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SCHOOL BUDGET

Sept. 1971

School Budget - The DOE & the Dollar

In 1971 the legislature passed a $282.8 million appropriation for the operation of schools in Hawaii. This figure represented over 22% of the entire state operating budget and is by far the largest single item in the state budget. How is this vast amount of money spent? Who plans for it? Where are priority decisions made? These are all basic questions and must be answered as the League attempts to understand and effect the problems of education in Hawaii.

The first thing to understand is that budgeting in the state government is in a period of transition and it is difficult at this time to foretell exactly how these basic changes will effect future decision making. The $282.8 million figure stated above is a two year budget, the first that the legislature has passed. (Although the money appropriated covers a two year period the figures are separated for each fiscal year and second year figures can be reviewed in the next session of the legislature.) Collective bargaining will require adjustments in the system.

A more far-reaching change, however, will be seen in the next biennial budget, for by 1973 the state is pledged to change its entire concept in budgeting and convert to a Program Planning Budgeting System (PPBS), the sophisticated system used under Robert MacNamara in the Defense Department and adopted for all federal departments in 1965.

One of the most important functions of a budget is its use as a device for planning. Later as the budget is implemented it is a tool for control and evaluation. The pro¬cedures and devices that are used to accomplish a job often effect the results. Since statehood, Hawaii has used a performance budget which is organized by department and sub-department and is a listing of resources and services needed for those departments for the following year. The format lists funds for each item in three columns: CURRENT SERVICES, (the amount required to continue current operation taking inflation and salary increases into account); WORKLOAD, (increases brought about by increased enrollment or added work); and EXPANSION (establishment or extension of new programs). This type of budgeting has been criticized for emphasizing control over planning and processes of work over purpose of work for its line by line listing of goods and services lends itself to budget cutting without consideration of the total picture. It is short ranged, does not systematically consider alternatives, and does not measure effectiveness in terms of stated objectives. In addition, because the Capital Improvement Budget (CIP) has been presented separately from the Operating Budget, total costs are not considered in an integrated manner.

Program, planning budgeting is developed around programs designed to meet the state's broad goals (i.e. transportation, education and culture, environment, etc.)

All costs, capital as well as noncapital, to be expended to reach the goal, regardless of where they fall in the departmental structure, are considered together. Programs to reach goals must be clearly defined, alternate approaches considered so as to gain maximum cost effectiveness, and measures of evaluation developed to see if programs are indeed achieving the desired goals. Planning budgets are drawn up to cover a six year period so that long range costs are apparent from the start.

The 1966 legislature passed Act 185 which initiated this change in an effort to increase accountability in government spending. In its transition to PPBS the DOE has worked with the office of the Legislative Auditor and a special interim committee of the legislature appointed to oversee the implementation of the program. Other departments have worked with a central analysis group set up by the governor in the Department of Business and Finance. Eventually they will be integrated. There have been problems in the transition primarily centered around the need for a highly trained analytic staff, a computer based information system, and the difficulty of discovering a system of evaluation for something as elusive as the educative process.

PPBS is designed to be a tool for making effective management decisions and when perfected will effect how decisions are made, but the question of where the basic decisions are made still remains. This question is illustrated by the following figures. Governor Burns submitted to the legislature any operating budget for education for the fiscal year 197172 that totaled $131,093,964, The Department of Education with the approval of the Board of Education had earlier submitted a budget request of $173,734,907 to the Department of Budget and Finance whore the governor's budget is drawn, After emerging from the legislature, operating funds had been increased over the governor's figures to $160,677,610. Because of the current economic downturn the governor will not release all of the legislative authorization for he is empowered to keep expenditures in line with revenues,

What are the details of this process?

The budget is prepared in the DOE Office of Business Services on an estimate of projected income, This projection is not a scientific one, but a broad estimate based on past increases and an eyeball analysis of the condition of the economy. Ceilings based on this projection are passed to the seven school district offices and from there to the schools.

Budget funds are divided into A, B and C funds (A - personnel; B - supplies; C - equipment). The state office budgets for personnel with position counts included in the budget.

The number of teaching positions is determined by enrollment in each school (the pupil-teacher ratio is: K3, 26; grades 46, 27; grades 712, 28 plus or minus 5). Supplies and equipment for use in the schools are based on budgets prepared in the schools and brought together by district budget people into a district-wide budget which includes money for district projects and requests for additional district personnel. The district would cut a school budget that didn't relate rather closely to the previous year's allocation, Equipment that is used in some programs such as ETV and the Hawaii English Program is budgeted on the state level and materials are distributed to the schools.

This year a meeting of state personnel and district superintendents, the Superintendent's Group, met to set priorities on expansion items that had come in from the districts. At this point the Board of Education was asked to set its priorities, With this input from the districts and the board, the department then developed its budget. A second budget in PPBS format was also prepared for the legislature, Upon completion the budget was then considered by the Board of Education acting as a commit¬tee of the Whole and approved,

The department budget then proceeds to the Department of Budget and Finance where it is reviewed by a budget analyst and adjusted to fit projected income and the governor's priorities on total state spending. Together with the responsibility of drawing the state budget goes broad powers to analyze and revise programs, cut or increase dollar amounts and position counts and the duty to continuously investigate the operation of the departments, The Department of Budget and Finance consults DOE personnel as it works on the budget, and the law requires that it be given the department's priorities, but the degree of consultation and autonomy granted is left to the discretion of the Director of Budget and Finance.

In the legislature the budget which has been worked into a less detailed bill form, goes to the House Finance and the Senate Ways and Means Committees, The Senate and House Education Committees also receive the budget. They hold hearings and submit priority recommendations to Finance and Ways and Means committees where final money decisions are made. The power of the subject committees in influencing the budget varies from year to year and is somewhat dependent on the power structure of the legislature. Differences between the two houses are worked out in a conference committee, The bill carries a committee report that includes directives to departments to work on areas of their program the legislature feels need improvement, Upon final passage of the legislative budget the bill is sent to the governor for his signature. The governor has the power to veto the entire bill or to veto or to reduce a specific item,

This is how the budget is prepared and passed but it is also necessary to understand how the budget is implemented to understand the system fully.

Upon passage of the budget the department drays up an expenditure plan showing how and when its money will be spent. It is at this point that the districts are told the amount they will receive for their programs. The districts in turn make their allocations to the complexes and the schools. The allocations are based on the school pupil load, construction, and program and are not necessarily uniform. The allocation to the schools comes as a lump sum to be used for the purchase of supplies and equipment for the following year. The principal and his staff draw up their expenditure plan which tells in what quarter they will make their purchases (expenditures are broken down into areas of the curriculum language arts, math, etc., the PPBS format).

The budgets are submitted to the districts where they are brought together to make the district expenditure plan. A school that showed an imbalance in emphasis would be questioned by the district.

When all figures are gathered for the department-wide expenditure plan, the department prepares a quarterly allotment advice requesting the release of funds from the Department of Budget and Finance. The director has the power to modify allotments to fit the state financial picture, but must stay within the purposes of the authorization,

In the past the governor has presented two budgets to the legislature, its operating budget and a capital improvement budget to cover construction projects. Since the passage of Act 97 in 1965, school repair and maintenance and construction have been included. Before that they were a county responsibility. Planning and standards are developed in the DOE, however, engineering and construction is the responsibility of the Department of Accounting and General Services.

The CIP is projected out over a six year period, although funds are appropriated for one year at a time. Individual projects are funded a phase at a time (planning, site development, construction often incremental). Capital improvements can be funded either by monies from the general fund or sale of general obligation bonds. Bonds do not have to be sold before a project is started; they are sold as need is determined by the Department of Budget and. Finance. Many capital improvement projects approved by the legislature are never started for the list is long and the money limited. Legislation passed this year provides that the funds appropriated for specific projects that have not been started will lapse five years from the authorization, (Operating funds lapse at the end of a budget period),

The Department of Education establishes the CIP priority needs for the governor's budget. These priorities are established first in the districts by a committee of state and district facilities people and representatives from each complex. District priorities are then worked into a statewide list by district and state facilities people. General Board of Education policy in this area requires that program dictate facilities and that first priority be given to classrooms. Approximately 15% is reserved as a lump sum for construction and relocation of portables, minor capital improvements, wall removal, minor site acquisitions, etc. Changed circumstances can result in a realignment of priorities.

This year in a transitional move to program planning budgeting, the legislature combined the capital improvement and operating budgets, This bill incorporated department priorities and carried $43.7 million for the biennium. The legislature passed a separate General Improvements Bill which carried $25.8 million for school construction as an expression of legislators pet projects (pork barrel).

The department puts its priorities on legislative projects after the passage of the bill, but they are not necessarily released in order,

Funds for capital improvements are released project by project by the governor on the basis of release requests (allotment advice) which usually come from the Department of Accounting and General Services as they work from an implementation plan prepared in the DOE district office. In a matter of urgency a release request may be started in the DOE district office, It must have written justification.. and be passed through the line of command of state facilities people and the Department of Budget and Finance before it is acted on by the governor.

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