FILE: DCF
LONG-TERM FORECASTING
The annual operating budget focuses on a single twelve month period. Nevertheless, spending and revenue decisions made today have effects that extend beyond the twelve month period. New capital expenditures require additional spending on operations, maintenance, and debt carrying charges. Additionally, altered health care benefits carry long-term commitments to other post employment (OPEB) benefits. Hiring, layoff, and salary schedule decisions also have fiscal impacts that extend well beyond the year in which they are made.
Accordingly, the purpose of this policy is to:
ensure on-going financial sustainability beyond a single fiscal year or budget cycle,
achieve the School Board’s organizational mission, and
systematically link the annual budget to a multi-year master financial plan.
Financial sustainability is defined as the School Board’s long-term financial performance and positioning, where planned educational services can continue without interruption, without unplanned increases in taxes, and without disruptive cuts to services.
Commitment
Each year, the Superintendent or his/her designee shall forecast operating revenues and expenditures for all funds that will have an ending fund balance or net position (as defined by Generally Accepted Accounting Principles). A clear presentation of such information and/or the resources needed shall be presented with, and made a part of, the annual operating budget document.
The process should identify critical areas which have, or are expected to have, an impact on the financial condition of the School Board over the next three to five years. This commitment is intended to:
Ensure that the School Board can attain and maintain financial sustainability;
Ensure that the School Board has sufficient long-term information to guide financial decisions;
Ensure that the School Board has sufficient resources available to provide educational programs and services;
Ensure that potential risks to on-going educational operations are identified and communicated on a regular basis;
Establish procedures to help identify early warning signs; and
Identify changes or anticipated changes in revenue or expenditure structures needed to deliver educational services or to meet the goals adopted by the School Board.
Scope
The Superintendent shall issue long-term forecasts of revenues, expenditures, and financial position for a period of at least three years into the future, or longer where the specific issues call for. The forecast shall include, but not be limited to, an analysis of the affordability over a multi-year period of:
maintaining or increasing current educational services, projects, and obligations,
maintaining or increasing current salary schedules,
maintaining or increasing current health care benefits for medical, life, dental, and vision, which are offered to all active and retired employees,
maintaining or increasing current debt levels,
maintaining or increasing current capital assets,
maintaining minimum reserve levels,
expanding educational programs or services where funding has been identified through alternate sources (i.e. federal grants, state grants, competitive grants), and
purchasing and/or constructing new capital assets that will impact operating and maintenance costs.
IDENTIFYING POTENTIAL FUTURE Imbalances
Long-term forecasting shall be required annually and shall be included in the annual operating budget document for the purpose of identifying potential future imbalances. The forecasting method shall include financial data and shall start with the baseline assumption that current programs and services will be maintained.
The financial data used to support the forecast shall consist of financial data from the previous two budget years, the current budget year, the proposed budget year, and forecasted data for at least three (3) years beyond the proposed budget year. Additionally, the financial data within each fund shall include at a minimum:
the top 5 revenue sources,
the top 5 expenditures by object code (i.e. salary, employee benefits, etc.), and
the beginning and ending fund balances or ending net position.
Should long-term forecasts and analysis show that the school system does not have a “positive operating balance” over the multi-year period, the Superintendent shall bring this to the attention of the School Board by including such information within the transmittal letter section of the operating budget document.
For the purposes of this policy, a “positive operating balance” means that the ending fund balance (or net position) meets or exceeds the minimum levels prescribed by the School Board’s reserve policies.
Long-Term Balance
To maintain long-term fiscal solvency and to minimize any disruptive effects in future budget years, the School Board directs the Superintendent to present proposed budgets and/or budget revisions that will place all one-time revenues and unpredictable revenues (which are defined as non-recurring because they are unreliable in future budget periods) into non-recurring expenditures first. Acceptable uses of non-recurring funds shall include, but not be limited to:
increasing reserves,
expending monies for capital project improvements,
funding of OPEB liabilities,
early retirement of debt, and
giving one-time supplements to employees rather than permanent salary increases.
Additionally, if a “positive operating balance” is not shown within a fund for any fiscal year forecasted beyond the proposed budget year, the Superintendent shall be required to identify strategies that would restore these reserves to the required minimum levels outlined in the School Board’s reserve policies.
New policy: March 6, 2014
Ref: Board minutes, 3-6-14
DeSoto Parish School Board