This results in the District’s constitutional debt limit being approximately $197 million. After deducting the amount of outstanding debt and adding back the cash available in the Debt Service Fund, this results in a $147 million legal debt margin.

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FUND BALANCE

The fiscal year, as determined by Board Policy DBB, is inconsistent with the school year. Both are inconsistent with the tax year.

Fiscal Year: July through June

School Year: August through June

Tax Year: January through December

Essentially, the District receives one large paycheck per year. Although tax revenues in smaller amounts are received by the District throughout the year, the bulk of the revenue arrives in late December and early January. These revenues are generated by local property taxes, which are collected in the fall and distributed to school districts by the County Collector. The Board of Education must set aside money to pay District bills for the balance of the fiscal year (January-June) and for the first six months of the next fiscal year (July-December). As a budget for the following year is being created in the winter months, the Board must work with the actual amount of tax revenue received in January and estimate the amount that will be collected some 11-12 months later.

The Board must, therefore, project its expenses far into the future. For example, when an official tax levy is established in September of one year, the taxes are not actually received by the District for six months, but must support the District until taxes are distributed again some 18 months later! Put graphically, here are the ABC’s of school taxes:

A B C D July 2021 December 2021 January 2022 January 2022-December 2022 Begin Fiscal Year September 2021 tax levy set Taxes collected by County Collector District receives local taxes (81% of total income) District operates on taxes collected and fund balances 18 Months -----------------------------------------------------------------------------------------------------------→

If tax receipts in January are lower than estimated, it will be more difficult for the District to pay all of its operating expenses for the next 12 months. If new families move into Clayton over the summer months and additional children appear at school in September, additional faculty may have to be hired. If unexpected building repairs are needed, scheduled maintenance may have to be delayed.

In setting a tax levy that will provide the money to support the budget, the District takes several steps.

• First, financial planning is of prime importance. Annual costs for teachers’ salaries, building operations, and instructional materials are carefully analyzed. The District’s Chief Financial Officer carefully monitors projected increases in assessed valuation, the rate of tax collection, and political actions that may have an impact upon the District’s financial future.

• Second, in building the budget, the Board sets aside contingency monies in each of the three operational funds: Special Revenue, General, and Capital Projects. (As stated earlier, the Debt Service Fund is predictable.) For example, the District could experience unpredicted increases in enrollment that would make it necessary to hire additional teaching staff and purchase additional instructional supplies. Contingency money could be used to meet these unanticipated expenditures. 39