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Question:  What are some of the common terms used in education finance?

Answer:  Some of the more common terms and their definitions are listed below.

Categorical funds: Funds which come from a specific source for specific purposes. These funds may not be used for other purposes or to finance other activities than those set by the funding source.

Certificated employees: Employees who are required by the state to hold teaching credentials, including full-time, part-time, substitute or temporary teachers and most administrators.

Classified employees: School employees who are not required to hold teaching credentials, such as secretaries, custodians, bus drivers and some management personnel.

COLA: An increase in funding for revenue limits or categorical programs. Current law ties COLA’s to various indices of inflation, although different amounts are appropriate in some years.

Employee benefits: Amounts paid by the LEA on behalf of employees. These amounts are not included in the gross salary, but are over and above. They are fringe benefit payments and while not paid directly to employees, they are nevertheless a part of the cost of salaries and benefits. Examples are: (1) group health or life insurance payments; (2) contributions to employee retirement; (3) OASDI (Social Security) taxes; (4) worker’s compensation payments; and (5) payments made to personnel on sabbatical leave.

Encroachment: The use of unrestricted money to support restricted program expenditures.

Encumbrances: Obligations in the form of purchase orders, contracts, salaries and other commitments chargeable to an appropriation for which a part of the appropriation is reserved.

Expenditures: The cost of goods delivered or services rendered, whether paid or unpaid, including debt retirement and capital outlay.

Fiscal year: A period of one year, the beginning and the ending dates of which are fixed by statute, in California, the period beginning on July 1 and ending on June 30.

PERS: Public Employees’ Retirement System. State law requires that classified employees, their district and the state contribute to this retirement fund.

Restricted Funds: This is money whose use is restricted by legal requirements or by the donor.

STRS: State Teachers’ Retirement System. State law requires certificated employees, school districts and the state to contribute to this retirement fund.
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