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Financial Management

Iowa school districts are subject to chapter 24 of Iowa Code regarding budgeting. The authorized expenditures of a school district shall not exceed the lesser of the budget for that year which was certified or amended under section 24.17 or the authorized budget. The authorized budget is the sum of the combined district cost for the year, the actual miscellaneous income received for the year, and the actual unspent balance of the authorized budget from the preceding year. The budget authority, with the exception of the miscellaneous income, is granted to the school district as of July 1 of the budget year. This is true without regard to whether property taxes that fund the authority are delinquent or state aid is reduced during the year. This provides stability to school districts that have negotiated salaries and certified budgets by April 15 prior to the start of the fiscal year, as required by law. This can cause some unique budgeting and reporting issues for districts that already have the full budgetary authority to expend when an across-the-board (ATB) cut is ordered.

When state revenues fall short of the estimates used to create the state budget, an ATB cut could be ordered during the budget year after the budgets and appropriations have been set. The ATB cut reduces revenues to a district but does not reduce the amount of money a district can expend within its authorized budget. An ATB cut applies to all state General Fund expenditures without regard to need or priority (Iowa Code subsection 8.31(5)), and the cut is distributed within the school finance formula on a per pupil basis calculated with weighted enrollment (Iowa Code section 257.16). This has occurred a few times in the history of Iowa education funding during times of economic stress. The most recent was in fiscal year 2010. Districts have basically three options when revenues are cut: (1) reduce expenditures where possible, (2) use funds on hand, or (3) levy for the cash reserve tax.

ATB cuts are rare, so when one does occur, many concerns and questions are raised related to how districts and area education agencies (AEAs) should address the fiscal issues. Should an ATB cut occur, the Department of Education and the Department of Management will provide guidance in addressing key fiscal issues, including procedures for handling accounting and financial reporting for budgetary allocations, AEA controlled budgets, AEA flow through, special education receipts and balances, and categorical grant funding. Information regarding the impact of ATB cuts is included in the Uniform Administrative Procedures (UAP) manual.