2006 / 2007 MMSD Food Service Budget Discussion

28 minute video excerpt of this evening’s discussion of the MMSD’s food service budget (the food service budget is evidently supposed to break even, but the operating budget has apparently been subsidizing it by several hundred thousand dollars annually).

This sort of excellent citizen oversite is essential to any publicly financed organization, particularly one that plans to spend $332M in taxpayer funds next year and hopes to pass referenda in the near future.
Former Madison Mayor Paul Soglin made a similar case today when he discussed our fair city’s water problems:

It’s funny how progressives forget their history and the reason for doing things. The idea is to have a citizen board, not a board with public employees. That is part of the checks and balances. In fact the progressive left in Madison went though considerable time over the years gradually removing city staff from committees so they would not dominate and squelch the citizens who are more likely to be ‘whistleblowers.’

In the water example, a citizen spent years chasing this issue, finally getting the attention of the traditional media and the politicians.
A number of board members have been asking many questions (the video clip will give you a nice overview of who is asking the questions and what the responses are). You can check the action out here (Each “Tab” is a question to the Administration, with their response”). For example, we learn in tab 11 2 Page PDF that the district spent a net (after 200K in gate receipts and 450K in student fees) $1,433,603 on athletics in 2005/2006 and plans to spend a net $1,803,286 in 2006/2007, a 25% increase. The overall budget will grow by more than 3%.
This is quite a change from past years, and provides some hope for the future.

8 thoughts on “2006 / 2007 MMSD Food Service Budget Discussion”

  1. I watched the meeting and learned quite a bit. I appreciate the level of discussion among board members, and the work the administration is doing to respond to questions. Clearly, the discussions and ability of the School Board to make decisions re allocation of resources will be improved if the budget becomes a year-round process for the School Board.
    Can someone explain how the district’s equity works with the accounting system? At the end of last year, Food Service spent more than they earned. The deficit for this line item was adjusted using the district’s equity. What is the district’s equity – where, specifically do these dollars come from? Out of this year’s operating expenses, so there are cuts elsewhere? Where are the dollars transferred from? For some reason, I’m stuck on “getting” this.
    I was pleased to hear Roger Price say changes are being made to monitor the budget – I hope so. The cost overrun in food services, and other areas, may be small in the context of the district’s budget, but can be very large when compared with courses and services the School Board wants to keep.

  2. Thankfully the board finally seems to be playing its appropriate role in oversight and direction of the administration. It was wonderful to hear Ruth say that the board should set the priorities and the administration should respond with funding options.
    As to the “equity account” with $25 million sitting in it, the closest documentation on it that I can find appears in the MMSD balance sheet on page 21 of the document titled Finacial Summaries (http://www.madison.k12.wi.us/budget/mmsd/0607/Financial_Summaries.pdf).
    On June 30, 2005, the balance sheet shows “Unreserved” funds and under that category shows “Undesignated” funds of $20,974,636. Oddly, the balance sheet for the previous year does not show “Unreserved” funds, so we can’t know the amount of “Undesignated” funds for that year, meaning also that we can’t know whether the amount increased from one year to the next.
    I’d presume that the “equity fund” came from underspending in previous years, which raises questions of why the administration underspent.
    From watching the video, it appears that the equity fund (or “undesignated” funds) serves as a slush fund for the administraton, outside of board oversight.
    I now find it harder than ever to believe the board majority and administration when they say, “we don’t have the funds” to do whatever. It appears that they have $20+ million sitting in some bank account somewhere. The funds could be used to:
    – Restore strings
    – Expand Read 180 or initiate another reading program for the 20%+ who can’t read in high school
    – Restore library pages
    – Fund the expansion of Leopold without either a referendum or a drain on the operating budget
    – Put more teachers in the classroom
    – And much, much more.
    The video of last night’s discussion certainly gives me hope of seeing the budget process and board oversight improving.

  3. The funds in question are the district’s fund balance. All districts, except those in dire financial crisis, have a fund balance.
    The fund balance serves as a district’s long term contingency fund (as opposed to an annual contingency), reduces the need for short term borrowing during the fiscal year, and may also be used for special one-time expenses. School districts have steady expenditures throughout the year, but only receive revenue in a few large installments. As a result, short term borrowing is necessary during the year and the fund balance reduces the amount of borrowing.
    A Board should have a target level for the fund balance. 15% is a target favored by many finance specialists.
    The Leopold expansion and, possibly, READ 180 expansion, are the kind of expenditure that a Board might consider tapping the fund balance for. Although, that would need to be considered in light of the district’s long term financial plan. Recurring expenses like strings, library pages, teachers, etc. are not wise uses of the fund balance, no matter how worthwhile they might be in isolation. Resourcing recurring needs from the fund balance just delays the day of reckoning while sapping the district’s financial reserve.
    DPI has a page on fund balance at Fund Balance Practices .

  4. Tim,
    Thanks for your post. I was wondering what financial folks considered a reasonable fund balance. I had no idea.
    Based on 15% and a proposed budget of $332,947,870, the MMSD should maintain a fund balance of at least $49,942,180.
    Did I do the math correctly? I’m not used to working with such large numbers; my checking account only occassionally tops a million bucks.

  5. Carol Carstensen also provides an explanation of the Equity Fund balance.
    Before we start identifying what/how to use the Equity fund, I would like to see the School Board continue the budget dialogue that began last Monday. – look more closely at the timing and decisions on expenditures that are things vs. human capital, look more closely at how the district is structured and organized and look long-term. The School Board has not looked long-term except to say that if we continue as we are, we will cut $x 10s of millions in five years. That is not long-term planning.
    Personally, I do not support cutting any academic curriculum that has not gone through an assessment and developed a long-term plan. That is the case for reading, math, fine arts (p.s. – strings is part of the music education curriculum). Year after year, curriculum planning is thrust into the budget process, and this is bad practice. I also do not support cutting librarian pages for the same reason. Lastly, I do not support cutting curriculum and teachers when we budget $2.4 million (50 teachers) for extracurricular sports. And, I would not support cutting extracurricular sports until the District went through an appropriate process here as well.
    I don’t support cutting any of the above that takes away from children’s learning when we are not fully utilizing our spaces.
    I support Lawrie Kobza when she talks about looking at “things”, cutting things first and putting back in expenditures for “things” when we know better what/how the revenues will match. You can’t do this as easily for staffing. I support her when she says the District must have a long-term strategic plan and budget planning that goes throughout the year. I hope other School Board members will support her.
    Lastly, I am not naive about the issue of revenue caps, but I believe the School Board has to address some of the above issues if they want to pass future referendums.

  6. Thanks, Tim.
    I’ve seen anumber of explanations flying around since this came up. You have managed to provide the first neutral, understandable, way of thinking about the equity fund. I also appreciate the DPI link.

  7. I’d also add that you don’t have to think about this in percentage terms. Boards can also set fund balance targets that are oriented around covering the cash flow gaps for a desginated period of time, plus a target interval (1 month, 2 months) of normal operations.
    The most important thing is that a Board should have a long range financial plan that includes a formal target for the fund balance.

  8. Thanks, Tim. Excellent points. An important point for me is the School Board’s involvement in and understanding of the Equity Fund as one part of a School Board long range financial plan and monitoring the budget over the year. I feel the School Board has operated long enough without one, especially since revenue caps began in 1993.
    The Equity Fund became a question for me this year when I realized to prepare the balance sheet district administration was taking dollars from the Equity Fund to balance accounts that were overbudget without expected future revenues to cover the overbudget or other differences (required on June 30th to balance books at end of fiscal year). The overbudget items with no expected future revenue stream concerned me, especially since the School Board does not seem to “know” about this until way after the fact.
    That’s why I support Lawrie’s approach to moving forward with implementing the budget – keep staffing, add things in as the school year progresses and the School Board can see how and where the money is being spent, unexpected issues come up. This would not mean deep cuts, but would protect children’s learning.
    I know, for example, if my husband wants to belong to professional organizations, he has to pay for his own membership.

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