APS – FY13 Budget Cushions – How Big Are the Built In Contingencies?

It is common – and fiscally prudent – to build in cushions in a budget to cover the cost of unexpected expenditures that often arise during the year. The question is always how much cushion has been built in and for what purposes will any excess cushion be used. As I reviewed the detailed FY13 Budget, it is possible that there is as much as a $20.5 million cushion that is currently built in – which exceeds the projected FY13 Budget deficit of $15.3 million. The following table presents the estimated cushions:

  1. Employee Benefits – as noted during the review of the FY13 Proposed Budget, the Employee Benefits were inconsistent and were subsequently revised in the Approved Budget. However, the percentage applied to Salaries for Employee Benefits of 27.1% is above the historical average by 2.2% – resulting in a likely budget cushion of $6.9 million.
  2. State Unemployment Reserve – as a result of the layoffs, APS may have to increase its payments to the State for Unemployment Benefits. The amount budgeted in FY13 is $6.0 million, or $4.0 million higher than the historical amount. However, the actual amount that will have to be paid to the State is dependent on how many employees are actually laid off versus reduction due to attrition.
  3. Early Intervention Program – as noted in a prior post, there is a problem with the budget for this program. Either the Salaries are too high; the employees are to low; or a combination of both. For this analysis, I am estimating that the error is approximately 50% of the calculated amount, or $5.3 million.
  4. Special Revenue Fund Transfers – the FY13 Budget includes a transfer of expenditures from the Special Revenue Fund of $1.5 million that is related to the administration of the district Charter Schools. The annual audit report does not include fund transfers with General Fund expenditures and so the amount likely represents an overstatement of expenditures.
  5. Reserves for Capital Projects – prior to approving the FY13 Budget, the budgets for the CFO, CIO and Operations were increased by a total of $5.0 million for potential capital improvements. However, there were no details provided regarding how these funds would be used. If in fact they are for Capital Projects, then similar to the above, the amounts will be treated as a fund transfer.
  6. Textbooks – as noted in a prior post, the Textbooks is likely under-budgeted and therefore offsets the other potential cushions.

Over the course of the next year, I will be monitoring these accounts closely to determine if they represent budget cushions and, if so, then how the funds are used. My hope is that any cushion are used to reduce the deficit.

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