Budget matters were the topic of discussion Monday during a special meeting of the Elkin Board of Education, including how the school system has been dipping further into its fund balance each of the last few years to make the final budget balance.
While the state recommends government agencies keep eight-percent of its operating budget in fund balance, which would be $168,000 for the local school system, Interim Superintendent Dr. Don Martin said auditors Dixon Hughes Goodman recommends keeping at least three months of what an entity spends, which in Elkin City Schools’ case would be $525,000.
In preparing for Monday’s meeting, Martin said he emailed other area school systems to find out what local funds they receive and the amount of their fund balances. In presenting those Monday, they ranged from five percent or $820,603 in Rockingham County Schools’ fund balance for an operating budget of $15.8 million to 103 percent or $2,681,981 in Caswell’s fund balance for an operating budget of $2.6 million.
Then he compared Elkin, Mount Airy and Surry County. Elkin had a 71-percent fund balance of $1.5 million for a $2.1 million budget; Mount Airy had a 57-percent fund balance of $1.48 million for a $2,578,015 budget; and Surry County had a 53-percent fund balance of $4.84 million for a $9,143,000 budget.
“Clearly Elkin City Schools has a healthy fund balance now, it is very solid,” said Martin.
But then Martin showed the school board where its budgeting has been trending over the past three years, with the school system spending more local funds than what it is receiving from the county, leading to more money being allocated each year from the fund balance to balance the books.
“While this is not a problem now, you’re going to be dealing with a crisis eventually,” Martin explained during his PowerPoint presentation. “We want to be prepared for it.”
He said the board needs to decide its “Goldilocks” fund balance, the comfort level it wants to be just the right fit. And then, “the biggest piece is developing a plan to achieve a balanced budget,” said Martin.
One of the biggest impacts on the fund balance has been the loss of state funding for teachers and teaching assistant positions. “In a city district, it is hard to predict enrollment levels,” Martin said. “Twenty-five percent of your students are choice students from other districts. The important piece is the state dollars that come with them, or is it going to increase expenses to bring them on more than tuition covers, especially for exceptional children.”
He said the ways to accomplish a balanced budget while growing fund balance by reducing expenditures will not be happy. “If next year is like this year, you’re going to be in trouble.”
In 2013-14, the school system used $1,500 of fund balance to balance the budget. Then in 2014-15, $270,000 were allocated, followed by $395,000 allocated in the 2015-16 school year. He did point out that the school board originally allocated spending $899,000 to balance the 2015-16 budget, but by June 30, only $395,000 were required to be used, with the contingency line item that was not needed being part of that $899,000.
For the coming fiscal year, school staff plan on budgeting the revenues and expenditures closer to actual spending, said Martin, but there are a couple of things that will determine the final amount of revenues received — the final enrollment totals, which last year were project at 1,256 students and ended up with 1,185, meaning less revenue, as well as the state moving in tiers and receiving less low-wealth funding.
The state has projected enrollment at 1,201 for Elkin City Schools for the upcoming school year, which starts Aug. 29, Martin reported, but as of Aug. 15, the enrollment was 1,179 students. Depending on what grades those student enrollments are up or down in will determine if the school system will lose any teaching positions, because student-to-teacher ratio is different at the varying levels.
As things are looking now, Martin said he is projecting the fund balance needing to be allocated to make the balance budget for the 2016-17 fiscal year at $594,791. This is due to additional salary expenses mandated by the state in the form of retirement matches, health insurance and salary increases, totalling $133,491; additional non-salary budget increases of $137,269; the $395,076 in expenditures over last year’s budget; and $206,125 in loss of revenue from local, state and federal appropriations.
Those amounts minus the decision to not fill two vacant teaching positions, two TA positions and half a guidance counselor and to transfer a central office teaching position to the middle school, which will save the system $276,179, is where the $594,791 comes into play.
In years past, Martin said tuition money has been collected on the school level, rather than at the central office, and of that money the schools are keeping 80 percent with 20 percent being sent to the district office for the activity bus fund. He recommended having all tuition funds deposited in the district general fund and a formula being developed for how it is allocated to the schools for use.
Also, the school system has received resignations from three TAs during the summer months and those have not yet been filled, Martin reported. He said he would be talking with staff this week about those positions and would make a recommendation at next week’s regular school board meeting on whether to fill those or not.
He said if the school board decided to make no changes to the budget proposed earlier to be presented to the county commissioners during its budget process, then the nearly $600,000 used from the fund balance would leave the school system with about $900,000 in that account.
The school board members did ask about the possibility of increasing the supplemental tax rate, which is now at 12.2 cents per $100 valuation for properties just in the Elkin school district. In the past it had been 14.4 cents, but was decreased twice in the past few years by the county commissioners.
Martin said he would talk with County Manager Chris Knopf to find out more information on how that supplemental tax rate is set and the decisions made behind decreasing those rates.
The interim superintendent suggested the school board pass its final 2016-17 budget at its September meeting.
The next meeting of the school board will be Monday at 5 p.m., with public items on the agenda at 6 p.m.
At the end of the special meeting, the board went into closed session to discuss narrowing its candidates in the search for a new superintendent. The survey for feedback from the public on the search, which is online and through hard copies at the central office, will be closed on Monday.
Wendy Byerly Wood may be reached at 336-258-4035 or on Twitter @wendywoodeditor.