Budget Dance: Act 2

by Jessee Perry

In Act 1 we broke down the meals tax ordinance and the city charter regarding issuing debt. Continuing our musical number, Act 2 of the RVA Council-RPS Board budget dance begins when Council approves the FY budget. Grab the eye drops and brace for some eyestrain as we go on a tumble down the rabbit hole to the fun world of government documents. I will be using Fiscal Year (FY) 2017 (July 1, 2016-June 30, 2017) for the purpose of walking through what we can find about the use of city and school funds to increase transparency and accountability of our elected officials. 

In going through all of these documents, I noticed the most difficult part is the definitions between City Council and School Board of fund types appear to be different. For example, City Council ordinance and budget considers the City's State Sales Tax fund for Education to be "local funds" while School Board lumps that dollar figure in with State Funds. In addition, the numbers breaking down expenditures by category are slightly different which I have to think is another definition difference. I’m not sure if it is possible, but to make things easier for everyone to hold their elected officials accountable, it would be nice if Council and School Board could reconcile their definitions so the money is easier to follow between the two government entities. 


RVA Council Budget

Think of the City budget as one massive pot of money called the General Fund. Making up that General Fund pot there are segments of revenue such as the general fund and special reserve funds. Unfortunately, the city does not make this delineation for us, but when I talk about the big collective pot of money that includes everything, I am going to capitalize it (General Fund) and when I mean the smaller segment of unassigned revenue, I will keep it lower case (general fund). The general fund is made up of revenues that do not get automatically directed by law to any specific agency. Currently, the entire 6% meals tax goes into this general fund. 

When City Council passes their budget, it is done by ordinances that are available on the City Council website by looking up legislation or seeing what legislation was passed on a specific day. These ordinances are then put together into a massive budget document for the year that is available on the Office of Budget and Strategic Planning Website.  In addition, there is a Comprehensive Annual Financial Report (CAFR) released on the city website to serve as a follow up to the budget to list the actual revenues and expenditures of the previous fiscal year. So for Council, we will explore information we can find in the ordinances, check out the fancy budget report, and glance at the CAFR. 

 

Budget Ordinances- using FY 17 as examples

First, there is the General Fund Budget that lists the total amount of revenues and budget for the year. The ordinance shows the Mayor's proposed budget amount and the final amount approved by council. In addition, there is documentation of proposed amendments to the original budget proposal. When Council altered something from the Mayor's proposal, the ordinance has the Mayor's proposal stricken through and the updated information right next to it. Here you can see in FY 17, the total General Fund Budget was $717,059,117. 

FY 17 General Fund Budget

FY 17 General Fund Budget

In addition to the General Fund Budget ordinance, Council passes ordinances for each agency, including schools. The ordinance serves as a summary of the revenue sources, allocation, and any terms and conditions. In this ordinance we can see the total RPS budget of $280,384,472 was broken down from the following sources:

  • $179,350,679 from the City's General Fund ($26,328,770 State Shared Sales Tax fund, $151,521,909 from City's general fund, $1,500,000 in prior year surplus funds)
  • $624,651 from other local revenue
  • $99,689,142 in state funds
  • $720,000 in federal funds

When we are talking about a meals tax special fund, that number would be delineated similarly to the State Shared Sales Tax fund. What I do not know is if the sales tax and meals tax would be added together into one number or if they would be broken out as two separate numbers for the purpose of the ordinance. When Stoney talks about transparency and accountability with this money, this is the big difference between taking money from the general fund. The money in the general fund does not HAVE to be directed to schools whereas the special reserve fund money is automatically set aside for schools. In Stoney's meals tax ordinance, it specifies the money goes to a special reserve fund. Currently, the money from the existing 6% meals tax goes directly into the general fund so there is not a way to track it's disbursement directly to a city agency or line item. 

FY 17 School Budget Ordinance

FY 17 School Budget Ordinance

After breaking down the sources of revenue, the ordinance lumps all of the different sources together and breaks it down into how it will be allocated among major classifications.

FY 17 School Budget Ordinance

FY 17 School Budget Ordinance

Then, the ordinance then outlines reporting requirements placed on any money provided that is above and beyond what is required by state law.

  • Quarterly financial report to City's Director of Finance
  • Cost/Pupil report within 90 days of ordinance effective date to City Auditor
  • Quarterly financial report to City Council's Finance and Economic Development Standing Committee

I assume the money that would be provided for facilities construction from the meals tax would be considered "above and beyond" what is required by state law. Therefore, this might be some reporting we would see that could add another check and balance. I don't think City Council could admonish or force RPS Board's hand to alter their funding use; however, it is another place this information would be presented publicly. 

 

City Budget Report- using FY 17 as example

Basically, this is a pretty version of the ordinances that includes charts and graphs; however, it is super long because it includes a TON of other information. You can learn all about the budget process, economic standing of the city, forecasts and more. In addition, there are all types of financial summaries of revenues and expenditures in chart and graph form. What I think is probably one of the more notable parts of this document is every agency has it's own few pages that summarize their funding... including RPS. In agencies with more direct city oversight, you will find very granular line item breakdowns for budgeted expenses. For example, pages for the Social Services Department identify budget allowance for pest control services, janitorial services, etc. The excerpts below break down the larger pots of money from the general fund and special reserve funds that are sent to the school system. Since there is not direct oversight of line item expenditures, this portion is extremely brief as an all-up summary of money allocated to the schools. 

FY 16-17 Budget Document

FY 16-17 Budget Document

FY 16-17 Budget Document

FY 16-17 Budget Document

Comprehensive Annual Financial Report (CAFR)- using FY 17 as example

The CAFR includes a LOT of numbers about the city's finances including a run down of the city's liabilities (read: outstanding debt), revenues, expenditures, and more! By the way, it is not nearly as exciting as the exclamation point I just used may lead you to believe. Below I included a portion of the CAFR that shows the actual revenues put into the General Fund. Highlighted, you see the sales tax for education that is a special reserve fund that can only be given to schools. If the meals tax is approved, there should be a separate line item in the CAFR that shows how much was actually collected under this line item. This number matches exactly with the number listed in the ordinance passed by Council. 

FY 17 CAFR

FY 17 CAFR

The CAFR also provides a run down of the city's capital improvement programs and debt service fund. Here, you can see that projects financed by General Obligation Bonds are listed by their name. There is similar information for capital improvement programs. I would hope that for ensure transparency, the city would continue to list projects by name in the CAFR to show the allocation of our debt service (aka not to a coliseum). 

FY 17 CAFR

FY 17 CAFR

Oversight Bonus Round!

Last year during the budget cycle, RVA Council decided to invoke power granted by section 6.07 of the Charter of the City of Richmond that provides additional oversight where RVA Council has to approve and transfer of funds between programs or subprograms by use of budget amendments. RVAPol did a great job explaining the move and possible implications back when it happened. Admittedly, I was not a fan of this at the time because I felt like it was making Mayor Stoney pay for transgressions of past administration; however, it is really cool to be able to see movement of money in ordinance form which also means it is searchable on the City Council website. Hopefully, RVA Council will continue to invoke this power in this, and future, budget cycles because I believe it is added security and increased transparency for the people of Richmond. 

FY 18 General Fund Ordiance

FY 18 General Fund Ordiance


RPS Board Budget

MOU and CAP

Before we dig in here, keep in mind that schools do not have total discretion over their funds as they have to fulfill some basic state mandates. Per the Bellweather company's 2016 Budget Analysis, RPS only has discretion with $150M of it's ~$350M budget. Another important fact here is that the Bellweather report was completed before RPS was put under a Memorandum of Understanding (MOU) with the Virginia Department of Education. The MOU adds additional oversight at the state level to ensure dollars are going to addressing the Corrective Action Plan (CAP) and will remain in place until all schools are accredited. The CAP is a document with deficiencies identified by the state. The CAP includes items to address with governance, teacher support, academic success and... addressing the facilities. This agreement with the state includes review of  RPS's expenditures to ensure all dollars go toward progress in the corrective action areas.  

Corrective Action Plan under MOU

Corrective Action Plan under MOU

 

Budget Documents

RPS Board uses a totally different website system than RVA Council for tracking meetings and documents creatively named... BoardDocs. After City Council approves their budget and sends it over to School Board, School Board has to adjust the Superintendent's Estimate of Needs to accommodate the amount of money the received. Once they receive the final number, the Superintendent and his team put together a final general fund budget and CIP budget for items to be paid for by local dollars and present it to the School Board to review, amend, and approve. All of these budget presentations can be found on BoardDocs. Below is the FY 17 fnal budget presentation that lists the line items that were requested from the City to pay for versus what they allocated the funding they received for. In FY 17, the Superintendent asked for $21.6M; however, the City only allocated $13.5M so the decision was made to fund teacher salary decompression (read: raises) and addressing some structural deficiencies; however, the cost cutting came by eliminating funding for the items Dr. Bedden recommended from his Academic Improvement Plan and much of the Capacity Building and Program Improvements. Line item details of the broad categories can be found in the presentation.

FY 17 updated School Budget

FY 17 updated School Budget

Looking at the updated CIP budget, the request was for $196M from FY 17-21 to address construction, renovations, structural issues, HVACs, and more. However, City Council only approved $4M of the CIP in FY 17 to address issues at Overby-Sheppard Elementary. 

FY 17 Updated CIP budget. 

FY 17 Updated CIP budget. 

Per School Board policy, School Board receives a monthly financial report regarding their general fund budget (also available on BoardDocs).  The first report for FY 17 was presented to the board in August 2016 with data from July 1st-July 31st. These reports contain both month-to-date and fiscal-year-to-date numbers. Oh, and by the way, there is this nifty little denotation that tells the reader what percentage into the year the report is through. That said, remember how I mentioned correlating the reports between Council and School Board is a little difficult? Yeah, this is where the struggle bus comes into town. Below I put the numbers from the Council Budget ordinance on the left and the School Board financial statement on the right. The expenditure break down is not as clear how they change their definitions; however, the revenue adds up as follows: 

City Definition of Local Funds = surplus + state sales tax fund + city general fund

School Board Definition of Local Funds = city general fund + other sources of revenue

City Definition of State Funds = state funds

School Board Definition of State Funds = state funds + state sales tax

Numbers are pulled from City Council budget ordinance and School Board July 2017 Financial Report

Numbers are pulled from City Council budget ordinance and School Board July 2017 Financial Report

Now that the money is over on the School Board side, it is time to look and see where it gets spent. The financial report breaks down the expenditures by line items code for the general fund, capital improvement program, and special revenue funds... BUT... since schools are funded by a mix of local/state/federal funds, they lump all of the money together on their reports and disburse it out across the different categories.

FY 17 School Board Financial Report Month End Report July 2016 

FY 17 School Board Financial Report Month End Report July 2016 

While the way schools are funded and RPS's reporting makes it difficult to track one group of specific dollars through the process, there is a portion of this report that breaks down capital improvement expenses at the school level. Below, the $5M for maintenance is tracked at the school level and the $4M Council approved for Overby-Sheppard is in a separate pool for tracking. 

FY 17 School Board Financial Report Month End Report July 2016

FY 17 School Board Financial Report Month End Report July 2016

Show Me the Receipts!

Now that the money has gone all the way from Council to the School Board, it is time for the departments to spend it. If you have the same warped definition of fun that I do, something fun about Richmond Public Schools is everyone can look at expenditures made by looking at the Checks Register. Here you can search by codes, data range, dollar amount range, or the vendors name. In the upper right hand corner, there is a codes legend where you can find out more information about what the fund code, function code, and object code mean. This would help you correlate the expenditures to the line items within the budget finance reports. Basically if you ever want to go REALLY far down the rabbit hole, this is a cool resource to see the company, dollar amount, and quick description of where money is going from the school's budget. 

Oversight Bonus Round!

In addition to monthly financial reports presented to RPS Board, school board policy requires annual expenditures to be sent to City Council. I am still confirming exactly which report gets sent over and where it can be found (provision states it can be accessible on the school division website or in hard copy at central office); however, while City Council can not dictate how they spend their funds this gives some assurance of review. In addition, similar to the City Council provision, all budget transfers must be sent to School Board and approval is required for any transfer over $10,000.

Richmond School Board Policies  

Richmond School Board Policies  


Summary

So... it is not the easiest or most streamlined process known to man and womankind....  but it is possible to track the finds from City Council to School Board line item. While we can not force School Board to cut a check to a construction company, we can hold them accountable to their words and these are the documents available to use as resources. Regardless of if the meals tax passes, I believe residents of Richmond should feel empowered, not afraid, in conversations about building new schools or other projects the city needs (aka public housing, not coliseums) so we can move forward and make advancements as a city instead of being held captive by the past mistakes of our elected officials. In an ideal world it would be nice for School Board and City Council to reconcile their reports to use the same definitions, but there may be some reason mandated by law that each body uses the reporting that they do. Oh if only there was a regular (quarterly?) joint meeting between the Mayor, Council, and School Board to discuss such a request *cough* Education Compact *cough*. 

Sunsetting Our Dance

Alas, nothing is perfect and I believe we have justified reasons to be distrustful of our government. I have heard calls to include a sunset clause to discontinue the meals tax; however, there already is one built into City Council powers. With a new ordinance and vote City Council can repeal or amend any of the city's taxes at any time. We may feel a little better with an automatic expiration date; however, I believe that breeds complacency. As an informed citizenry, we need to stay vigilant and involved in our government process. Our elected officials should be able to answer our questions; however, we need to leverage our resources to verify our trust. And if someone violates our trust, we have to remember it come election time. Catch ya in City Hall, Richmond!  

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