Operating Capital funding is used for large capital maintenance projects, like major repairs to roofs or parking lots. This state aid is designated specifically for that use. We are not allowed to use those dollars for classroom specific expenditures such as wages, benefits or supplies. 

No. Take for example the current operating referendum, passed in the fall of 2001. The local levy paid by property owners is based on a per student amount, not on the value of property. We are actually collecting slightly less on the referendum each year, in part because our enrollment is declining slightly every year. 

No. The accounting category called “regular instruction” is only a portion of what schools are expected to do on a daily basis. The state has separate accounting categories for:

• Regular Instruction – which includes courses such as science, math, language arts, social studies, art, music and physical education.
• Vocational Instruction – which includes courses like business and metals.
• Instructional Support – which includes items such as the cost of operating media centers, curriculum and curriculum development and staff development.
• Special Education – which includes providing learning experiences for students who, because of certain characteristics or conditions, require educational programs differentiated from those provided to students in regular or vocational instruction.

The bottom line is that Willmar typically spends about 75% of our budget for student instruction.

The state determines how much money a school district will receive. The state sets funding formulas that both allocate money to the schools (state aid) and determine the maximum amount a school district can request from their voters through local property taxes (referendum). The state also decides what portion of funding comes from local property taxes, state aids and student fees.

Think of school funding as a piece of fabric. The state determines the maximum size (amount of funds), threads (property taxes, referendum and state aid) and design guidelines (mandates to pay for certain things) of the fabric. Each school district then determines the pattern (budget) of the educational fabric.

In the school year 2003-2004, we spent $475,000 on sports and other extra curricular activities at the Senior High School on a net basis, after subtracting revenues from fees and gate receipts. This was 1.3% of our general fund revenue. These dollars allowed about 580 students to participate in a large number of activities throughout the school year. The Senior High School has an enrollment of about 1,260 students.

First, a short summary of what a Fund Balance is…

• A measure of past resource management and future spending power
• The excess of Assets over Liabilities (Assets – Liabilities)
• Increased by revenues and decreased by expenditures
• An indicator of our financial position

Second, a fund balance is not the same as “cash”. Cash is an asset and is a component of a fund balance. The cash balance is not the fund balance.

Third, the district has four main fund balances:

• The General Fund (by far the largest)
• Food Service
• Community Ed and Debt Service

There are several other miscellaneous funds. Some of these funds also have several “reserved” accounts and these reserves must be spent for specific purposes (such as Operating Capital).

Fourth, the critical fund balance measure is the “unreserved” fund balance. These resources are at the discretion of the School Board, within state statutes.

We need an unreserved fund balance for a number of good reasons, including the following:

• Our revenue sources are subject to unpredictable fluctuations
• Emergency or unforeseen expenditures
• Enrollment changes
• If the district has a low or negative fund balance it must borrow additional money to meet cash flow needs. This increases district expenses. The district must pay vendors and employees on a timely basis. State aids are paid only partially during the fiscal year and a portion in the next year.

Finally, how much fund balance is needed? There is no absolutely right answer. In general, various experts (MDE, Auditors, Moody’s, S&P’s, school officials) seem to agree on an unreserved fund balance in the 5% - 15% range (of expenditures). Our district has a School Board policy of maintaining a 6% minimum fund balance. In our case, that means a savings account of about five weeks of operating expenditures (about $2.2 million). Having a goal of maintaining a savings account of at least five weeks of expenditures is not acting like we are a bank. It is sound financial stewardship.

Willmar Public Schools receives funding from three primary sources – the state government, federal government and local property taxes – each of which has its own requirements for how the funding is used.

The state provides general appropriations which can be used at each district’s discretion, and program specific funds which state law requires to be used for specific purposes. In Willmar, program specific funds help pay for such programs as special education, English Language Learners education and compensatory education.

Federal funding usually has very specific uses, including Title I, which must be used to help schools with high numbers of students who qualify for free and reduced-price lunch; Title III, with helps to pay for English Language Learners; and Title IV, which helps pay for educating special education students.

The school district is generally required to use local property tax funding for specific purposes which are outlined in state law. However, districts are allowed to use funding from voter-approved referendums for many purposes. The Willmar Public Schools uses revenue from the referendum passed in 2001 to maintain reasonable class sizes and better access to technology.

The General Fund’s portion of the property tax levy (referendum, health & safety, operating capital, etc.) provides approximately 4.1% of the General Fund’s revenue. The property taxes from the referendum itself provide approximately 2.6% of the General Fund’s revenue.

School funding was created by the state to address many interests and needs. Lawsuits have led to legal precedents for the legislature to follow when enacting school finance legislation. Continued demands on public education are expressed through the political process to create the present complicated system.

The legislature also has tried to address unique needs such as rural sparcity, desegregation and high concentrations of poverty by developing “categorical” funding formulas. These formulas reflect the political compromises made to reach agreement on how to serve these special needs.

Finally, the state also sets school tax levies and the amount of money a local school district may request from its voters. Together, these factors produce an extraordinarily complex set of school funding laws. Because these laws are so difficult to understand, they contribute to the current distrust by politicians, the public and the media of school spending.