12/14/11 Schools, county spar over fund balance

Schools, county spar over fund balance
By Chris Lavender The Times-News 12/14/11     
Reprinted with permission.

   The Alamance-Burlington School System’s $21 million fund balance came under further scrutiny during a meeting Tuesday between the school board and county commissioners.

   The meeting was held after several commissioners suggested in October that the county should dip into the school system’s reserve fund to offset county expenses for the current fiscal year. The commissioners also suggested that the school system should adopt a policy regarding the saved money.

   The county received an audit report in October that showed its fund balance was at $19 million, of which $5.3 million was reserved and $13.7 million was unreserved. These amounts were lower than expected by county management. Of the $13.7 million unreserved, $4.2 million has been designated for use by the county.

   The state recommends that county governments keep their fund balances at no lower than 8 percent of their total budgeted expenditures. Alamance County’s fund balance is currently at 10.9 percent. The commissioners and school board members agreed to meet Tuesday to better understand the county’s and school system’s financial conditions.

   During the meeting, County Manager Craig Honeycutt said the county’s sales tax revenue has increased $400,000 through Nov. 30 compared to the same period in 2010. The county’s overall revenues increased by $2.1 million and the county’s fund balance remained just below 11 percent.

   Honeycutt said the positive trend can’t be relied on to continue through the end of June. The county had proposed a 5 percent cut to outside agencies including the school system to prevent the county’s use of its fund balance if revenues were to decrease.

   The 5 percent proposed cut would mean an additional $1 million less for the school system, which has already experienced local, state and federal funding cuts for the current fiscal year. The school system is facing a $5.7 million cut in state funding for fiscal 2012-13.

   Schools Superintendent Lillie Cox said the system allocated $10.5 million of its fund balance for the current fiscal year. Four million dollars has been spent on meeting the system’s technology needs.

   Several commissioners said the school board needs to take another look at how it uses it fund balance. Commissioner Tom Manning, a former member of the school board, said the Board of Education has been too conservative in its spending and its fund balance has dramatically increased by $14 million in the past two years.

   Manning said after the merger of the county and city systems in 1996, the new system’s fund balance was about $5 million and had increased to $8 million in 2007. The county recently conducted a survey of 12 school districts in the state that showed Alamance-Burlington School System’s fund balance was at 64 percent of the total local dollars allocated by the county annually. This was the highest percentage among the 12 school districts included in the study.    Manning also said the survey showed that the county funded its school system at a higher rate than all but one of the districts included in the study.

   Manning also discussed how the school system last spring said it was going to use $3 million of its fund balance for operations, but ended up not using it. Instead, Manning said the school system added $3 million to its fund balance.    “The $6 million swing in fund balance raised some eyebrows,” Manning said.

   COMMISSIONER BILL Lashley criticized the school board for its use of the fund balance and said he wouldn’t support giving the school system additional funds if requested because it had “stashed away $21 million.”

   “I am here to protect the taxpayers,” Lashley said.

   Lashley said the county’s only responsibility in school funding is for heating and cooling expenses, and to cover maintenance costs.

   Several school board members defended the system. School board chairwoman Jackie Cole said the fund balance was kept at its current level to ensure the system was prepared for potential funding cuts while providing a quality education for its students.

   “We felt some anxiety in the system to protect education,” Cole said.

   School board member Patsy Simpson said the board hasn’t done anything inappropriate. Simpson said the county’s tax rate needs to be revaluated since the current rate of 52 cents per $100 of assessed value isn’t a revenue neutral rate. Simpson said if the tax rate was set at a neutral rate, then the county wouldn’t have to dip as much into its fund balance to offset expenses.

   Commissioner Tim Sutton said the current tax rate was set before the county’s property tax base decreased by millions of dollars through a lengthy appeal process after the last revaluation was completed. Sutton said the rate was set at a neutral rate before the appeal process ran its course.

   During the meeting, Sutton said the school board and commissioners need to work together to prevent a public relations problem on how they use the fund balances. Sutton said when money isn’t spent for what the school system said it will spend it for, then it could become an issue.

   “We are walking a delicate line,” Sutton said. “We need to get the public behind what we are doing.”

   Cole and Simpson said they would be open to discuss a fund balance policy, but need more assurances that the county would fund the school system at fair levels.

   “We can go out and spend this (fund balance) money,” Simpson said. “We do have needs.”

   School board member Kristen Moffitt said the school system shouldn’t spend the money just to spend it because future cuts are likely. Moffitt said all of the system’s current fund balance could be used in three years and a conservative approach should be used.

   Cox said the school system would begin to develop a new strategic plan next spring based on community input. For now, Honeycutt plans to meet with Cox after Jan. 1 to discuss the latest financial reports to help determine if funding cuts would be necessary.

   There was no discussion during the Tuesday meeting about the possibility of the county dipping into the school system’s fund balance to offset its expenses. Sutton has said he would oppose taking money from the school system’s fund balance to offset county expenses.