.gov

Arizona School Boards Association 2100 North Central Avenue, Ste 200 Phoenix, AZ 85004-1441
(602) 254-1100 www.azsba.org

Arizona Department of Revenue 1600 W. Monroe
Phoenix, AZ 85007-2650 (602) 716-6090 www.azdor.gov

Arizona School Facilities Board 1700 West Washington, Suite 230 Phoenix, AZ 85007
(602) 542-6501 www.azsfb.gov

Arizona Association of School Business Oficials 2100 N. Central Ave., #202
Phoenix, AZ 85004 (602) 253-5576 www.aasbo.org

Arizona School Administrators 1910 W. Washington
Phoenix, AZ 85009 (602) 252-0361 www.azsa.org

Association of School Business Oficials International
11401 North Shore Dr. Reston, VA 20190
866-682-2729 www.asbointl.org

Table of Contents

Arizona Association of School Business Oficials | School Finance Summary Manual

Overview: “A Global Perspective” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Budget Formula Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Maintenance and Operations Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Base Support Level (BSL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Pupil Transportation Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Revenue Control Limit (RCL) and District Support Level (DSL) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 District Additional Assistance (DAA). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Additions to the Maintenance and Operations and
Unrestricted Capital Outlay Budgets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Where Formula Dollars Come From . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 State and County Equalization Assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 School District Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 How Budgets are Categorized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Maintenance and Operations (M&O) Fund 001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Classroom Site Fund 010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Instructional Improvement Fund 020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 County, City and Town Grants Fund 050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Special Projects Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 School Plant Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Other Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Capital Related Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Other Miscellaneous Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Arizona Association of School Business (AASBO) Oficials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Arizona Association of School Business Oficials | School Finance Summary Manual

OVERVIEW: “A Global Perspective”

The public elementary and secondary schools of Arizona are governed by the Arizona Constitution and Title 15 of the Arizona Revised Statutes (A.R.S.). The legislature has required that the Arizona Department of Education and the state’s Auditor General interpret Title 15 and design the state’s Uniform System of Financial Records (USFR) which is used in maintaining local school district financial records and preparing reports. Two USFR manuals exist, one for school districts and one for charter schools. The USFR prescribes the accounting system,

5

standards for capital related issues in public schools. This system more tightly controls the capital funding as compared with the past when it was typically financed by the sale of general obligation bonds. The Students FIRST program is governed by the state School Facilities Board.

In 1995 the Legislature authorized charter schools — a new educational option. In the first years, charter school funding was based on the RCL, CORL and Capital Levy Revenue Limit (CLRL), which was calcu-

minimum requirements for internal	lated in the same manner as the districts.

controls, and includes a detailed descrip-tion of the legally established chart of accounts structure. The USFR and Memo-randums are available to download from the Auditor General’s site (www.azau-ditor.gov). The USFR includes a calendar, chart of accounts, compliance require-ments, best practice procedures, and other valuable information.

“Thefocusofthis manualistoprovide anunderstandingof thewaypublicschool districtsintheStateof
Arizonaarefunded”

Over the years, the funding has evolved to include Charter Additional Assistance, which replaced the CORL, CLRL and Transportation funding, plus additional monies in lieu of capital funding from the School Facilities Board (SFB).

The focus of this manual is to provide an understanding of the way public school districts in the State of Arizona

In 1980-81, the Arizona Legislature	are funded and does not include charter

refined the school finance system to
provide equal dollars per weighted pupil for school district operations through a balancing of the local qualifying prop-erty tax rate and State and County equalization assistance. This concept, commonly referred to as the “equalization formula” allowed school districts throughout the State of Arizona to experience similar “effort”in raising educational dollars for their students irrespective of the property valu-ations within their boundaries. This equalization formula is still utilized today in funding a district’s Revenue Control Limit (RCL) and Capital Outlay Revenue Limit (CORL) now known as District Additional Assistance (DAA). Further details of these formulas are included in the section of this document entitled, Budget Formula Construction.

school funding. The sections that follow will help to better understand some of the detailed compo-nents that make up the financing formulas.

In 1994, the Arizona Supreme Court ruled that the state’s statutory formula for funding school facilities and equip-ment violated the Arizona Constitution. A four-year struggle to create a new capital finance system ended July 9, 1998 when the legislature passed and approved Students FIRST (Fair and Immediate Resources for Students Today) legis-lation. Students FIRST created a completely new capital financing system aimed at creating minimum adequacy

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction

A school district budget is for the fiscal year from July 1 to June 30. Each school district must propose, adopt and revise an expenditure budget according to the following

6

chart. The following is a schedule of the dates, publishing and meeting notice requirements for Expenditure Budgets per Arizona Revised Statutes:

Type of Budget
	
Publishing Requirements
	
Public Hearing and Board Meeting
	
Post Notice of Public Hearing*

Proposed budget
	
Propose call for public hearing
	
On or before July 5
	
Yes

Adoption of proposed budget (A.R.S. § 15-905.C)
	
Publishproposedbudgetorsummary andnoticenolaterthan10daysprior topublichearingorpostontheArizona DepartmentofEducationwebsite
	
On or before July 15
	
Yes

September 15 budget revision (A.R.S. §15-905.Q)
	
No (reminder: this revision only applies if legislative change is enacted after budget forms are issued)
	
On or before September 15
	
Yes

November 1 budget revision related to 1.06% teacher salary increase
(Laws 207, Ch, 305, § 33) 2017
	
Publishnoticenolaterthan10daysprior topublichearingorpostontheArizona DepartmentofEducationwebsite
	
On or before November 1
	
Yes

December 15 budget revision (A.R.S. § 15-905.E)
	
Publish revised budget or summary and notice no later than 10 days prior to public hearing or post on Arizona Department of Education website
	
On or before December 15

Yes

Final budget revision; tuition reve-nues A.R.S. §15-905(I); Type 03 HS tuition A.R.S. §15-905(J); Impact Aid A.R.S. §15-905(K) and (0)
	
No
	
On or before May 15
	
Yes

Any other elected budget revisions
	
No
	
On or before May 15
	
Yes

*Regular public hearing notice requirements for posting must be met.

The Expenditure Budget contains categories from which school districts can expend monies. These categories

(funds) fall into these major classifications:

• Maintenance&Operation • UnrestrictedCapitalOutlay • ClassroomSiteFund
• InstructionalImprovementFund

• SpecialProjects(Federal/State) • BondFunds
• AgencyFunds
• FiduciaryFunds
• SpecialRevenueFunds

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.

Maintenance and Operations Budget

The Maintenance & Operations (M&O) Fund budget is where most of the day-to-day expenditures take place. Typical budgeted expenditures include: salaries, employee benefits, supplies, utilities, maintenance and repair, and miscellaneous expenditures not of a capital nature.

Although the format and formula computation of the M&O Fund is very structured, the process of determining how the monies will be spent varies among school districts. Typically, the budgeting process starts months before the budget year begins.

7

The Equalization Formula consists of the following: •BaseSupportLevel(BSL)(A.R.S.§15-943)(CYADM) •TransportationSupportLevel(TSL)/Transportation Revenue Control Limit (TRCL) •DistrictAdditionalAssistance;(DAA)(PYADM),(A.R.S. §15-961)
•Tuition •Consolidation/UnificationAssistance

These budget limit components may be allocated to M&O or Capital.

The M&O Budget limit is based on a number of formulas which are heavily dependent upon the Average Daily Membership (ADM) (A.R.S. §15-901). School districts are funded on current year (CY) ADM. ADM means the average enrollment of fractional students and full-time students, minus withdrawals (A.R.S. §15-901). A.R.S. §15-902.04 provides an option to offer a 200-day calendar and receive additional 5% of base level funding. The modified calendar requires a10% increase in instructional time.

Student Membership

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.	8

Base Support Level (BSL)

Weighted Student Count

The Weighted Student Count takes into consideration the relative associated cost of educating certain classifications of students, the size of the district, whether the students are in elementary or high school, the isolation of small rural school districts in the state, and special needs children. Weighted Student Count is specified per A.R.S. §15-943.

GroupAStudents

Base Support Level =

{

Weighted Student Count X
Base Level Amount (with or without teacher compensation) X
Teacher Experience Index

Group A students are defined in A.R.S. §15-901 as, SLD, ED, MID, RE, SLI, etc. students. For school districts with 600 or more

students,thechartbelowliststheweightsbygradelevel.

Grade Level
	SupportLevelWeight
	
Pre-SchoolwithDisabilities (PSD)
	1.450
	
K - 8 grades
	1.158
	
9 - 12 grades
	1.268

The additional 0.450 is added for preschool students with special needs. The additional 0.158 added for K-8 and 0.105 of the 0.268 added for 9-12 are additional funding designed to help fund the following programs: Career Explo-ration,SpecificLearningDisability, Emotional Disability, Mild Intellectual Disability, Remedial Education, Speech Language Impairment, Developmental Delay, Homebound, Bilingual, Other Health Impairments, and Gifted. The remaining 0.163 of the 0.268 is a high school base provided as additional support for9-12students.

Schooldistrictswithfewerthan600studentsinelementaryand/orhighschoolgradeshaveweightsthatvarybygraderange. Weight factors for the small isolated school districts are greater than those for the small school districts. School districts must be designated by the Superintendent of Public Instruction in order to use small isolated district weights. As defined in A.R.S. §15-901(B)(26),asmallisolatedschooldistricttobesodesignatedmustcontainnoschoolwhichisfewerthanthirtymiles,or fifteenmilesifroadconditionsandterraincausedrivingtobesloworhazardous,fromanotherschooloperatedbyanin-state school district and which teaches one or more of the same grades as the school to be designated as within an isolated small school district. Following is how to calculate the student support level weights for these school districts as identified in A.R.S. §15-943.1.(Seechartbelow)

Support Level Weights for Small School Districts Not Designated as Isolated
	
Student Count
	K-8 Grades
	9-12 Grades
	
< 100
	1.399
	1.559
	
> =100 & < 500
	1.278 + [.0003 x (500 – student count)]
	1.398 + [.0004 x (500 – student count)]
	
> = 500 & < 600
	1.158 + [.0012 x (600 – student count)]
	1.268 + [.0013 x (600 – student count)]
	
Support Level Weights for Small Isolated School Districts
	
Student Count
	K-8 Grades
	9-12 Grades
	
< 100
	1.559
	1.669
	
> =100 & < 500
	1.358+ [.0005 x (500 – student count)]
	1.468 + [.0005 x (500 – student count)]
	
> = 500 & < 600
	1.158 + [.002 x (600 – student count)]
	1.268 + [.002 x (600 – student count)]

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.	9

Base Support Level (BSL) Continued..	Teacher Compensation

Group B Students

Additional support level weights are provided for special needs and other students who were served the previous year. Funding for Extended School Year (ESY) is included within the funding generated by these additional weights. These weights are specified in A.R.S. §15-943.2. They are as follows:

K-3 Reading
	
0.040

K-3
	0.060
	
ELL (English Language Learners)
	0.115

Hearing Impairment
	
4.771

MD - R, A-R and SID - R
	
6.024

MD - SC, A-SC and SID - SC
	
5.833

Multiple Disabilities Severe Sensory Impairment
	
7.947

Orthopedic Impairment (Resource)
	
3.158

Orthopedic Impairment (Self Contained)
	
6.773

Preschool-Severe Delayed
	
3.595

DD, ED, MIID, SLD, SLI, and OHI
	
0.003

Emotionally Disabled (Private)
	
4.822

Moderate Intellectual Disability
	
4.421

Visual Impairment
	
4.806

Base Level Amount

The Base Level is the amount of money determined annu-ally by the Legislature per 1.0 weighted student count. For budget year 2017-18 the Base Level is $3,683.27 without
teacher compensation.

A district can increase its Base Level amount by an additional 1.25% if its teacher performance evaluation system receives approval from the State Board of Education, in accordance with A.R.S. §15-952. Funds received by this in-creased budget capacity may be expended only for additional teachercompensation.Forbudgetyear2017-18,theBaseLevel is$3,729.31withteachercompensation. Thismustberenewed annually.

Teacher Experience Index (TEI)

This factor is derived from the formula specified in A.R.S. §15-941. Its purpose is to allow extra budget capacity for school districts whose average years of experience for teachers exceed the State of Arizona average. Districts that qualify are allowed to increase the support level by 2.25% for each year of experience above the State of Arizona average. The average and each district’s TEI factor is calculated from the School District Employer Report (SDER) that is due annu-ally by October 15; this report is commonly compiled by a district’s Human Resources or Payroll department.

Additional Teacher Salary Increase (Laws 207, Ch. 305, §33)
Legislation was passed in 2017 that allowed for an increase to the BSL specifically for a 1.06% increase to teacher sala-ries. The amount is to be determined by the school district or charter school and is based upon total actual salaries paid in fiscal year 2017 for each eligible teacher. As defined by the Auditor General, eligible teachers consist of any person eligible to be included in the year-end full-time equivalent (FTE) teacher count on the Annual Financial Report (AFR) of an Arizona school district or charter school in FY 2017 and who teaches at the district during FY 2018. The employer share of retirement system and FICA expense is also to be calculated and included in the additional amount needed for the salary increase.

The amount needed is to be estimated at the time of budget adoption. The amount may be revised after the AFR has been completed and no later than November 1, 2017. If the budget calculation is not revised, the calculation on the adopted budget will be used to determine the amounts to allocate to each district and charter school by December 1, 2017.

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.

Pupil Transportation Funding

A.R.S. §15-945 and §15-946 provide increased budget limits for districts that transport or contract for the transportation of students to and from school. There is additional funding for academic, vocational and athletic trips. The subsections below provide details on the computation of the transpor-tation limits.

Transportation Support Level (TSL)

The Transportation Support Level (TSL) is based on the average daily route miles per eligible student transported. Districts are required to use the prior year Approved Daily Route Mileage in calculating this amount for the budget year. Eligible students are those in elementary school (grades PSD-8) whose place of residence is greater than one mile from their school of attendance, and those in high school (grades 9-12) whose place of residence is greater than one and a half miles from their school of attendance. The formula is based on 180 school days (or 200 days).

The first step in calculating the TSL is to divide the district’s total daily route miles by the total number of eligible students transported. The quotient obtained from this calculation is used in this chart to determine the district’s funding per route mile.

Daily Route Mileage Per Eligible Student
	
State Support Level per Route Mile for FY2018
	
0.5 or less
	$2.59
	
More than 0.5 through 1.0
	$2.12
	
More than 1.0
	$2.59

10

Thesecondsectionofthesupportlevelisforacademic,voca-tionalandathletictrips.Thisadd-onamountvariesbytypeof districtandisdeterminedbythefollowingchart:

Daily Route Mileage Per Eligible Student Transported
	District Type
02 or 03
	District Type 04
	District Type 05

1.0 or Less
	
0.15
	
0.10
	
0.25

More than 1.0
	
0.18
	
0.12
	
0.30

Type 02 = unified district, Type 03 = elementary district not in a high school district, Type 04 = elementary district in a high school district and Type 05 = high school district.

The factor determined above is multiplied by the to-and-from support level (excluding bus tokens and passes) to calculate this add-on.

The third part of the calculation is the support level for the extended year programs which is determined by multi-plying the total route miles for students with disabilities attending the extended school year program by the per mile factor used in the basic to and from support level.

Thesumoftheabovethreeitems,(to-and-from,academic/ vocation/athletic, and extended school year) constitutes

the TSL.

“The Transportation Support Level

(TSL) is based on the average daily

The factor chosen from the chart is multiplied by the total route mileage and then actual expenditures for bus passes and tokens for eligible students is added to that product to determinetheto-and-fromschoolsupportlevel.

route miles	per eligible student

transported.”

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.	11

Pupil Transportation Funding cont. Transportation Revenue Control Limit (TRCL)

The Preliminary Transportation Revenue Control Limit (TRCL) is determined by adding the increase in the budget year TSL from the prior year TSL to the prior year TRCL.

In accordance with A.R.S. §15-946, the budget year TRCL cannot increase from the prior year TRCL amount if the budget year TRCL would exceed 120% of the budget year TSL.

If the budget year Preliminary TRCL is greater than 120% of budget year TSL, then the budget year TRCL is the same as the prior year TRCL.

In 2007, the Arizona legislature amended A.R.S. §15-946 to set the TRCL to equal the TSL, when the TSL is greater than the TRCL (Laws 2007, 1st Regular Session, Chapter 234, Section 1).

“The	Preliminary	Transportation RevenueControlLimit(TRCL)isdeter-mined by adding the increase in the budget year TSL from the prior year TSLtotheprioryearTRCL”

Revenue Control Limit (RCL) and District Support Level (DSL)

The Revenue Control Limit (RCL) is a spending limit and is calculated by adding the BSL to the TRCL. The RCL may be allocated, in amounts determined by the district, between the M&O fund budget and the unre-stricted capital fund budget.

The District Support Level (DSL) is thatportionoftheRCLthatiseligible forequalizationassistance.Itiscalcu-lated by adding the BSL to theTSL.

“TheRevenueControl Limitmaybeallocated, inamountsdetermined bythedistrict,between theM&Ofundbudget andtheunrestricted
capitalfundbudget.”

Common school districts not within a high school district (Type 03) are funded for high school students based on high school tuition paid to other districts. The Base Support Level formula for those districts uses the elementary student count only. The tuition amount paid for high school students from these districts is included in DSL and RCL for purposes of determining the General Budget Limit, but excluded when calculating the amountofbudgetoverrides.

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.	12

District Additional Assistance	Student Count of Less Than 600

Just as there is a formula that determines the Revenue Control Limit, there is also a formula for Capital Outlay in A.R.S. §15-961. The District Additional Assistance (DAA) is an allocation and, like the RCL, may be allocated (in whole or in part) to either the M&O or unrestricted capital fund. The DAA calculation is a multiplication of the unweighted actual student count (100th Day Prior Year ADM) by the appropriate support levels. The 2017-2018 formula for districts of 600 or more students is as follows:

For small and isolated districts, the basic formula per student dollar amounts for K-8 and 9-12 are multiplied by the corresponding weights as determined from the chart in the Small Districts Not Designated as Isolated table on page 8 of this document and prescribed by A.R.S. §15-943 (for small school districts).

Grade Level
	
Support Level
	
Actual Amount

PSD
	
$450.76
	
$67.00

K-8
	
$450.76
	
$67.00

9-12
	
$492.94
	
$73.00

The sum of the above products is the DAA Base. If a district’s student count is greater than 5% over the prior year student count, the DAA Base is increased by 50% of the actual percentage increase in the school district’s student count.

The final factor in the DAA formula is an increase for text-books for high school students. Prior to 1984, high school students had to pay a rental fee for textbooks. In 1984, the Legislature adopted a compulsory education statute which requires students to be 16 or to have completed the 10th grade prior to leaving school. In conjunction with the compulsory school requirement, the Legislature commenced the process of furnishing textbooks free to high school students. In FY2018, the allowable amount for high school textbooks is $69.68 per high school student count. It should be noted that these provisions apply only to required textbooks and related printed materials. School districts may continue to charge a reasonable rental fee for other supplementary materials.

For2017-2018,thelegislature reducedtheDAAfundingbyover
85%

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.

Additions to the Maintenance & Operations and Unrestricted Capital Outlay Budget

After allocating the RCL and the District Additional Assistance (DAA) between the Maintenance & Op-eration Budget and the Unrestricted Capital Out-lay Budget there are certain adjustments to be made in arriving at the total budget for these funds. There are numerous reasons for an increase, but most districts will typically only have some of the adjustments noted below. Unless otherwise noted, the adjustment may be made to both.

Budget Overrides

A.R.S. §15-481 allows a district to increase its budget up to 15% of its Revenue Control Limit if the voters of the district approve by election. The voter authorization is given for up to seven years. If the additional increase is for five years or more, the percentage increase remains constant (up to 15%), except during the next to last year when the percentage decreases to two-thirds of the initial percentage and during the last year when it decreases to one-third of the initial percentage. A district can renew its authorized percentage (up to 15%) prior to the phase out of the existing override of an existing override by passing another election. This override may only be allocated to the M&O Fund.

A special override election for special programs may be held. Five percent of the Revenue Control Limit attrib-utable to the weighted count in PSD, kindergarten and grades 1-12 can be requested under the provisions of A.R.S. §15-482. However, when this provision is used in combina-tion with the use of proceeds from the sale or long-term lease of school property (A.R.S. §15-1102) or with an over-ride in accordance with A.R.S. §15-481, the total increase cannot exceed 15% of the Revenue Control Limit. This special program override can be for the same duration as an M&O override. This override may be allocated to the M&O or Unrestricted Capital Outlay Fund.

13

A.R.S §15-481 allows for a special override election for capital outlay. For overrides approved by a vote of the qual-ified electors of the school district at an election held from and after October 31, 1998, the period of the additional increase prescribed in this subsection shall not exceed seven years for any capital override election. This override may be allocated to the Unrestricted Capital Outlay Fund only. Starting in 2010-11, capital outlay override election authorizations are limited to 10% of the revenue control limit. There is no phase down process for capital overrides.

Overrides are calculated on the RCL calculation using prior year ADM. Overrides may not be increased for growth in student counts. Equalization Assistance is not provided for override amounts.

Tuition Revenue

Districts are allowed to budget an additional amount for tuitionand/orcertificatesofeducationalconvenience(CEC) revenues. If this revenue was underestimated, the district may increase the budget prior to May 15. If this revenue was overestimated, the district must reduce expenditures and the general budget limit based on actual revenues.

“Overridesmay notbeincreased forgrowthin
studentcounts.”

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.	14

Budget Balance Carryforward	Registered Warrants

A district may carry forward any unused M&O budget balance. None of this carry forward can be attributable to required reductions such as tuition revenue budgeted and not received or expenditures for the debt service portion of the cost of tuition. Authorization for this addition is found in A.R.S. §15-943.01.

A district may also carryforward any unused District Addi-tional Assistance Fund budget plus interest earned for the prior fiscal year. Interest earnings from the prior year may not be used to increase the M&O budget.

Desegregation Costs

Additional budget capacity for a district to comply with or continue to implement activities relating to a court ordered desegregation or administrative agreement with the United States Department of Education Ofice for Civil Rights is allowed under A.R.S. §15-910. A district qualifying and choosing to budget for these expenses may budget both maintenance and operation and capital outlay funds outside of the RCL and DAA. A separate desegregation budget must be prepared on forms prescribed by the Superintendent of Public Instruction.

Equalization assistance is not provided by the State or county for these costs. Current law has capped the deseg-regation budget for 2009-10 and each year thereafter at the amount budgeted for desegregation expenses in fiscal year 2008-09.

Small School District Exemption

School districts that have a student count of 125 or fewer students in grades K-8 or 100 or fewer students in grades 9-12 may adopt a budget in excess of their normal calcu-lated budget limit. Districts that utilize this provision are allowed to add any needed dollars at the time the budget is proposed (A.R.S. §15-949). This additional funding is paid
by a local tax levy.

Districts may budget for interest expenses for registering warrants or net interest expense for tax anticipation notes (TANS) incurred in the fiscal year two years prior to the budget year. This applies if the county treasurer pooled all district monies for investment and the district applied for early payments of their state aid apportionment or the district was not eligible for state aid.

Tuition Out Debt Service

Districts may budget the bond issues portion of the cost of tuition charged to the district as provided in A.R.S. §15-824 for pupils attending school in another school district. A.R.S §15-910 L. This increase is made only to the M&O Fund.

Dropout Prevention Programs

School districts which participated in the dropout preven-tion program as originally established pursuant to laws 1987, Chapter 333 and continued by Laws 1990, chapter 399, may continue to budget for the dropout prevention program in an amount not to exceed the amount budgeted in fiscal year 1990-1991 (Laws 1992, Chapter 305, Section 32). Expenditures for programs serving grades 4 through 12 are allowed.

Joint Career and Technical Education and Vocational Education Center
Districts that have entered into an intergovernmental agreement to establish a jointly owned and operated joint career and technical education and vocational education center as provided in A.R.S. §15-789, may budget for vocational maintenance and operation expenses which are specifically exempt, in whole or in part, from the revenue control limit for a period of not to exceed three years, beginning the first year that the career and technical education and vocational education center is
operating. (A.R.S. §15-910.01)

Arizona Association of School Business Oficials | School Finance Summary Manual

Budget Formula Construction cont.

Performance Pay Budget Balance Carryforward
A district that has a performance pay component in its salary schedule may budget any budget balance in the maintenance and operation section of the budget that is directly attributable to the performance pay component in the salary schedule from the current fiscal year for use in the performance pay component of the salary schedule in the budget year. Budget balance for this item means the difference between the actual and budgeted performance
pay component of a district’s salary schedule. This increase

15

DAA Allocation Adjustments

The District Additional Assistance allocation is used to arrive at the Unrestricted Capital Outlay budget limit. It may be allocated in whole or in part between M&O and the Unrestricted Capital Outlay fund as determined by the school district for capital needs. There are adjustments to the DAA allocation that may affect this determination and allocation to the Unrestricted Capital Outlay budget limit. The adjustments are as follows:

• Districts with a K-12 student count of fewer than 600 students are allowed a special transportation capital

is made only to the M&O Fund.	adjustment. A district must make application to

Other Adjustments

Districts shall adjust the budget for adjustments required by the Department of Education or adjustments required by the State Board of Education (eg., budget reduction for prior year for over expenditure pursuant to A.R.S. §15-905 L.) A.R.S. §15-905 M.

Audit Expenses

The district BSL is increased by the amount of the audit expense reported on the AFR two fiscal years prior. The audit cost reported are those that cannot be charged to
federal programs.

school finance and obtain approval through the State Board of Education for this special adjustment to DAA, and it must meet several requirements set forth in A.R.S. § 15-963.
• State budget reduction as determined by the State Legislature.

Unrestricted Capital Outlay Budget Limit Adjustments
As is with the M&O budget limit, there are adjustments that may be made to the Unrestricted Capital Outlay fund to arrive at the budget limit as described below.

• DAA allocation adjustment as determined by a school district in whole or in part with M&O.
• Unrestricted Capital Outlay fund budget balance may be carried forward to the subsequent budget year.
• The Unrestricted Capital Outlay fund may be adjusted for interest earned from the previous year.
• Districts shall adjust the budget limit for adjustments required by the Department of Education or adjust-ments required by the State Board of Education (eq., budget reduction for prior year for over expenditure pursuant to A.R.S. § 15-905 L.) A.R.S. § 15-905 M.

Arizona Association of School Business Oficials | School Finance Summary Manual

Where Formula Dollars Come From

The money to support the Revenue Control Limit and District Additional Assistance, as set forth in the preceding sections, are obtained from two main sources - state equal-ization assistance and property taxes.

State Equalization Assistance

The school finance formula attempts to ensure that each district has equitable budget capacity compared to others inthestate.Equalizationassistancehelpstoensurethatthe

16

The State Board of Education is charged with distributing state aid (equalization assistance) from the state aid entitle-ment for school districts. A.R.S. §15-973 provides the following schedule for state aid distributions to school districts:

Onthefirstbusinessdayof:

August	1/12ofthetotalamountisdistributed

September	1/12ofthetotalamountisdistributed

revenues available for district budgets are shared equitably asdescribedinA.R.S.§15-971.Equalizationassistanceisthe amount of money that the state provides to school districts over and above the levy amount raised with the uniform Qualifying Tax Rate (QTR). If the local tax rate necessary to fund the RCL/DSL, CORL and allocation formulas is equal to or lower than the Qualifying Tax Rate, no state equaliza-tion assistance is given. If the tax rate necessary to fund the formulasisgreaterthantheQualifyingTaxRate,stateequal-ization assistance is provided in order to keep this portion of local property taxes uniform throughout Arizona. The

October November December January February March April
May

June

1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed 1/12ofthetotalamountisdistributed
1/12ofthetotalamountisdistributed

amount of equalization assistance provided varies inversely with a district’s per weighted student assessed property valuation.Asthedistrictassessedvaluationperstudentgoes up, the equalization assistance goes down.The state equal-izationaidformulacanbedescribedasfollows:

1. Equalization base is the sum of the lesser of the RCL or DSL, District Additional Assistance Allocation and District Type 03 tuition-out charge (if applicable).

2. District Preliminary Assessed Valuation (A.V.) - Including valuation of in-lieu contributions.

Onthelastbusinessdayof:

June	1/12ofthetotalamountisdistributed

If a school district has cash flow problems, it can apply to theSuperintendentofPublicInstructionforearlypayments on the schedule shown above. Advance payments will be madeifstatefundsareavailableandifapprovedbytheState Treasurer, the Director of the Department of Administration andtheSuperintendentofPublicInstruction.Innoeventisa schooldistrictallowedtoreceivemorethanthree-fourthsof itstotalapportionmentbeforeMay1ofthefiscalyear.

3. Qualifying Tax Rate (QTR) for 2017-18 is $2.0234 for elementary level students and high school students. Unified and Type 03 elementary districts must separately determine equalization based on PSD-8 student count and 9-12 student count.

4. Qualifying Levy is the district’s Primary Assessed Valuation divided by 100 multiplied by the Qualifying Tax Rate.

5. Equalization Assistance is the Equalization Base minus the Qualifying Levy.

Arizona Association of School Business Oficials | School Finance Summary Manual

Where Formula Dollars Come From cont.	17

School District Property Taxes

A significant portion of school district financing in Arizona comes from local property taxes on real and personal property. As outlined in the previous section on equalizationassistance,thefundingfortheRevenueControl Limit and District Additional Assistance for each district is based upon what a tax rate generates in each district. This system results in districts with high taxable property values per pupil paying a higher percentage of the total cost with local taxes. In contrast, school districts with lower taxable property values per pupil pay a lower percentage of the total cost. Items outside the RCL and DDA that don’t have a dedicated funding source are from the local propertytaxleviesofeachdistrict.

In August, the County School Superinten-dents’ofices transmit tax levy requirements foreachdistricttothecountyfinancedepart-ments who, in turn, inform the county Board of Supervisors of the necessary levy by fund foreachdistrict.Thelevy,placedonproperty in August, applies to the assessed valuation determined for real property and secured personal in the district through the previous January(variesbycounty).Fortheunsecured
personal property in each district, the new tax rate for each year is not applied until the following January (varies by county). This variation in assessing practices can result in a revenue lag if district tax rates increase substantially over a previousyear.

Property(M&OandCapital)andsecondary(bondsandover-rides)taxleviesaredeterminedbyapplyingtaxratesagainst thenetlimitedassessedvaluationoftheschooldistrict. This is based on a limited value determination specified in the constitution,whichlimitsthevalueofthepropertyusedfor taxpurposeseachyeartofivepercentgrowth,uptothefull cash value of the property. It should be noted that for the property valued by the Arizona Department of Revenue, there is a separate limited value calculation – the full cash valueofthepropertyisalsothelimitedpropertyvalue.

Property taxes are collected and distributed in November andAprilofeachyear.GenerallyinArizona,thedelinquency rate on taxes has been averaging approximately 5%, which canaccountforcashflowproblemsinsomeschooldistricts. A portion of the taxes due is paid by the State in the form of additional state aid, as provided by the homeowners tax reduction provisions pursuant to A.R.S. §15-992. Salt River Projectfundsareinlieuofpropertytaxes.

Regardless of the collection of taxes or the timeliness of being received in a district, the district can spend up to the budget capacity authorized by the previously described limitations. The district must register warrants if the cash is
notavailableatthetimeofexpenditure.

Registering warrants is the system estab-lishedinA.R.S.thatallowsthecountytreasurer to provide short-term financing to school districts for cash flow problems in its primary levyfunds(M&O,AdjacentWaysandDDA)and theClassroomSiteFund(CSF).

Checking the Calculations

The budget limit and equalization assistance calculations can be checked by obtaining the APOR 55-1 report on the Arizona Department of Education’s web site. This report is updatedforeachpaymentscheduledpursuantto15-973.

The ADE web site also provides the BUDG25 and BUDG75 reports.TheBUDG25reportcomparesthebudgetsubmitted by the district to a calculation of the district’s budget that is performed by ADE and notes the differences. The BUDG75 report compares the actual expenditures in the Annual FinancialReport(AFR)submittedbythedistricttothelesser of the ADE calculated budget and budget limits and calcu-latesthebudgetbalancecarryforwardforthenextyear.With studentcountscontinuingtobeadjustedafterthebudgets are revised in May, it is important for districts to reconcile their budgets and AFR’s to the BUDG75 to ensure they are usingthecorrectbudgetlimits,carryforwards,etc.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized

Maintenance and Operations (M&O) Fund 001

This fund is divided into multiple programs. The three main programs are: Regular Education, Special Education, and Pupil Transportation. For reporting and accounting purposes, each of the programs is further subdivided by function (instruction, support services, and operation of non-instructional services).

The total budget for the M&O Fund cannot exceed the budget limits previously specified and the expenditures cannot exceed the budget. The budget limit determines spending authority rather than cash availability.

18

Desegregation Expenditures — Programs 510-515
This program is established to account for the expenditures related to a desegregation plan either court-ordered or by administrative agreement with the United States Depart-ment of Education Ofice for Civil Rights for the purpose of remediating alleged or proven racial discrimination. A separate budget must be maintained for these expendi-tures. Expenditures must be solely for the purpose of satis-fying the compliance with an approved desegregation plan.

Dropout Prevention Program —Program 530

Eligible districts participated during FY91 in the dropout

Regular Education — Program 100 This program is used to account for expen-ditures relating to activities that provide students in kindergarten through grade 12withlearningexperiences.Expenditures notspecificallyassignedtootherprograms

shouldbeclassifiedhere.

“This(M&O)fund isdividedinto programs.Thethree mainprogramsare:
RegularEducation,

prevention program as provided under the Laws 1992, Chapter 305. Eligible districts are allowed to budget using local tax monies above their Revenue Control Limit equal to the FY91 budget. The monies must be spent on dropout prevention as outlined in the legislation.

Special Education Programs —
for expenditures relating to activi-
ter — Program 540
SpecialEducation,	Joint Career and Technical Educa-Program 200	andPupil	tion and Vocational Education Cen-This program is used to account             Transportation.”	A school district may enter into an intergov-

ties for students receiving services
outside	the	realm	of	“regular
ernmental agreement (up to three years) with other school districts or community
programs”	in	accordance	with	the	disability
technical, and career education.
exempt in whole or in part from the revenue control limit
college districts to establish a jointly owned and operated classifications as defined in A.R.S. §15-761, and programs	vocational and technical center. The expenses, which are for: gifted, remedial, English immersion, vocational and	as prescribed by A.R.S. §15-910.01, are accounted for in this
program.

Joint Technical Education — Program 300-399 TheseprogramsareusedtoaccountfortheJTEDprograms bydiscipline.

Pupil Transportation — Program 400
This program is used to account for operating expendi-tures relating to transporting pupils to and from school or schoolactivities.

K-3 Reading Program — Program 550

Accounts for expenditures from the amount generated by the K-3 Reading support level weight to be used only on readingprogramsforpupilsinKindergartenandgradesone,
twoandthree.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.

Other Instructional Programs — Program 610-630
These programs are used to account for activities that add to a student’s educational experience. These activities typi-callyincludeeventsandactivitiesthattakeplaceoutsidethe traditional classroom. Some examples of such activities are athletics,band,choir,anddebate.

Classroom Site Fund 010

The Classroom Site Fund (CSF), as prescribed by A.R.S. §15-977, was established in fiscal year 2002 to account for the portion of state sales tax collections and State Trust Land income provided to school districts as an additional source of funding for teacher salary increases and other specified maintenance and operation purposes. The amount that school districts receive from the State to use at school sites is based on actual tax collections, not to exceed the Joint Legislative Budget Committee (JLBC) annual estimate.

19

The monies in the three funds must be used to supplement, rather than supplant, existing monies and must not be used for administrative purposes.

011 Classroom Site Fund —Base Salary

This fund includes 20% of the current CSF allocation and any prior year’s unexpended budget balance and interest earn-ings. Monies in this fund can only be used for teacher base salary increases, teacher employment related expenses, and registered warrant expenses for this fund.

012 Classroom Site Fund —Performance Pay

This fund includes 40% of the current CSF allocation and any prior year’s unexpended budget balance and interest earnings. Monies in this fund can only be used for perfor-mance-based teacher compensation increases, teacher
employment-related expenses, and registered warrant

A.R.S. §15-978 establishes the Classroom Site Fund	expenses for this fund.

Budget Limit (CSFBL) as the JLBC’s current estimate, plus any prior year’s unexpended budget balance and interest earnings in the CSF. Budget control is applied at the total CSF level (i.e., Fund 010 expenditures cannot exceed the CSFBL). The restrictions placed on the original allocation of revenues apply in all future years. Therefore, the unex-pended budget balance must be carried forward in each of the three CSF detailed special revenue funds (011, 012, and 013) separately.

The CSF is a budget-controlled fund; therefore, districts may make expenditures in the Fund that are within the CSFBL, prior to receiving cash in which case warrants would be registered for the fund.

Laws 2009, 3rd Special Session, Chapter 11, amended A.R.S. 15-977 to require that classroom site fund budget limit be adjusted for any prior year carryforward or shortfall. For FY2018, the budget amount per weighted student was set at $386 and can only be paid to certified teachers who hold an ADE teaching certificate and teach 50% or more of the time.

Each district must submit a Classroom Site Fund Pay for Performance Compensation Plan to the Arizona Depart-ment of Education on or before December 31st of each year. State requires that 33% of 301 funding is directly tied to the

individual teacher’s performance.

013 Classroom Site Fund — Other

This fund includes 40% of the current CSF allocation and any prior year’s unexpended budget balance and interest earnings. Monies in this fund can only be used for the following maintenance and operation purposes: class size reduction; teacher compensation (teachers
as defined in Fund 011) increases; assess-ment intervention programs; teacher devel-opment;	dropout	prevention	programs; teacher liability insurance premiums; and registered warrant expenses for this fund. Expenditures for class size reduction, AIMS intervention,	and      dropout      prevention programs must be appropriate expenditures under function 1000-Instruction, excluding
athletics.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.	20

Instructional Improvement Fund 020	Medicaid Reimbursement - Fund 290

The Instructional Improvement Fund was established in FY2003-2004andconsistsofmoniesreceivedfromIndian Gaming and interest earned. Districts may utilize up to 50% of these monies for teacher compensation increases and class size reduction. The expenditures for class size reduction,ifany,mustbeappropriateexpendituresunder function 1000-Instruction, excluding
athletics. Monies not used for teacher compensation and class size reduction shallbeutilizedforthefollowingmain-tenanceandoperationpurposes:

This fund is used to account for monies received from Medicaid. Since the original expenditures that result in the Medicaid reimbursement are accounted for in the M&O Fund and the reimbursement in the Medicaid Reimburse-ment Fund, this fund can be spent for any allowable M&O purpose.

School Plant Fund 500

School Plant Fund - Fund 500

This fund is used to account for the monies

1. Dropout prevention programs.
2. Instructional improvement programs including programs to develop minimum reading skills for students by the end of 3rd grade.

derived from the sale of school property before July 1, 1998 or lease of school property for over
one year. Limitations related to the maximum amount that can be used from this fund in any fiscal year are detailed in A.R.S. §15-1102. Prior to sale of school sites and facil-

The monies in this fund may not be used to supplant existing state and local monies. This fund is cash controlled and the monies received in this fund are non-reverting. Therefore, expenditures cannot be incurred prior to the receipt of monies and unspent monies at fiscal year-end may be used in subsequent years.

County, City and Town Grants Fund 050

This fund is for the accounting of revenues and expendi-tures of grants received from counties, cities and towns.

Special Projects Funds 100-499

Another category of funds used for operating and capital expenses is called Special Projects. These are federal and state grants which are used for supplemental educational programs, Title I, Title II, IDEA, National Forest Fees, E-Rate, Impact Aid, etc. Guidelines for accounting and reporting of these funds are set forth by the appropriate department of the Arizona Department of Education. Federal grants are recorded in funds 100-399; state grants are recorded in funds 400-499. Refer to the Chart of Accounts for fund numbering requirements.

ities, a school district must have a successful election of its voters. Common or high school districts that are bonded in excess of 7% of their secondary assessed valu-ation are subject to specific restrictions as set for in A.R.S. §15-1102.C. Exceptions to the requirement for voter approval to sell property are found in A.R.S. §15-342, paragraph 10.

Other Funds 510-595

Food Services - Fund 510

This fund is used to record the financial operations of school activities which have as their purpose the prepara-tion and serving of regular and incidental meals, lunches, breakfasts and snacks in connection with school functions
– primarily school cafeteria operations.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.

Civic Center - Fund 515

The governing board of a district may permit the use of school property, under its direction, for civic activi-ties, as defined in A.R.S. §15-1105. Monies received for use of school facilities and the related expenditures are accounted for in this fund. A reasonable fee shall be
charged for lease of property, unless

21

ExtracurricularActivitiesFeesTaxCredit-Fund526 This fund is used to account for revenues and expendi-tures of monies collected in support of extracurricular and character education activities, standardized test fees, prep classes and CTE assessments. Contributions to this fund may be taken as a tax credit by the taxpayer in accordance

with A.R.S. §43-1089.01. Amounts in this

the board permits uncompensated	fund should be spent on the activities

use for activities that promote the educationalfunctionsofthedistrict.In accordance with
A.R.S. §15-342(29), if program needs are met, excess monies may be expended for maintenance and oper-ation or unrestricted capital outlay purposes.

“Priortosaleofschool sitesandfacilities,a schooldistrictmust haveasuccessful electionoftheirvoters.”

for which they are collected. In accor-dance with USFR Memorandum No. 214, districts may choose to account for these transactions in Auxiliary Operations – Fund 525, rather than the 526 fund.

Gifts and Donations - Fund 530

This fund is used to account for the

Community School - Fund 520

This fund is used to account for revenues and expenditures for the purposes of academic and skill development for all citizens in accordance with A.R.S. §15-1141, 42 and 43.This fundcanbeusedtoaccountforsuchareasassummerschool on a tuition basis, GED testing, and adult basic education programs.InaccordancewithA.R.S.§15-342(30),ifprogram needsaremet,excessmoniesmaybeexpendedformainte-nanceandoperationorunrestrictedcapitaloutlaypurposes.

Auxiliary Operations - Fund 525

This fund is used to account for revenues and expenditures related to the bookstores and athletic activities in accor-dance with A.R.S. §15-1125. It can also be used for class fees and miscellaneous classroom collections, such as field trips
and book stores. Examples can be found in the USFR.

revenues and noncapital expenditures of gifts, donations, bequests and private grants made to the district (A.R.S. §15-341(A)(14). Fund 650 can be established for gifts and donations for capital items.

School Opening - Fund 545

This fund is used to account for monies transferred in from the Maintenance and Operation Fund ending cash balance to be expended for maintenance and operation purposes incurred in the first year of operation of a new school within the district. Monies in this fund are not subject to rever-sion, except that at the end of 5 years without any activity in the fund, any remaining monies must be reverted to the Maintenance and Operation Fund. A.R.S. §15-943.01 Budget balance carry forward must be reduced by amount of the
transfer.

Insurance Proceeds - Fund 550

This fund is used to account for the monies received from insurance claims and the related expenditures (A.R.S. §15-1103.A.) These funds are primarily for the replacement of capital facilities and equipment.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.	22

Textbooks - Fund 555	Capital Related Funds 600-700

This fund is used to account for monies received from students to replace or repair lost or damaged textbooks and library books, supplementary books or instructional computer software. (A.R.S. §15-729).

Indirect Costs - Fund 570

This fund is used to account for monies transferred from federal projects, including the Food Service Fund, for administrative costs. A district may use this fund only when it has obtained an indirect cost rate approved by the Arizona Department of Education.

Unemployment Insurance - Fund 575

This fund is used by districts using the reimbursement (self-insured) method of accounting for unemployment insurance contributions. Deposits are made into this fund based on an appropriate percentage of salaries in various
funds. When former employees draw upon their bene-

Unrestricted Capital Outlay - Fund 610

The Unrestricted Capital Outlay section of the budget accounts for budgeted expenditures for acquisitions by purchase, lease-purchase, lease or long-term lease of capital items. These are defined in the Uniform System of Financial Records, which include the following areas:

1. Land, buildings, and improvements to land and build-ings, including labor and related benefits costs and mate-rials if the work is performed by school district employees.

2. Furniture, furnishings, athletic equipment and other equipment, including software.

3.Pupilandnon-pupiltransportationvehiclesandequip-ment,includingallcapitalexpenditureswithinacontract,if thedistrictcontractsforpupiltransportation.

4. Instructional aids, including instructional software.

fits, expenditures are made from this fund to reimburse the Department of Economic Security.

Advertising - Fund 595

Fund 595 is used to record revenues from the sale of advertising space, such as on the exterior of school buses or on
athletic facilities.

“Thegoverningboardof adistrictmaypermitthe useofschoolproperty, underitsdirection,for
civicactivities”

5. Library books.

Adjacent Ways - Fund 620 Thisfundisusedtoaccountforspecialprop-ertytaxassessmentsusedforconstructing, maintaining or otherwise improving any public way adjacent to any parcel of land owned by the school district or leased for

school purposes by the school district, or

Joint Technological and Educa-tion Districts - Fund 596
This fund is used to account for revenues received by member districts from Joint Technological and Education
Districtsforuseinjointtechnicaleducationprograms.

anintersectionofanypublicwayadjoining a quarter block in which the parcel of land
is situated, and for the construction of sidewalks, sewers, utilitylines,roadwaysandotherrelatedimprovementsinor along such streets and intersections.The monies generated fromthisassessmentshallnotbeusedforanyconstruction, maintenance or other improvements to the school district’s propertyexceptimprovementsnecessarytoassurethesafe ingress and egress for buses and fire equipment in accor-dancewithA.R.S.§15-995.Unexpendedfundscanbecarried over from year to year and interest earned should be cred-itedtothefund.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.

Bond Building - Fund 630

This fund is used to account for proceeds from the sale of bonds following a successful election. The money is used
to acquire land, purchase pupil transportation vehicles

23

Impact Aid Revenue Bond Building - Fund 639 Bond building funded by Impact Aid Revenues, rather than

propertytaxlevies.SeeBondBuildingFund630.

TheEWSFundconsistsofcapitalinvestmentmoniestofund
or pay contractors, consultants, and equipment vendors	Energy and Water Savings (EWS) - Fund 665 providing materials and services for facility projects and

Bond proceeds shall not be expended for items whose
or whose useful life is less than five years. The money not
maybedepositedinthefund romoneormorecompanies
and with whom they have a contract that is designed to
equipment as designated on an appropriate election ballot.       energy or water saving projects in school facilities. Monies useful life is less than the average life of the bonds issued       that provide utility, energy, orfwater services to the district

being used to satisfy payments may be invested. ncome
must be used as a designated pool of capital investment
monies to pay for the incremental cost of energy or water
from investments must be used to reduce the debt Iservice	saveenergyorwaterinthatdistrict’sfacilities.Thesemonies levy rather than add to the funds available for land acqui-
had asked a second question on the bond election ballot
rules may apply if interest earned on investments exceeds
interest paid on the bonds issued.) Effec-
projects or measures that save energy or water in school
sition, construction or equipment, unless a school district       savings measures in school facilities owned or operated by which provided authorization from the voters to use the       the district. Expenditures from the EWS Fund should be for interest earnings for additional bond purchases. (Arbitrage       facilities that are owned or operated by the district and for the repayment to the qualified provider or utility, energy or
tive May 31, 2009, interest on the bond
building fund can be spend for projects
reasonabe carrying ch rges ba ed on the
“Districtsarelimited
waterservicescompanyofcapitalinvestment monies deposited into the EWS Fund plus
rules require the interest to be used for
a monthly basis the amount of the monthly
without voter approval if federal laws or         astothemaximum       contract.lBased on theadistrict’ssrepayment capital expenditures. Districts are limited        valueofbondsthey       schedule, districts are required to transfer on

as to the maximum value of bonds they
Fund.
atanytime.”
can have outstanding at any time. Class A	canhaveoutstanding	payments to the EWS Fund from the M&O Bonds may not be issued after December
31, 2000. After December 31, 1998, districts may issue class B Bonds.

School districts may issue class B bonds to an amount in the aggregate, including the existing class B indebtedness, not exceeding 5% (for elementary or high school) or 10% (unified school districts) of the secondary assessed valua-tion, or $1,500 per student count, whichever is greater. In addition, the Constitutional debt limit applies to both Class AandClassBbonds.Foracommonorhighschooldistrict, theConstitutionaldebtlimitis15%ofitssecondaryassessed valuation,andforaunifiedschooldistrict,thelimitis30%of itssecondaryassessedvaluation.

Arizona Association of School Business Oficials | School Finance Summary Manual

How Budgets are Categorized cont.

Emergency Deficiencies Correction - Fund 686 This fund accounts for monies received from the School Facilities Board to correct emergency deficiencies. If a school district has an emergency, the school district shall apply to the school facilities board for funding for the

emergency. The school district’s application shall disclose

24

Impact Aid Revenue Bond Building Debt Service - Fund 720
Accounts for the accumulation of impact aid monies for the payment of long-term debt, principal, interest and related
costs. See Impact Aid Revenue Bond Building – Fund 639

Other Miscellaneous Funds
Student Activities - Fund 850
any insurance or building renewal monies available to the school district to pay for the emergency. “Emergency” means a serious need for materials, services or construc-
“Aschooldistrictisthe
tion or expenses in excess of the district’s adopted budget	Pursuant to A.R.S. §15-1121 to 1124, a school district is the for the current fiscal year and that                                                              custodian for monies raised by the efforts seriously threaten the functioning                                                              of students in connection with activities of of the school district, the preserva-                                                              student organizations and clubs.
custodianformonies
tion or protection of property or

raisedbytheeffortsof
public health, welfare or safety.	Internal Services - Funds 950-989

Fund 691
These funds are used to account for Building Renewal Grant –	studentsinconnection	revenues and expenditures relating to
withactivitiesofstudent
providing services to other school functions,

organizationsandclubs.”
The school Facilities Board distrib-                                                              other school districts, or governmental units. utes the Building Renewal Grant                                                              The revenues from the operation of a district Fund. This fund consists of monies                                                              services program shall be transmitted to the requested by school districts from                                                              county treasurer for deposit in the district the School Facilities Board to main-                                                              Internal Services Fund. Districts may employ tain the adequacy of existing school facilities.                           personnel, purchase supplies and equipment and incur other necessary expenses related to the operation of a

New School Facilities - Fund 695

This fund is administered by the SFB and has been established for the purpose of constructing new schools to meet the minimum adequacy guidelines. The criteria to determinedistricteligibilityformoniesfromthenewschool facilities fund is based on annual evaluation and approval of district enrollment projections, and the additional square footage that will be needed to maintain adequacy standardsinadistrict.TheSchoolFacilitiesBoarddistributes newschoolfacilitiesmoniestoschooldistrictsbasedonthe following formula: (number of students) x (square footage) x (cost per square foot) = allocation. Land costs are funded inadditiontoformulafundingfornewconstruction.

Debt Service - Fund 700

This fund accounts for the accumulation of property tax revenues for the purpose of making payments on long-
term debt principal, interest, and related costs.

district services program. Monies in these funds are not subject to reversion at the end of the fiscal year.

Intergovernmental Agreements - Fund 955

This fund is used by a fiscal agent to account for monies of an intergovernmental agreement (IGA). Revenues include amounts received from participants.

The USFR Identifies Other Funds that can be established by schooldistricts(Notaninclusivelist;refertoUSFRforothers)

1. Career and Technical Education and Vocational Education Projects - Fund 535
2. Fingerprinting - Fund 540
3. Litigation Recovery Fund - Fund 565 4. Teacherage - Fund 580
5. Insurance Refund - Fund 585
6. Joint Technological Education - Fund 596
7. School Plant Fund Special Construction - Fund 640 8. Gifts and Donations (for capital purposes) - Fund 650 9. Condemnation - Fund 660
10. Trust Funds - Funds 801-849
11. Enterprise Funds - Funds 901-949

Arizona Association of School Business Oficials | School Finance Summary Manual

Glossary

Annual Financial Report (AFR) - An annual comprehen-sive financial reporting due to ADE by October 15. The AFR includes budget and actual summary information for reve-nues, expenditures and fund balances for all district funds.

Approved Daily Route Miles - The mileage to transport eligible students to-and-from school for the first 100 days of school, plus an estimate for 80 additional school days, divided by 180.

Arizona Association of School Business Oficials (AASBO) -A professional organization made up of school employees who work in the business support areas, in the State of Arizona. AASBO is an afiliate of the Association of School Business Oficials – International (ASBO International)

Arizona Department of Education (ADE) – This agency operating under the direction of the Superintendent of Public Instruction, provides direct services to school districts. The agency executes the policies of the State Board of Education and the State Board of Vocational and Technological Education – implementing state academic standards; administering statewide assessments; disseminating information; administering and allocating federal and state funds; and providing program improve-ment assistance to schools and districts.

Average Daily Membership (ADM) - A method of counting the number of enrolled students based upon the first 100 school days in session. As examples: a student who enrolls 5 days after the start of the school year = 95/100 = .95 ADM, a kindergarten student who only attends school for one-half (1/2) of the day = .50 ADM, a high school student who attends only 3 of the required 4 class periods = ¾ = .75 ADM. ADM is a key component in the school finance funding formulas.

AzEDS – Arizona Education Learning and Accountability System - The administrative application that collects student detail information from school districts through the Internet. The district’s ADM and other attendance data is generated from this system. This system replaced SAIS (Student Accountability Information System).

Base Level – An amount determined annually by the Arizona Legislature per 1.0 weighted ADM. This amount is part of the RCL calculation.

25

Budg25 – An ADE generated report that assists districts in analyzing their expenditure budgets. The district’s submitted budget is compared to ADE calculations. Differ-ences indicate a need for the district to provide additional information to ADE or revise the budget.

Budg75 - An ADE generated report that assists districts in analyzing their prior year budget balance. The district’s submitted Annual Financial Report data is compared to ADE calculations. Differences indicate a need for the district to provide additional information or make adjustments in order to accurately reflect budget balance carry forward or over expenditure.

Concurrency – A concurrency occurs when a student is enrolled in two or more district or charters at the same during the same year. If a valid concurrency exists between a charter and a non-charter and both have validated the concurrency as true, the state will allocate the ADM between the two based on the actual enrollment in both the district and charter.

Current Year - Current budget year.

District Additional Assistance (DAA) – The Arizona Legis-lature combined the Soft Capital Allocation and Capital Outlay Revenue Limit Allocation into a single allocation. This allocation can be placed into the M&O fund or the Unrestricted Capital Outlay fund. The Soft Capital Alloca-tion fund has been eliminated.

District Support Level (DSL) – The Base Support Level (BSL) plus the Transportation Support Level (TSL).

Equalization Assistance – The amount of money that the state and county provide to school districts over and above the Qualifying Tax Levy (QTL) to ensure that the revenues available for district budgets are shared equitably.

Fiscal Year – For Arizona schools, is July 1 through June 30 of each year.

GDP Price Deflator – The average of the four Implicit Price Deflators for the Gross Domestic Product (GDP) reported by the United States Department of Commerce for the four quarters of the calendar year.

Arizona Association of School Business Oficials | School Finance Summary Manual

Glossary cont.

Grants Management - ADE department that ensures the proper allocation, distribution, and expenditure of all federal and state funds administered by ADE. They process grant budget applications, revisions, cash management reports and completion reports.

Group A – Educational programs for career explora-tion, a specific learning disability, an emotional disability, mild mental retardation, remedial education, a speech/ language impairment, homebound, bilingual, preschool moderate delay, preschool speech/language delay, other health impairments and gifted pupils.

26

Student Accountability Information System (SAIS) – This system is decommissioned and replaced by AzEDS.

Student Count – Current Year (CY) ADM, Special Educa-tion (SPED) and English Language Learners (ELL) student counts are used in calculating the Base Support Level for state aid purposes and Revenue Control Limit (RCL). Excep-tion for overrides, budget overrides are a percentage of the RCL which is based on the prior year ADM, SPED and ELL student counts.

Students FIRST – Students Fair and Immediate Resources for Students Today – 1998 legislation that created a

Group B – Educational improvements for pupils in	new capital financing system aimed at creating minimal

kindergarten programs and grades one through three, educational programs for autism, a hearing impairment, moderate mental retardation, multiple disabilities, multiple disabilities with severe sensory impairment, orthopedic

adequacy standards for capital related issues in public schools. Administered by the School Facilities Board.

Title 15 – A compilation of selected education laws passed

impairments, preschool severe delay, severe mental	by the Arizona State Legislature.

retardation and emotional disabilities for school age pupils enrolled in private special education programs or in school district programs for children with severe disabili-ties or visual impairment and English learners enrolled in a program to promote English language proficiency.

K3 Reading - Move on when reading program.

M&O – A common acronym for the Maintenance and Operation fund, Fund 001. Calculation of this budget is formula driven. This budget is used for most of the day to day expenditures of a school district.

Prior Year - Prior budget year.

Uniform System of Financial Records (USFR) – A publication that is a joint responsibility of the Arizona Auditor General and ADE. This document interprets Arizona Title 15 and contains the guidelines and directions by which Arizona schools must financially comply.

USFR Memorandum - Issued by the Auditor General to update the USFR manual between major revisions. These are available on the Auditor General’s website or via e-mail.

Weights – A multiplier that is applied to an ADM number to allow for variable educational costs based on certain classifications of students.

Qualifying Tax Rate – QTR - A hypothetical tax rate that is multiplied times the Primary Assessed Valuation and Assessed Valuation for SRP properties to determine the local tax levy effort required before a district is eligible for equalization assistance. The QTR is adjusted annually, based on an inverse relationship to the assessed valuation for the entire state.

School Facilities Board (SFB) – An Arizona government entity created in 1998 to oversee building new schools (fund 695), building and capital deficiencies and building renewal (fund 690).

Arizona Association of School Business Oficials | School Finance Summary Manual

Acronyms

A: Autistic

AASBO: Arizona Association of School Business Oficials

ADA: Average Daily Attendance

ADE: Arizona Department of Education

ADM: Average Daily Membership

AFR: Annual Financial Report

AG: Attorney General or Auditor General

AOI: Arizona Online Instruction (formerly TAPBI)

APOR: Apportionment Report

ARS or A.R.S.: Arizona Revised Statute

ASBA: Arizona School Boards Association

A.V.: Assessed Value

BBCF: Budget Balance Carry forward

BSL: Base Support Level

CAFR: Comprehensive Annual Financial Report

CEC: Certificates of Educational Convenience

CORL: Capital Outlay Revenue Limit

27

MIID: Mild Intellectual Disability

MD: Multiple Disabilities

OHI: Other Health Impairments

OI: Orthopedic Impairment

PFP: Pay for Performance

PSD: Pre-School with Disabilities

QTL: Qualifying Tax Levy

QTR: Qualifying Tax Rate

R: Resource

RCL: Revenue Control Limit

SAIS: Student Accountability Information System

SC: Self-Contained

SDER: School District Employer Report

SFB: School Facilities Board

SLD: Specific Learning Disability

SLI:Speech/LanguageImpairment

SID: Severe Intellectual Disability

CPI: Consumer Price Index

CSF: Classroom Site Fund

DAA: District Additional Assistance

DD: Developmental Delayed

DSL: District Support Level

ED: Emotionally Disabled

ELL: English Language Learners

ESY: Extended School Year

GDP: Gross Domestic Product

JTED: Joint Technological Education District

K: Kindergarten

K–3: Kindergarten through Third Grade

K–8: Kindergarten through Eighth Grade

K–12: Kindergarten through Twelfth Grade

M&O: Maintenance and Operation

Students FIRST: FairandImmediateResourcesForStudentsToday

TANS: Tax Anticipation Notes

TEI: Teacher Experience Index

TRCL: Transportation Revenue Control Limit

TSL: Transportation Support Level

USFR: Uniform System of Financial Records

Arizona Association of School Business Oficials | School Finance Summary Manual

200 N. Stone Ave., Tucson, AZ 85701

AASBO Board of Directors — 2017-18

Ricky Hernandez, President
OFFICERS —

Pima County Schools Superintendent

(520) 724-8451 - ricardo.hernandez@schools.pima.gov

Jill Barragan, President-Elect Avondale Elementary School District
295 W. Western Ave., Avondale, AZ 85323 (623) 772-5013 - jbarrag@avondale.k12.az.us

Nate Bowler, Vice President Buckeye Elementary School District
25555 W. Durango Street., Buckeye, AZ 85326 (623)925-3407 - nbowler@besd33.org

Lizette Huie, Treasurer
Sahuarita Unified School District
350 W. Sahuarita Rd., Sahuarita, AZ 85629 Building 10 (520) 625-3502 ext. 1078 - lhuie@sahuarita.net

Ken Hicks, Past President Peoria Unified School District
6330 W. Thunderbird Road, Glendale, AZ 85306 (623) 478-5610 - KHicks@pusd11.net

DIRECTORS —

Joanne Fimbres, Director of Membership Services Pendergast Elementary School District
3802 N. 91st Avenue, Phoenix, AZ 85037 (602) 772-2220 - jfimbres@pesd92.org

Gary Barkman, Director of Purchasing Mesa Public School District
555 S. Lewis Street, Mesa, AZ 85201 (480) 472-6116 - gabarkma@mpsaz.org

Shari Zara, Director of Educational Programs Arizona Department of Education
1535 W. Jefferson St Bin #2, Phoenix, AZ 85007 (480) 987-5936 - szara@qcusd.org

Annette Moreno, Director of Business Administration Pendergast Elementary School District
3802 N. 91st Avenue, Phoenix, AZ 85037 (623) 772-2217 - amoreno@pesd92.org

Deborah Sandoval, Vendor Representative Mohave Educational Services Cooperative, Inc. 5225 N Central Ave, Suite 218, Phoenix, AZ 85012 (602) 277 4290 - deborah@mesc.org

Robert Jacobson, DirectorofMaintenanceandOperations Laveen Elementary School District
5001 W. Dobbins Road, Laveen, AZ 85339 (602)501-9929 - rjacobson@laveeneld.org

Russell Deneault, Director of Information Technology Glendale Elementary School District
7301 N 58th Ave., Glendale, AZ 85301 (602)723-1461 - rdeneault@gesd40.org

Sandra Schossow, Director of Child Nutrition Peoria Unified School District
10721 N 95th Ave., Peoria, AZ 85345 (623) 487-5183 - sschossow@pusd11.net

Bert Herzog, Director of Transportation Washington Elementary School District 12641 N. 39th Ave., Phoenix, AZ 85029
(602)896-5284 - robert.herzog@wesdschools.org

AASBO Staff

2100 N. Central Ave., Suite 202 Phoenix, AZ 85004

David Lewis, Executive Director (602) 253-5576 x126 dlewis@aasbo.org

Dr. Chuck Essigs, Director of Governmental Relations (602) 253-5576 x122
cessigs@aasbo.org

Jeff Gadd, Director of Professional Development & Training (602) 350-5209
jeffgadd@jeffgadd.com

Anabel Aportela, Director of Research & Student Achievement (602) 253- 5576
aaportela@azsba.org

Ana Sanchez, Membership Services Coordinator (602) 253-5576
asanchez@aasbo.org

Audrey Hawthorne, Communications Coordinator (602) 253-5576
ahawthorne@aasbo.org