If Elkin City Schools doesn’t find a way to increase its revenue stream for the 2017-18 fiscal year, it could have a depleted fund balance and a shortage in funds for the following year, according to information provided to the school board during its retreat Friday.
Jan Zachary, chief finance officer for the school system, explained during her presentation that the 2016-17 fiscal year started out with $1.5 million in the fund balance, but $475,000 to $495,000 of that amount is expected to be used during the fiscal year. Also, the fund balance has to keep three months of operational funding, or $620,000.
She said it is projected that the school system will have an undesignated amount in the fund balance of $426,109 for 2017-18 fiscal year. Meaning the budget can’t include use of as much money out of fund balance as it is using this year to balance the budget.
Adversely affecting the projected revenues for 2017-18 is an average daily membership, or student attendance, of 1,180 next year, a decrease of 21 students over 2016-17. Also affecting the teacher allotment for each grade level, Zachary noted the individual grade level projections, which the principals said were not accurate based on the number of students in the grade levels this year that will be moving up.
“We had the same conversation last year,” Zachary said of the grade level allotment. “The projections are from Raleigh, and we lost two teachers last year. This is what they base it on until we have first and second month numbers in [at the beginning of the school year]. This year we didn’t lose enough students to lose a third teacher.”
The coming year also will see increased expenses in employee benefits and hospitalization costs the school system is required to pay, as well as dental insurance costs, which have not increased in a couple of years, are predicted to go up, Zachary reported.
Other talk in Raleigh that could hurt the local and state budgets is of funding through providing pots of money, rather than funding per position, she explained. “Right now we are getting state positions pay for classroom teachers and instructional support positions. I try to put as many people on state positions as I can, because it saves on local funds,” Zachary said. “With pots of money, it’s like having $100 in your pocket, and you have a $90 cost and then there is tax on it so it costs you more than you get for it.”
In the current fiscal year, cuts to teacher assistant positions hurt the school district, as it lost $16,000 as well as the ADM drop caused another $16,000 decrease in funds. The TA positions are determined on a ration of 1:21 in a classroom.
But one move at the state level, the proposed kindergarten through third grade class size mandate, could have a major impact on funding for the 2017-18 fiscal year, if it remains as it is now proposed, Zachary said.
While it might help in funding more TAs, it also would require the school system to hire an additional five teachers for K-3, “the way the law sits now,” she said.
A proposed compromise to the class size mandate, House Bill 13, would allow for three more students in each class over what has been introduced.
“Now we are making our classes look like our funding level, and they’re not understanding that we use those other funds to hire our resource teachers like art, music and P.E.,” Zachary explained. “If the bill stays like it is now, the Senate is fighting the relief [HB 13], we would have to hire five additional teachers.”
With the new law, those five additional teachers would be required and funding for those, or for the resource teachers which Elkin now pays out of the class size allotment funding, would not be increased out of state funding. On average, those teachers with benefits would cost $55,000 each, Zachary said.
“It is critical we talk to senators to get them to pass HB 13,” she said.
School board member Dr. Jane Riley, also an educator in Iredell County, said rumors were floating that the state was looking at funding the resource teachers, but in reality, noted board chair Dr. Richard Brinegar, there is no way to know what will happen.
Another concern with the class size mandate is space to put the additional teachers being required. Elkin Elementary School Principal Pam Colbert said there is space, but it may require rearranging some teachers and possibly having two of the resource teachers sharing one classroom. “We would have to look at condensing spaces and using our building in a new way,” she said.
To help offset the costs of these new mandates and the increase benefit costs, Zachary suggested looking at new local revenue opportunities. “We wanted to give you the worse case scenario for ideas of bringing in new possibilities of revenue,” she told board members. “To keep the school system as it is, we’re going to have to do something. We’re dipping into fund balance to keep the school system as it is.”
One of those funding sources is to start requesting Medicaid reimbursements, something that is a lot of paperwork and manpower. Zachary said the school system did that for a while, but for the small amount it was receiving back it was too much upfront work. Now those reimbursements provide more money, around $20,000 instead of $1,500, she said.
A second way to increase revenue is by increasing the out-of-district tuition rate per student. “It doesn’t bring much in, but we are less than any of the surrounding systems,” Zachary said of that rate. She suggested a $50 increase, which would bring the out-of-county rate to $350 and the out-of-district rate to $250.
In its request for local funding to the Surry County commissioners, Zachary recommended requesting $1,175 per student in local funds, which was requested last year as well. The commissioners funded the school system at the rate of $1,115 per student, in spite of the requested increase, but she said that additional $60 per student would bring in just shy of $28,000 to the school system to offset increasing expenses.
Another request to the county commissioners would be for an increase in the Elkin City School System’s supplemental tax, an additional tax levied on residents living just in the Elkin school district. “It’s been at 12.2 percent for the last eight years. It was 14.5 percent, and that would increase us $161,000. We’ve not had that 14.5 figure since 2003-04,” she said.
In the 1990s, the supplemental tax rate was at 16 percent, but the amount of how much to request would be up to the school board to decide, Zachary told them.
Included in the 2017-18 budget year is the design phase for an additional gym on the campus of the middle and high schools. The county commissioners already have said they would take out a loan to fund needed school capital projects around the county, and Elkin’s next project is the gym, with the design phase estimated between $660,000 and $800,000. Zachary said they could request that design phase funding from the county commissioners as well.
Superintendent Dr. Myra Cox also reported that she has developed a committee to start looking at places the school system can cut costs that won’t affect instruction in the classroom.
School board member Frank Beals acknowledged that despite the potential increases in revenue, the school system is still going to be running at $450,000 deficit. “Then next year, we would have to be looking at cutting $450,000 because we won’t have any fund balance left to use,” he said. “That’s if [the state legislators] don’t do anything else to us pulling a stunt next year.”
“We’ve got to take a hard line and look at some of this stuff,” said Zachary. “It’s not going to be popular anywhere we go. Everyone has their own way of looking at what education is and how to get that well-rounded student to come out of the school system.
“Cuts have to be made and revenues have to be brought in. None of that is popular,” she said.
In the capital outlay budget, Zachary said the school system is proposing asking the county commissioners for $100,000 to replace the last 1998 activity bus left in Elkin’s fleet. Other proposed capital outlay expenses include lighting for the ball fields at Crater Park and LED light replacements in the school buildings, with Duke Energy providing reimbursement for some of those LED lights.
Another increase to be seen by parents and students is that of lunch menu costs. The United States Department of Agriculture mandates paid lunch equity, with Elkin being down 12 cents on the weighted average it will need to increase lunch costs by 15 cents at each school.
The school system makes its budget presentations to the county commissioners on April 6, so final decisions on requests to be made will need to be voted on by the board of education at its March 27 meeting.
Wendy Byerly Wood may be reached at 336-258-4035 or on Twitter @wendywoodeditor.