Connection

The Official Blog of Forecast5 Analytics

Scot Ecker
WRITTEN BY
Scot Ecker

Analytics, Best Practices, Forecasting, Trend Analysis

How to Create a Budget Forecast in Uncertain Times

Posted on Jul 6, 2017 9:31:08 AM

According to the “National Center for Education Statistics” February 2017 publication, over 90% of school district revenues come from local or state sources that are controlled by statutory funding formulas.  With such a significant portion of revenues being subjected to political or legislative processes, school business officials often wonder, “How am I supposed to predict what the state is going to do in terms of educational funding?”    

Fortunately, the school business official doesn’t have to be an economist, statistician or fortune teller to present reasonable budget projections to the school board, superintendent and community.  Instead, scenario analysis and pattern recognition, can be extremely valuable analytic methods to develop “educated guesses” for unknown data points.

Supplemental content. Read "(Fore)Casting a Vision for Your Community"

Forecasting Revenue with Scenario Bands

Developing revenue scenario bands for local and state funding sources with a “Low-Mid-High” approach can help decision makers understand the key issues around revenue including:

  • Which revenue sources are the most important for us to focus on?
  • If revenues are in the lower end of the band, will we have to adjust expenses?
  • On a multi-year basis, what will happen if revenue continues to come in on the low end?
  • If revenues are at the higher end of the band, can we afford new programs or staff?

You can create your Low-Mid-High estimates for each revenue source by using historical data and then applying reasonable band-width on each side of your middle of the road estimate.

Evaluating Expenses with Pattern Recognition

 June30_BlogPost_1.png

In the graphic above, a pattern emerges that would make it reasonable to forecast that the 7th occurrence will be yellow.  If we wanted to hedge our bets, we could cautiously predict that the 7th occurrence will be yellow, green or peach.  This example is provided in the context that many school expenses follow time and allocation patterns.  The trends in expense are easy to identify with visualization tools.  And in fact, many school district expenses are tied to compensation costs which can be easily predicted and modeled.

How can you make estimates with confidence?

In most states, accurate projections (both short- and long-term) can be created if the school business official can estimate four key factors: 

  1. Enrollment
  2. Local property value
  3. State funding per student
  4. Salaries and benefits costs

Identifying patterns and creating multiple scenarios for the variables that are linked to these factors will allow you to present a meaningful financial forecast to your district’s stakeholders.  And, it will also help to identify and communicate complex financial issues that are key to building trust in your budget. 

Reference:  National Center for Education Statistics

Scot Ecker joined Forecast5 Analytics as a Senior Analytics Advisor in February 2016.  Scot spent the last sixteen years working in school finance.  Mostly recently Scot was the Vice President and Chief Financial Officer at Carthage College.  Prior to that, Scot spent 13 years serving as a business manager for school districts in Wisconsin. He is a member of the Association of School Business Officials International and a past board member of the Wisconsin Association of School Business Officials (WASBO). Scot holds a Bachelors degree in business from UW-Madison, a Masters degree in school business administration from UW-Whitewater and an MBA from UW-Eau Claire.

Post a Comment

From the learning center

Merrillville Community School Corporation Uses New eLearning Insights

Merrillville Community School Corporation Uses New eLearning Insights

As the COVID-19 pandemic moved across the nation, schools began closing, and Merrillville made the decision to move all classes virtual. Dr. Dexter Suggs, Assistant Superintendent of Curriculum & Instruction, was faced with the daunting task of trying to determine how to support student learning in this new environment.

Download Now
Boundary Planning Playbook

Boundary Planning Playbook

Get your playbook for step-by-step guidance to a successful boundary planning process. (eBook)

Read Now
Carroll ISD Leverages Data Analytics to Educate & Empower School Board

Carroll ISD Leverages Data Analytics to Educate & Empower School Board

During William Wooten's first week with Southlake-Carroll ISD as their Assistant Superintendent for Financial Services, he was faced with
the daunting task of sharing the district’s financial information with newly elected board members during onboarding training.

Download Now
Stephenville ISD Receives Improved Marks in S&P Financial Management Assessment

Stephenville ISD Receives Improved Marks in S&P Financial Management Assessment

 Texas district improves their S&P Management Assessment marks through a new formalized financial planning process based on Forecast5 solutions.

Download Now