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CSD budget process reveals impact of both pandemic and state funding cuts

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CSD budget process reveals impact of both pandemic and state funding cuts

FILE PHOTO USED FOR ILLUSTRATION PURPOSES: The City Schools of Decatur Board of Education. Top row, left to right: former Superintendent David Dude and School Board Chair Lewis Jones. Bottom row, left to right: School board members James Herndon, Tasha White (Vice Chair), Heather Tell and Jana Johnson-Davis. Image obtained via City Schools of Decatur

By Sara Amis, contributor 

Decatur, GA — City Schools of Decatur has significantly changed its approach to budget planning in recent years, seeking to make the process more transparent and to finish it earlier in the year. Some assumptions have also been reconsidered.

In a YouTube video released February 15, Superintendent Dr. David Dude stated that previously, the district typically kept fund balances high, planned extremely conservatively, and kept millage rates fixed while letting the fund balances fluctuate. In the past two years however, the district has been trying to keep fund balances at around 10 percent of expenditures, plan a little less conservatively, and allow the millage rate to be the changing variable within reason.

In the past the district has also tended to plan one year at a time. In the new approach, said Dude, the district is looking and planning ahead as much as possible, with the caveat that even during a single year’s planning process the budget may change as new information becomes available. Additionally, according to Dude, the CSD Board wanted to take an approach where they were looking at the district’s needs and considering how much it would cost to meet them, rather than looking at the district’s tax revenue amount as the starting point for decisions.

The budget numbers for Fiscal Years 2021 and 2022 have been especially volatile, due to the twin forces of austerity cuts to the State of Georgia’s Quality Basic Education funding, and the COVID 19 pandemic. Fiscal Years for the school district run from July 1 to June 30.  FY22 will run from July 1, 2021 to June 30, 2022.

At the initial discussion of the proposed FY22 budget at the January Board meeting, projections assumed that no new CARES act funding would be forthcoming and that the 10% austerity cuts in QBE funding for the FY21 and FY22 budgets would stay in place.  Because of a combination of austerity cuts and expenses associated with the pandemic, CSD drew a total of $11.2 million from reserve funds in FY21, some of which was offset by an initial round of CARES funding. With no change in expenses or cuts in QBE funding, the district would have had to draw an additional $5.3 million from the reserve fund in FY22, reducing it to approximately $235,000.

By the next meeting to discuss the budget on January 27, Executive Director of Finance Lonita Broome was able to present a budget that included an additional $1.1 million in CARES funding added to the FY21 budget, as well as a projection that 60% of austerity cuts would be restored to both FY21 and FY22, increasing funding for both years by $1.9 million. At that meeting Dude also discussed the need to fund remediation for students who have fallen behind due to the pandemic.  At the regular Board meeting on Feb. 9, a draft of the budget was presented which included both the restoration of austerity cuts and the planned remediation programs

At a work session on Feb. 23, Broome presented both a new version of the FY22 budget and projections for FY23-25. Those budgets included both cost of living adjustments and step increases for staff, and the proposed remediation programs which would be phased out over time.

Broome stated that because of when the taxes are collected and received, 96% of FY22 tax revenue will come from the current version of the senior tax exemption.  The proposed new exemptions, if they pass, will not take effect until January of 22.

The budget projections also assume that the millage rate will fluctuate in order to maintain a reserve balance of 10%.  In order to raise the fund balance from a low of 6.8% this would require a millage rate of 23.10 in FY22 and FY 23, 22.42 in FY24, and 22.00 in FY25.

Board members expressed willingness to allow the fund balance to stay below 10% in order to ease the process of bringing the district’s finances back up to speed. Board member James Herndon said that he didn’t think it was necessary to raise the millage rate so quickly to bring the fund balance back, considering that more revenue will be coming in 2022 when the current senior tax exemption expires and that an increase in housing prices means that the district is likely to receive more money at the same millage rate.

Board member Lewis Jones said that he believed it would be better to go slowly and cut some expenses if necessary.

“23.10 mil, that’s a hefty increase all at one time,” said Jones. “Under the circumstances, I think we should see what we can cut this year.”

Board Chair Tasha White raised the question of keeping the millage rate the same. Under those circumstances, the reserve fund would be drained completely and some expenses would have to be cut. “It looks like we have to raise the millage rate or cut some things,” said White.

In a separate interview with the superintendent and the executive director of finance, Dude explained that the upper limit of the fund balance, capped at 15% of the total expense budget, is set by the state.  School districts are required to spend the tax money that they collect, and are not allowed to hold it in the style of an endowment. A hard lower limit is imposed by state law. Schools are not allowed to do any deficit spending. “We cannot approve a budget that has a negative fund balance. You would have to cut expenses or just figure out where you’re going to get more revenue, you just can’t approve a budget that way,” said Dude.

The lower limit of 4% adopted by CSD as a matter of policy is simply to make sure there are funds available for unexpected expenses so that the school district can pay bills without having to take out a short term loan, as nearby school districts have had to do at times.

“COVID is a prime example,” said Broome, pointing out that the district would not have been able to respond to the pandemic the way that it did without money in reserve.

Dude said that the value of allowing the millage rate to be the flexible variable is that under ordinary circumstances, it would mean that the district only collected the amount of taxes that it required and no more.

“At times like this unfortunately it’s having the opposite effect, we might have to raise the millage rate, but what was happening before is that we were missing opportunities where we might be able to lower the millage rate,“ said Dude. Currently, the district must raise the millage rate, make cuts in the budget, allow the fund balance to stay below 10% longer than it otherwise might, or some combination thereof.

A second draft of the budget will be reviewed and discussed at the March 9 Board meeting, and the board will adopt a tentative version of the budget at the April 13 meeting.  The final budget will be adopted at the May 12 meeting. If necessary, public hearings about any changes to the millage rate will be held after the Board receives the preliminary tax digest in June.

One advantage of completing the budget process early in the year, said Dude, is that it allows the district to make hires for the following year sooner and from a more competitive pool of candidates.

While some iterations of the school budget may be a bit hair raising at times (one version included a projected millage rate of 24.0), Broome feels that showing all of the steps of the budgeting process allows the public to understand how decisions are being made.

“Our focus and goal is to be more transparent,” said Broome.

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