You probably take it for granted that your local school district uses a budget to make financial decisions. The folks in Monona Grove made that mistake, and they sure feel like chumps now.
In August, the district had to come clean with taxpayers that it had been writing out checks for years without keeping track of the balance. The district has been operating with a deficit for the past three years, but no one ever noticed until it became a crisis.
Like many districts, the Monona Grove School District tries to manage its finances without using a budget. Instead of a budget, the district produces a “budget summary.” It’s really just a glorified income statement. It shows the district’s revenue sources and broad allocations, but little else. It only lists three expenses: Instruction, Support Services, and Non-Program Transactions.
An actual operating budget would provide decision makers with the detailed information they need to allocate resources, manage performance, and assess the results. It would include all labor costs (teacher salaries and benefits), instructional materials (textbooks), overhead (maintenance and utility costs), and administrative costs (superintendent and staff). Ideally, each school and department in the district would develop their own budgets, which would then be combined into a master budget at the district level. Obviously, Monona Grove isn’t doing any of that, and the chickens finally came home to roost.
“I guess I always assumed that you all had more information than what was presented. I don’t think I can run under this assumption anymore. My trust has been broken, and I’m appalled at the lack of oversight that this board has demonstrated time and time again,” one mother told the school board on Aug. 26th.
Evansville
Sadly, Monona Grove’s attempt to run a school district without a budget is not unique. Many school districts throughout the state are doing the exact same thing.
MacIver first encountered this phenomenon shortly after Evansville School District’s referendum failed this past spring. In the aftermath, the district seemed hellbent on punishing taxpayers for rejecting its demands. It announced a wide barrage of cuts–seemingly designed to maximize the emotional pain inflicted on parents–to programs like art, science, foreign languages, and tech ed teachers. The goal was to cut $2.1 million.
Like too many school districts, Evansville does not post its budgets online, which makes it hard to look into its financial problems. The MacIver Institute, in response, simply asked the district for its budget. But instead, what we got was a budget presentation.
It showed that Evansville got $23.3 million in general fund revenue in 2022-23, and $23.7 million in general fund revenue in 2023-24. In both years, revenue exceeded expenses, and so its fund balance grew from $3.36 million to $3.43 million in 2023 and to $4.1 million in 2024. This occurred despite federal aid dropping by half during that time. Looking at these numbers, it’s obvious there isn't a crisis; nor a need to cut core programs like science, and certainly no need for a referendum.
Something else must be going on that led to Evansville’s demand for a referendum. Unfortunately, no other budget information is available. We went back and forth with the district for weeks trying to get it. First, they sent us a one-page budget summary.
“I'm afraid there was a misunderstanding about the request. First, I want the detailed budget, not just a summary document,” I explained to the superintendent.
Next, they sent a list of expenses that they submit to the DPI.
“This isn’t a budget. This is your raw budget report data that you’re required to submit to DPI. I want your budget,” I wrote.
But that’s all they had. How is a manager or planner supposed to make informed decisions with documents like these? The documents apparently can’t even be used to identify an impending budget crisis. Monona Grove certainly learned that the hard way.
How common is this?
There are examples of districts that have actual budgets which can be used by managers and planners to make intelligent and informed decisions, like Milwaukee Public Schools (MPS) and the Edgerton School District. MPS, however, is the only district that I’ve ever encountered that actually uses individual school budgets to create a master district budget.
Unfortunately, simply having the tools to make good decisions doesn’t guarantee that you will make good decisions. MPS’s recent financial fiascos are proof of that. However, I’m more than happy to point out when government does get something right, and MPS’s budget is one such example that should be used as a model for all school districts. What a low bar it is to praise a government organization for merely having an actual budget.
Out of the 121 districts going to referendum this fall, 47 of them do not post their budget online. That’s about a third. Of the remaining 74, about half of them only post a budget summary. The MacIver Institute sent an open records request to the districts with the largest referendum questions for their complete operating budget, “Not a summary or a balance sheet. I want the actual budget.” Most ignored the request.
Janesville sent us a slick 34-page budget presentation that amounted to little more than a budget summary. Half of its general fund expenses are grouped into the broad category “Instruction,” which was allocated $63 million last year.
Prairie du Chien sent us their list of expenses. But not their budget.
Superior came the closest to sharing a real operating budget. It provided a list of expenses that was, at least, grouped by grade and subject areas. It even included what was budgeted and what was spent.
So, what’s really going on here?
There are two types of accounting: financial accounting and managerial accounting. The purpose of financial accounting is to satisfy regulators and legal requirements. The purpose of managerial accounting, on the other hand, is to enable internal planners and managers to make intelligent decisions.
But most school districts only seem to know about financial accounting. That’s why they’re able to fulfill all the regulatory and legal requirements regarding their revenues and expenses. Unfortunately, that type of accounting is useless when it comes to actually running an organization.
Financial accounting practices do not produce the documents or collect the data needed to responsibly manage an organization. It only creates products like the income statements that many districts call their “budget summary.” This system does not produce anything resembling an operating budget. That type of information is only available through auditing.
Monona Grove's situation is a great case study on the ineffectiveness of financial accounting in managing a school district's financing. Using financial accounting, the district calculated it had a balanced budget, when in reality it had a budget deficit for the last three years.
Without an operating budget based on managerial accounting practices, it is impossible to successfully allocate resources to achieve organizational goals. That is an underlying reason why Wisconsin’s public school system so often fails to educate its students and to manage taxpayer funds responsibly.
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