Funding Student Success

Host: 00:00:00

What goes into responsibly funding student success in Cobb? We'll find out in this week's episode of the Inside Scoop. Hello and welcome back to the Inside Scoop. I'm David Owen.

If you hear something helpful or something new to you, make sure you like subscribe and share this podcast episode with a friend. When financial times get tight, families pay close attention to where every dollar goes.

Even when times are good, we always want to get the best bang for the buck, metaphorically speaking.

Here to give us an overview of how Cobb stays in better financial position than most other school districts is our own Chief Financial Officer, Brad Johnson. Brad, welcome to the podcast.

Brad Johnson: 00:00:46

Thank you for having me.

Host: 00:00:47

Let's just start with something very simple. A lot of people don't necessarily watch the board meetings, as strange as that may seem. It's must see tv, but they don't get to know who you are.

The guy who's in char of all the financial picture of Cobb county school district, that's a huge thing, a huge responsibility. Tell us a little bit about who you are and a little bit about your past.

Brad Johnson: 00:01:14

Since 83, I've been working in the school district and I got on with the school district back then. Been with the school district a long time.

r three years and then around: 2010

Host: 00:01:33

So you were forgiven for that, that faux pas. Momentary faux pas.

Brad Johnson: 00:01:37

I, when I left, I really didn't want to go. But it was good for my career at that point. But I was blessed to be able to come back. And Cobb is a great place.

Host: 00:01:46

Yeah, it's. It is. And I think you've been a part of making it a great place. Tell us a little more about the breadth of what finance as a department does.

Brad Johnson: 00:01:56

So finance is a major department of the school district. We have a $1.6 billion budget. We have over 19,000 employee full time and part time employees. In the area of finance, we have payroll.

We have 10 people that pay 19,000 employees. I don't know if people knew that.

Host: 00:02:20

10 people manage all of that's correct.

Brad Johnson: 00:02:23

And with technology these days, we can do that. But we also have other responsibilities. Like we have local school accounting. There's a bookkeeper at every school.

We have after school programs at the elementary schools. In finance, we have financial systems management because we have big systems that handle this amount of money.

We have inventory management that that department handles. We also have accounting which handles financial reporting. It handles cash management, it handles investments.

And then we have another department that handles accounts payable, where we pay all of our vendors. Yeah, we also.

Host: 00:03:02

Let me. I'm sorry to interrupt you.

Brad Johnson: 00:03:04

Go ahead. It's a lot of stuff.

Host: 00:03:05

It is a lot of stuff. A lot of moving pieces here. Just a moment ago, you said investments. You're saying the Cobb school district has investments?

Brad Johnson: 00:03:14

We do. We invest all of our money whenever it's possible. Now, we have 19,000 employees that we pay, but any money that's idle, we invest, even overnight.

Host: 00:03:26

So why would money be idle?

Brad Johnson: 00:03:29

Money would be idle because it's in the budget. It just hasn't been spent yet.

For example, it's in the budget, and maybe it's a planned purchase of buses or something that may not happen at the first of the year, but it's waiting to be spent towards the end of the year. So there are idle expenses.

Host: 00:03:45

Yeah. Well, that makes sense. Just because you have the money to buy something that's needed doesn't mean that you immediately spend it on that.

So in the meantime, you're getting literally the best bang for the buck. You are getting the investment interest, I guess.

Brad Johnson: 00:04:01

Absolutely. We invest with the Georgia Municipal association and we get some of the best rates available.

Host: 00:04:08

Okay, well, that goes right into my next question. Which was, what is the involvement of finance with purchases?

Is purchasing a department that's a part of your department, or how does that all relate?

Brad Johnson: 00:04:23

In the area of finance, we have strict internal controls, strict procedures, and strict transparency. So when I speak of internal controls, I talk about separation of duties.

So in the area of purchasing, they decide and bid what's going to be purchased, whereas finance is totally separate and we pay for it. So we don't influence what's purchased. So purchasing is separate on purpose.

Host: 00:04:49

So it's almost like. And maybe it actually is, there is a business office, so to speak, and then there is a finance office that supports business operations. Is that fair?

Brad Johnson: 00:05:03

Well, there's another department called Business Services that actually has food service and purchasing in it, and that's separate from finance.

Host: 00:05:12

So let me move on from that into the budget cycle. Every year, I think around May, we tend to hear a lot of budget presentation stuff in the board meetings.

So tell us a little bit about overall how the budget cycle process happens, and what do you see as the. The biggest challenge in establishing a budget for the next school year?

Brad Johnson: 00:05:41

Well, let me start with the big picture. Our budget is $1.6 billion for the general fund, but we also have hundreds of millions of dollars in special revenue funds.

We have hundreds of millions in internal service funds, and we have hundreds of millions of dollars in SPLOSS funds. So there's a lot going on. We have 106,000 students. We're the second largest in Georgia and the 23rd largest in the United States.

So all that being said, it's a big budget. So we start a budget that's that big. Usually our fiscal year is July through June.

We start the budget process usually in the month of October, and it ends with board approval in May. And you can imagine there's a lot of things that have to be done.

And we have a strict calendar that we have that divides out each responsibility in the budget preparation and who's responsible and when it has to be done.

Host: 00:06:41

Yeah.

Brad Johnson: 00:06:41

And so all the money is divided up into funds and accounts, and all those funds and accounts are assigned to a budget administrator, and they're responsible for those. And every year, all those thousand tens of thousands of accounts are reviewed.

And so that goes into a process where positions, number of students are counted, positions are calculated, revenue is estimated, expenditures are estimated.

And then we put together a tentative budget for the superintendent to present to the board, Usually in the month of April, the board approves a tentative budget. The board also has public hearings for citizens to give input on it, and then we usually have a final approval of the budget in May.

So I wish the budget's much more complicated to. But that's a big picture.

Host: 00:07:32

Yeah. Yeah.

I've seen the budget books that you guys bring into the board meetings when it's time to present your budget, and those books are, like, that thick. They're huge.

Brad Johnson: 00:07:45

Well, every account is calculated, and there is a formula. And the whole world can look on the website or in those budget books, and they can see how we calculated our numbers.

And so everything is transparent. They can look in the books. They can look on the website, and they can see exactly how we prepared the budget.

Host: 00:08:05

That is amazing. Do all school districts do that? Is that a requirement for school districts, at least in Georgia, to do that?

Brad Johnson: 00:08:13

No, I don't think so.

And I've seen other districts, many other districts, and I don't think most other school districts even come close to the level of detail that we have to the level of transparency that we have. And so we can present very confidently to the public that we are using and planning taxpayer money in the most efficient way.

Host: 00:08:38

Yeah. I remember years ago, a presentation talking about the.

I believe it was administrative percentage or administrative costs versus the costs of the classroom operations. I think Cobb was around 4% at the time. Now, it's probably gone up a little bit, but that means the remaining 96% was spent in the classroom.

What is the biggest expense for teaching all of these? I think you said over 106,000 students.

Brad Johnson: 00:09:13

So the budget is very labor intensive. Over 94% is spent on salaries and fringe benefits. Now, that seems like a lot, but it's really not because guess what, we're in the people business.

And so that's where the budget is put forward. The focus of the budget is classroom only.

You said 4%, but really right now only 1% is going towards general administrative expenses, which is amazing, really. And then a vast majority is going into instruction.

And you can see on all the information that the school district puts out that we spend very little money compared to other school districts. And we have some of the highest test scores. In fact, recently, I think we are the highest test scores.

Host: 00:09:59

Aren't we like the largest employer in Cobb County?

Brad Johnson: 00:10:02

We are. Years ago, it used to be Lockheed. And those of us who have lived here for 40 or 50 years, we remember when Lockheed was by far.

But now Cobb schools is the largest.

Host: 00:10:13

So whenever you and the leadership of superintendent do things like issue a raise, I'm sure that has an impact on the overall economy of Cobb county, right?

Brad Johnson: 00:10:24

Absolutely.

I mean, when you think about 19,000 employees full time and part time and that's all over the county, it has a tremendous effect on the economy of Cobb.

Host: 00:10:35

Yeah. Just about every decision you guys make is so impactful when it comes down to the various moving parts that you have to manage.

And you've got about how many people are in finance department?

Brad Johnson: 00:10:52

Probably around 65 or 70.

Host: 00:10:54

Okay.

Brad Johnson: 00:10:55

Now every school has a bookkeeper, too.

Host: 00:10:58

Yeah, yeah. And that's huge because if you don't get your original entry right, then everything after that is going to be in trouble.

It's not going to be accurate. But one of the things that you guys have gotten notoriety for is just excellence and accuracy. Right.

Tell us a little bit about some of the awards that you guys have gotten or your staff has gotten in the past few years.

Brad Johnson: 00:11:21

Well, in finance, there's a deep history of best practices and accountability.

o organizations going back to: 1980

And our staff has continually, as people have retired, people have come in and we've maintained that sense of excellence and hard work and Wanting to do things right. We have credit ratings from Moody's, Standard and Poor's and Kroll credit rating agencies.

And in fact, we're the only entity in the United States that has three AAA credit ratings. And the only corporations that even hold one is Microsoft and Johnson. And Johnson.

So I think that's proof to our taxpayers that finance is trying to handle taxpayer money in a very professional manner.

Host: 00:12:31

Wait a minute. That's astounding to me. Okay, let me reel that back in, because that's.

You're saying that not only are is the Cobb School district financial office, I give y'all full credit because that's where it belongs, responsible for having achieved three AAA or top ratings with these financial entities. It's not just public schools that you're comparing against. It's major corporations like Microsoft.

Brad Johnson: 00:13:09

Yeah, we are literally the only organization in the United States that has three AAA credit ratings.

Host: 00:13:15

Holy cow.

Brad Johnson: 00:13:16

And so that's been a long time coming. We have been working on that for a long time. But we put tremendous effort and emphasis on internal controls, procedures.

And I think these credit ratings reflect. And it's not just financial practices.

This goes back to the superintendent, the executive cabinet and management of the school district, including principals, of sound management practices, a sound tax base that the school, the Cobb county citizens, will support us and fund balance reserves so that we can actually do the things that we need to do for our students.

Host: 00:13:59

So a lot of people listening to this and, you know, as soon as we mentioned awards, some of the cynical ones might have said, oh, here we go, tooting their own horn. Okay, fine. But it's more than just putting a certificate on the wall or a statue on the mantle.

What does this mean in terms of benefit to the students and teachers in classrooms and the taxpayers?

Brad Johnson: 00:14:25

Well, I think it means that we're handling money in such a way, and we call it frequently in our board meetings, conservative budgeting practices. So if we're going to be off in our estimates, we're going to be off to the good, either, whether it be revenue or expenditures.

And so we feel like we can budget in that way, putting as much money into the classrooms as possible. And I think that that's our indirect way of supporting instructional success.

And so when I hear these test scores, I'm thinking, well, finance had a part in that, and I'm proud of it. And it's our whole team. Yeah, it's our whole team.

Host: 00:15:04

So one of the things that we also benefit from, I was thinking of this a moment ago, is another school district Nearby has a bond that they had to issue to be able to do major construction projects. We. And they also have a SPLOST ED SPLOST in place. We have ED splost, but no bond. So how does that all interact? Is that related to our credit rating?

Brad Johnson: 00:15:35

bond issues going back to the: 1960

But in the: 1990

And if you have bonds, if you look at any organization that have bonds, they pay millions of dollars in interest expense. We don't pay anything. And having splossed money for schools and technology, it allows us to buy these things and essentially work as a pay as you.

Yeah, so we're saving all kinds of money for that.

Host: 00:16:17

So it's almost like getting a discount.

Brad Johnson: 00:16:18

Yeah.

Host: 00:16:19

So when taxpayers open their tax bill, they're looking at just the regular school tax but no additional bond payment. So that's the benefit directly to the homeowners.

Brad Johnson: 00:16:33

Yeah. No. No long term debt, adequate financial reserves.

ve had some downturns back in: 2010

And I think the way we've handled the money, we're probably in a better position than most to be able to handle that.

Host: 00:16:56

So I'm glad you brought that up because that's one of the things I wanted to ask you.

erienced in the, what was it,: 2008

Brad Johnson: 00:17:23

Well, we monitor economic indicators very closely and one of the big indicators is state revenue. And so I watch how the state is collecting revenue, whether it be sales tax or income taxes.

And believe it or not, over the last 24 months, the state has been down in their collections.

Host: 00:17:42

Oh, yeah.

Brad Johnson: 00:17:43

And by, I don't know, 1 or 2%, which is a reflection of an economy that's not quite as good as we would like it to be. But what the state has done, though, alternatively, though, they have put together a pretty impressive reserve fund.

So the state has handled their finances pretty well too, because they'll have money available in case something does happen in.

Host: 00:18:12

An economic downturn, they can cover that shortfall or a gap.

Brad Johnson: 00:18:15

It'll be great. It would be very helpful for what they've done.

Host: 00:18:18

Okay, very good. Anything else you want to add before we close out here?

Brad Johnson: 00:18:24

Well, just some more accountability things as far as handling taxpayer funds. We haven't had an audit finding in 10 years. Financial statement audit finding.

Host: 00:18:37

Okay, so that's a great point from the auditors. So you guys go through an annual audit.

Brad Johnson: 00:18:42

Annual audit.

Host: 00:18:43

Okay. And that means that they are looking at everything you do and trying to find a problem. Right.

Brad Johnson: 00:18:50

They're looking at hundreds of thousands of transactions, and they literally find nothing. And we.

Host: 00:18:57

We.

Brad Johnson: 00:18:57

We have a system in place. We have a way of producing transactions. And so I'm very proud of the finance team for actually making that happen. And it's not only the finance team.

It's all the other departments in the central office, as well as the schools to where they follow our procedures. And we appreciate how they do that. We train them, and everybody handles it in a very professional way.

So I think that contributes to the financial success as well.

Host: 00:19:25

Yeah. As cheesy as it may come off teamwork, right?

Brad Johnson: 00:19:29

Yeah, well, it is teamwork, and so I'm just proud of the finance team.

Host: 00:19:33

Yeah. Well, that's fantastic. Well, Brad, thank you so much for coming in and sharing some of these things with us.

Obviously, a massive budget, a massive financial picture like the one that you are at the helm of. That's horrible grammar. Sorry, that's not something you cover in one podcast or even a series of podcasts. It's.

But thank you for taking time out of your busy schedule to come tell us about some of these things and help us learn a little bit more.

If you found some of this information helpful or new, enlightening, what have you, make sure you give us a like, subscribe and share it with a friend. Thank you for listening to this edition of the Inside Scoop, a podcast produced by the Cobb County School.