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Guidance on Across-the-Board (ATB) Cuts

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Iowa school districts are subject to chapter 24 of Iowa Code regarding budgeting. The authorized expenditures of a school district shall not exceed the lesser of the budget for that year which was certified or amended under section 24.17 or the authorized budget. The authorized budget is the sum of the combined district cost for the year, the actual miscellaneous income received for the year, and the actual unspent balance of the authorized budget from the preceding year. The budget authority, with the exception of the miscellaneous income, is granted to the school district as of July 1 of the budget year. This is true without regard to whether property taxes that fund the authority are delinquent or state aid is reduced during the year. This provides stability to school districts that have negotiated salaries and certified budgets by April 15 prior to the start of the fiscal year, as required by law. This can cause some unique budgeting and reporting issues for districts that already have the full budgetary authority to expend when an across-the-board (ATB) cut is ordered.

When state revenues fall short of the estimates used to create the state budget, an ATB cut may be necessary during the budget year after the budgets and appropriations have been set. The ATB cut reduces revenues to a district but does not reduce the amount of money a district can expend within its authorized budget. This has occurred a few times in the history of Iowa education funding during times of economic stress. The most recent was in FY10. An ATB cut applies to all state General Fund expenditures without regard to need or priority. Iowa Code requires that when a governor orders a budget reduction across the board, the cut shall be distributed on a per pupil basis calculated with weighted enrollments. This is different than the way many categorical funding components are generated. Even though categorical budgetary allocations are components of the state aid to districts, it is the state aid appropriation total which is cut and not the individual components. Categorical funding is considered paid in full, and the cut is taken from the undesignated portion of the state aid. Districts have basically three options when revenues are cut: reduce expenditures where possible, use funds on hand, or levy for the cash reserve tax.

ATB cuts are rare, so raise many concerns and questions related to how districts and AEAs should address the fiscal issues. The procedures for handling accounting and financial report for such things as budgetary allocations, AEA controlled budgets, AEA flow through, special education receipts and balances, categorical grant funding, etc. have been handled consistently for each of the ATB cuts that have occurred in Iowa education funding history. The Department has created an FAQ of questions it has received and the corresponding answers showing this consistent treatment of fiscal issues.

 

Printed from the Iowa Department of Education website on February 13, 2016 at 7:52pm.