Schools' spending request rejected

Friday, September 18, 2009

Faced with the prospect of having to increase property taxes in an election year, Marshall County commissioners told their school system leaders to cut more from their spending request.

That repetition of county Budget Committee direction to the schools' financial leaders on Tuesday concluded with Schools Budget Committee Chairwoman Kristen Gold asking her department's budget director, Janet Wiles, what could be done.

Wiles' reply: Ask the Tennessee Department of Education for an extension on an Oct. 1 deadline to have a county budget in place so the county wouldn't lose state funding for schools here.

A $34.6 million school budget was presented that Tuesday night when Gold told the county Budget Committee that the School Board had cut $100,000 from the annual financial plan. That's not enough, according to Commissioners Mary Ann Neill, Larry McKnight and Mickey King, the more outspoken commissioners at the meeting.

County Budget Director Freda Terry was consulted on what schedule the School Board faces to return to the commissioners' Budget Committee led by Commissioner King. Ten days before a county commission can consider a budget that will impact county taxpayers, there must be a legal notice published for all to see in a newspaper of general circulation.

County commissioners are scheduled to meet 10 days from today, on Monday, Sept. 28. Without a voting session of the school board scheduled until Sept. 23, the commissioners won't be able to adopt a school budget until sometime in October, according to Terry's interpretation of state law.

Meanwhile, the impression left with commissioners during the Budget Committee meeting on Tuesday this week was that state funding of Marshall County schools would stop on Oct. 1.

It will, according to state Education Department spokeswoman Rachel Woods, who said money that would be flowing to this county's schools would be held in escrow until a budget is passed.

Schools could continue here, but not with state money, Woods explained.

"They don't lose it," she said of the money.

What Marshall County faces is something that "happens every year with various counties," Woods continued.

"Usually by the end of September there are 20 (school systems) at the most" that haven't got a new budget for a fiscal year, she said.

The fiscal year started on July 1, but commissioners adopted a continuing resolution that allows spending to continue at the same rate as permitted by the budget for the fiscal year that ended June 30.

"What happens is we freeze the funds," Woods said. "They don't stand at risk losing the dollars, but they are frozen. There's no penalty. The money is held in escrow."

The state money would be sent retroactively after the budget is passed, she said.

It was unclear late Thursday morning how long the school system here could be run without a regular stream of state money.

The vast majority of public school budgets have three general sources of revenue: State, local and federal funding, in that order. Depending on the jurisdiction, state funds might be approaching three-fourths of the money spent on schools.

State funds only from Tennessee's Basic Education Program anticipated for Marshall County Schools' fiscal year 2009-'10 are some $21.7 million in a spending plan that's at about $34.6 million. That funding here is almost 63 percent of the county schools' budget.

School budgets this year also include federal stimulus money that's directed to specific expenditures, thereby freeing local money for other costs.

That federal revenue was described as temporary by county leaders on Tuesday night.

Two state rules have an effect on school budgets, and Neill has emphasized the point several times. One is the "maintenance of effort" in funding schools. It's not to go down. The other calls for starting the fiscal year with a fund balance of at least three percent.

If reserves are depleted to increase spending then county commissioners are faced with a requirement to increase funding the next year.

Given the figures presented Tuesday, commissioners concluded that it was an impossible situation, especially since the revenue generated by each penny on the property tax rate has decreased from about $5,100 to some $4,800.

While the budget presented this summer is balanced, it has the effect of requiring more money next year because reserves are being depleted. This, after a year of spending restraint by the school system that didn't spend all of what was allocated for operations last summer.

"So," McKnight concluded, "we're talking about a 22-cent increase (on the property tax rate) next year."

While it was never stated loud enough to be heard across the room, it has been clear that the next county election is in early August next year.

Various issues were discussed, including health insurance costs for teachers. Premiums are lower than anticipated. The Marshall County Education Association says it negotiated a dollar amount to be budgeted for that benefit. Schools leaders say the system ought to benefit from a reduced rate and that under the current circumstances a teacher's contribution toward health insurance coverage could actually decrease.

Given the relationship between the school board and the commission, "As I understand stand it," Gold said to the county budget committee, "you can tell us how much the schools get, so then we need some direction on where to cut" spending.

Commissioners declined to say where spending should be reduced, but they indicated how much. Some said the $1 million needed to avoid a property tax rate hike next year should start now with a $500,000 cut.

McKnight reported he'd found out several weeks ago how much the board had to cut, went to school headquarters and said it was $400,000.

"I hoped I didn't waste my time going out there," McKnight said.

Gold looked at Neill, who said Gold wouldn't like her suggestion. It was for another $500,000, or a total of $600,000.

Commissioner Don Ledford elaborated on a point made by King: County leaders cut the general fund for other county departments by $1 million.

Noting that Gold had said, "There's not a lot of fluff in there," Ledford asked: How much fluff is left?

Defending taxpayers and calling for cooperation, he moved to decline to accept the school budget, send it back to the board and Commissioner Wilford "Spider" Wentzel seconded the motion that was accepted unanimously.

Discussion then began on when to advertise a finished budget that could be approved by the commission in October. Terry apparently needs a document by Oct. 12. The commission might not be able to vote on it until the regular October meeting on the last Monday of next month.

The school board's budget committee was scheduled to meet on Thursday night.