A school district budget is more than numbers. It is a record of a district’s past decisions and a spending plan for its future. It shows a district’s priorities whether they have been clearly articulated or simply occurred by default. And it is a communications document that can tell constituents a lot about the district’s priorities and goals. A school district budget can certainly be difficult to understand and even more challenging to describe. But behind the volumes of mandatory reporting forms, accounting procedures, and jargon are some basic principles that can help bring clarity for those who develop school district budgets and for those who want to understand them. The first thing to understand is that district budgets in California use standardized object codes to classify their General Fund revenues and expenditures. The following represent the main categories into which these are placed. Revenues Revenue Limit Sources (8010–8099): includes base revenue limits, plus other funds such as Equalization, Summer School, Prior Year Adjustments, etc. Federal Revenues (8100–8299): includes all money received for the No Child Left Behind Act (Title I, Title II, etc.) plus Special Education and other federal programs. Other State Revenues (8300–8599): includes lottery and state categoricals (e.g., K–3 Class Size Reduction, Gifted and Talented Education (GATE), Economic Impact Aid). Local Revenues (8600–8799): includes interest, donations and reimbursements, parcel taxes, rents and leases, and other local sources. Expenditures (These categories directly relate to ongoing operating expenses every district has.) Certificated Salaries (1000–1999): includes teachers, certified pupil support, certified supervisors and administrators, etc. Classified Salaries (2000–2999): includes instructional assistants, athletics staff, clerical and office, maintenance staff, classified supervisors and administrators, etc. Employee Benefits (3000–3999): includes Health and Welfare, Worker’s Compensation, and other employee benefits. Books and Supplies (4000–4999): includes approved textbooks and core curricula material, books and other reference materials, materials and supplies, etc. Services and Other Operating Expenses (5000–5999): includes travel and conferences, dues and memberships, housekeeping services, rentals, leases, and repairs. (These expenditures, which are largely outside of K-12 instruction itself, are quite variable among districts.) Capital Outlay (6000–6599): most commonly refers to site improvements, equipment, and equipment replacement. Other Outgo (7100–7299): includes tax revenue anticipation notes (TRANs), payments to districts, and payments to county offices. Direct Support/Indirect Costs (7400–7499): used to record transfers of direct support and indirect costs within or between funds. Looking at an overview is the critical first step A look at a district’s line-item General Fund budget reveals a lot about its fiscal health. For example: Examining the difference between total revenues and total expenditures can show whether a district is operating with a deficit in any given year. A comparison of fund balances from year to year can do the same. Transfers from other funds to the General Fund may indicate that the district is balancing its ongoing budget by borrowing from other funds. Transfers into those same funds may mean that General Fund revenues are subsidizing other operations, such as facilities or a cafeteria program. The line-item budget also provides a quick assessment of what proportion of the district’s revenues are unrestricted (available for general purposes) and restricted (must be used for specified purposes). Expenditures are divided the same way. While these designations conform to state policy, they can also reflect local board decisions to restrict specific revenues or expenditures not required by the state. Download a sample line-item school district budget [PDF] In the General Fund, the classification “Designated for Economic Uncertainties” is sometimes referred to as “the reserve.” This is money set aside for major unforeseen expenses or revenue shortfalls. The state requires districts to maintain a reserve of between 2% and 5% of their General Fund expenditures (after deducting Transfers Out and Other Sources/ Uses). The percentage depends on the size of the district, with smaller districts needing to keep a larger portion of their budget in reserve. In difficult budget years it is much more challenging for even the most conscientious districts to make ends meet. Recognizing that, the state has occasionally relaxed for a limited time some of its expectations in regard to both fund transfers and reserves.