The Fayette County Board of Education on April 19 voted to restore $4 million in past employee pay cuts effective May 1. But that restoration is small potatoes compared to
the perfect storm of falling student enrollment, decreasing revenues and increasing expenditures that are forecast for the next couple of years.
And unless that storm is somehow abated, the school system’s $20 million general fund balance expected on July 1 is expected to decrease to $7 million on July 1, 2012 and to decrease even further to minus-$6 million in July 2013.
Though not directly discussed April 19, a school system financial history and forecast entitled “Comparison of Major Revenue Sources” by Audits & Financial Reporting Coordinator Tom Gray will presumably be a topic of conversation during the upcoming FY 2011-2012 budget talks that will occur in May. It was in that document that a breakdown of revenues, expenditures and student enrollment was provided for 2001-2013.
The bottom line is that state and local revenues continue to fall while school system expenses continue to rise. The projection shows the school system for 2010-2011 with $180.5 million in combined state and local revenues in the general fund, $178 million in expenditures and a fund balance, much of which was carried over from last year, at $19.9 million.
The projection for the 2011-2012 school year shows general fund revenues of $172 million and expenditures of $185 million and a fund balance of $7 million. The deficit gap widens even further in the 2012-2013 school year with combined revenues of $170 million and expenditures of $187 million and a fund balance of minus-$6 million.
Fund balances in the general fund from 2002-2009 fluctuated from a low of $1.7 million in 2008 to a high of $9.2 million in 2002 and averaged approximately $5.6 million for the period. A customary fiscal goal for school systems is to keep an equivalent of 10 percent or more of the general fund budget in reserve.
The chart also showed that without either significant growth in the local and state economies or some other source of revenue generation or a significant reduction in expenditures, a negative separation in revenues and expenditures will continue for an undetermined period of time.
That means that while the costs go up, the income goes down.
For years the local economy boomed, with corresponding increases in the growth of the tax digest and, subsequently, the amount of money collected from local property taxes. The chart also showed a relative, though less robust, increase in state (called QBE for Quality Basic Education) dollars.
Things began to change once the state and local economy were firmly entrenched in the recession. In QBE dollars, the Fayette school system hit an all-time revenue high of $92.6 million in 2007-2008 school year, according to information provided by Gray.
That figure dropped to $86.1 million in 2008-2009, to $86 million in 2009-2010 and to $82.43 million in the current 2010-2011 school year. Gray’s forecast shows state QBE revenues at $80 million for 20111-2012 and $78.5 million for 2012-2013.
A central, but not exclusive, factor in falling state revenues in recent years has been Fayette’s decrease in student enrollment. The school system receives approximately $4,000 from the state for each student it serves.
Enrollment saw a steady climb since 2001, peaked in 2006-2007 with 22,367 students and then began a decline, Gray indicated on the chart. Enrollment continued its decline each year and sits at 20,913 for the current school year, essentially the same enrollment seen by the school system in 2002-2003, eight years ago.
The falling enrollment numbers are expected to continue, dropping to an estimated 20,700 students in 2011-2012 and to 20,500 in 2012-2013.
Every decrease of 250 students amounts to an estimated $1 million decrease in state QBE dollars for the general fund. Decreases in enrollment also equate at some point to fewer teaching positions, since fewer teachers are needed to teach fewer students.
Local funding through property tax revenues also rose steadily since 2000. That revenue totaled approximately $74 million in 2007-2008, $81.4 million in 2008-2009 and peaked at $85.88 million in 2009-2010, according to information provided by Fayette County Tax Commissioner George Wingo.
School board Chairman Bob Todd at the April 19 meeting noted that a first-time decline in property tax revenues had occurred during the current school year. Wingo on Monday pulled data from July 2010 through late April that showed $77.747 million in property tax collections with a 97.2 percent collection rate.
Wingo said the $8.1 million decrease in collections was due to last year’s significant decrease in the tax digest. The current forecast by Fayette County Tax Assessor Joel Benton anticipates another reduction in the tax digest this year of around 5 percent. Such a decrease would signal another decrease in local school system revenues, Wingo said.
There is one constant in local revenues, albeit a small one. That small revenue source is in vehicle tags. The school system averages approximately $6.5 million per year for its share of those taxes.
So falling state and local property tax revenues are two issues that will have to be addressed by the school board, especially for the 2012-2013 school year.
Meantime, the budget for 2011-2012 will have to be adopted prior to June 30. Gray said general fund expenditures are expected to increase to $180-185 million due to issues such as teacher step increases and increasing healthcare costs. He estimated general fund revenues at $172 million. The $12 million difference can be made up with the estimated $20 million fund balance.
A topic that has yet to be explored in depth by the school board, though one that has the potential for such a discussion in the near future, is the cost of operating schools that are significantly under capacity. Several of those schools exist around the county, not the least of which is the new Rivers Elementary on Sandy Creek Road that currently houses a portion of the special education programs.
The cost of maintaining school buildings is also significant. The the old East Fayette Elementary School property has been listed for sale since Inman Elementary School opened in 2009 and, during the throes of the recession, has had few potential buyers.
The Fayette County School System is an employer with more than 3,000 employees on the payroll and with revenues this year of approximately $180 million. Its board of directors, like the county and the municipalities, depends on property owners for its livelihood. The current tax rate imposed by the school board is 20 mills, the legal maximum in Georgia. Only a voter-approved referendum can increase the number of mills levied by the school board beyond 20.
Unlike other local government entities, the school system also receives state tax dollars. Though it varies from year to year, state and local tax dollars over the years make up approximately equal portions of the school system’s general fund operating revenues.