By shifting funds and banking on temperate weather for the next fiscal year, the Bedford County Board of Education is prepared to cut more than $438,000 from the 2012-2013 budget, as directed by the county commission in June.
"To shore up a short-term shortfall in the county's debt service fund, the school system's tax rate was reduced by six cents or $438,000. That six cents was added to the allocation for debt service which made their allocation go from 10 cents to 16 cents, for a 60 percent increase," board chairman Barry Cooper said as Monday's meeting opened.
"This is in spite of the fact that the school system is already budgeting around a million dollars this year to pay debt service," Cooper said. "This is one of the reasons that we're so squeezed to begin with in our ability to give raises and fund all the school programs and improvements that we'd like to do."
Debt service, particularly that of the schools, is traditionally funded primarily out of local sales tax revenue.
Bedford County schools receive much of their funding from state and federal monies. Most of those funds are earmarked for salaries and wages.
Locally, it receives almost $8 million in property taxes. The six cent shift equals five and a half percent of the total money the school system receives from county property taxes each year, and is part of a declining trend in percentage of those dollars appropriated for schools in Bedford County.
The county's tax rate has been $2.27 per $100 assessed value since 2005, when rates were last adjusted to reflect reappraised property values. Of that amount, $1.06 was allocated to schools. The following year, the allocation for schools was reduced to $1.02, where it has remained for the past seven tax years.
In that same time, the school population has grown 13 percent, adding more than 900 students.
At its June 12 meeting, commission members -- some thinking they were voting on an earlier recommendation from the county's finance committee -- approved an allocation which reduced the rate further to 96 cents, shifting six cents to the county's debt service. After the meeting, several commissioners realized the cut had been made, and later requested a special called meeting on June 28 to rescind the June 12 motion. The move to rescind the earlier action failed in a split vote, 7-8-1.
"I understand that a couple of county commissioners made a statement that if we did get our 1.02 cents that it would require a tax increase, is that the case?" asked board member Amy Martin.
"I don't know, I haven't heard that," said Robert Daniel, the county's finance director. When reminded that County Commissioner J. D. "Bo" Wilson had made the assertion at the June 29 commission meeting, Daniel deferred to a state consultant who is reviewing the issue. "But as far as what their thoughts were, I have no idea."
"Why did six cents need to be moved to debt service?" Martin continued.
"I don't know," Daniel said. "I would ask the person that made the motion."
"I've come to the conclusion that anyone who has studied the budget can see that taking our six cents is not the only way that we can avoid a property tax increase in Bedford County," Cooper said. "Nevertheless, we must live with the hand we are dealt."
In 2005 the county received proceeds from the sale of Bedford County Medical Center (now known as Heritage Medical Center). After setting aside money to pay off hospital-related debt, the county had about $7 million left. The original intent was not to use the principal on that money, only the interest received. According to Daniel, $5.8 million remains in that fund, with interest money collected going to pay debt for fire trucks purchased by the county in 2006. With a downturn in the economy, the interest collected is not sufficient to make those payments, and the county has had to dip into the principal.
An agreement has been made regarding the sale of the county nursing home, and although the check has not yet been received by the county, the sale will add $3 million to county coffers. That money is not yet appropriated, Daniel said.
"It's good business, when you sell something, to pay off a debt. Wouldn't that be a legitimate use of the proceeds?" Cooper asked.
"We're reduced to having no cushion at all. Basically [the commission] is lowering what they have to do in the future by $438,000, all in the name of being in trouble on our debt service. But basically, and I'm not saying they've decided to do that, they can chose to punish us forever, $438,000 for a one-year problem if they want. This has a long-term effect for what looks to me like a legitimate short-term debt service problem that will work itself out in the next year."
The budget reduction was achieved primarily by lowering estimates of spending for electricity and natural gas by $250,000 and recouping $125,000 from open positions within the BCSD maintenance department. "Start praying for good weather," Cooper said.
Those expenses were offset by a need to increase allocations for custodial personnel by $25,000 and to increase the budget line item for substitute teachers by $125,000. The latter amount was underestimated in the prior years' budgets, and required an adjustment. As with energy costs, the allocation for substitute teachers is among the expenses out of the school's direct control. "If a teacher calls in sick, there has to be a substitute," Cooper said.
The remaining funds will be made up by shifting $200,000 in JOBS grant allocations to cover items in the General Fund.
The board made a motion to accept these changes, but then deferred the vote on budget revisions until the county finance director could update the budget document and re-present it to the board members for consideration. The board will meet at 6:30 a.m. Friday to finalize and approve the plan. The revised budget will then, in turn, be presented to the county finance committee for approval and will later receive a vote from the full commission.
BCSD does not anticipate any reduction in personnel at this time. "The budget is down to the person, we've got 900-plus employees, and every person is in that budget on a name-by-name basis," Cooper said. BCSD is the county's second-largest employer.
The county grew by 200 students last year, and growth cannot be assessed until enrollments are complete in August. Student-to-teacher ratios have been managed in past years by a fairly even distribution of the new population across several grade levels.
Dr. Ray Butrum, superintendent of schools, fears that ratio has reached the saturation point. "I'm just a little bit afraid that I'm going to have to come back to you [in September]," to request additional staff be hired to meet the legal requirements of teacher-student ratios.
On average, Bedford County teachers are the lowest-paid of all the surrounding counties, and rate near the bottom of the list for starting teacher pay.
"We're just not keeping up. We want to hire the best, but we don't want to pay them like the best," Cooper said.