SPENDING PRIORITIES

Categories of Spending

Functional categories and object categories are two different ways of classifying and reporting expenses in a school district's budget and financial statements.

Functional categories classify expenses according to the purpose or function of the spending, i.e., the reason why the money is being spent. The main functional categories are:

• Instructional - Expenses directly related to providing classroom instruction. Includes teacher salaries and benefits, instructional materials and supplies, and any purchased services or equipment used for instruction.
• Pupil Support - Expenses for services that support the needs and well-being of students outside of the classroom. Includes salaries and benefits for counselors, nurses, speech pathologists, etc., as well as supplies and services related to their work. 
• Staff Support - Expenses for services that support teachers and other staff. Includes professional development, training, meetings, and any supplies or services needed for those purposes.
• Administration - Expenses related to managing and operating the schools and the district. Includes salaries and benefits for principals, office staff, and district administrators, as well as purchased services like legal fees, postage, copying, and auditing. Supplies and equipment for administrative purposes are also included.
• Operations - Expenses related to maintaining and running the physical school buildings and transportation. Includes salaries and benefits for custodians, maintenance staff, and bus drivers. Also includes purchased services like utilities, building repairs, and insurance, as well as supplies like cleaning products and fuel. Equipment and capital improvements for buildings and buses fit here too.

These categories provide insight into how resources are allocated to different aspects of running a school district and supporting student learning.

On the other hand, object categories classify expenses according to the types of items or services purchased, i.e., what the money is being spent on. The main object categories are:

• Wages - Salaries and compensation paid to employees for their work. This includes base wages, overtime, stipends, and any other forms of payment for services rendered. Wages are usually the largest object category for school districts.
• Benefits - Compensation provided to employees in addition to wages. This includes retirement contributions, health insurance, life insurance, workers' compensation, unemployment insurance, and other benefits. Benefits are a significant expense for districts and often the second largest category after wages.
• Purchased Services - Services provided by outside vendors or contractors rather than district employees. Examples include utilities, repairs and maintenance, rental of equipment or facilities, transportation, insurance, legal fees, professional development, and consultants. This category covers a wide range of services necessary for district operations.
• Supplies and Materials - Consumable items used by the district. This includes instructional materials like textbooks and worksheets, office supplies, cleaning supplies, food for cafeterias, and maintenance supplies. These are goods that are used up and regularly replaced.
• Capital Outlay -  Purchases of durable goods that are expected to last more than one year. Examples include furniture, computers and other technology equipment, vehicles, machinery, and buildings or real property. These are larger, long-term investments rather than regular operating expenses. 
• Other Expenses - Any expenses that don't fit into the above categories. This can include fees, dues and memberships, interest on debt, judgments against the district, and miscellaneous expenses. The specific expenses in this category vary depending on the unique circumstances of each district.

Object categories provide insight into the specific types of costs incurred across all functional areas. By classifying all expenses into these object categories, school districts can analyze their spending in a standardized way, compare costs over time or to other districts, and make budgeting decisions. The categories provide a clear picture of where the money is going and what types of items or services are being purchased to support district operations and student learning.

To illustrate the difference, consider a teacher's salary. In terms of functional categories, it would be classified as an Instructional expense because the teacher's job is to provide classroom instruction. But in terms of object categories, it would be classified as Wages because it is a salary expense.

Functional categories focus on why money is spent (the purpose), while object categories focus on what the money is spent on (the type of item or service). Both are important for understanding and analyzing a district's finances, but they provide different perspectives. Functional categories give a big picture view, while object categories give more granular details.