The Bulloch County Board of Education discussed next year's budget, revenue sources and a number of other topics at their last meeting.
Fiscal Year 2013 Budget Presentation
Assistant Superintendent of Business and Finance Charles Wilson made a presentation to the Board about the preliminary Fiscal Year 2013 Budget and the budget process. Wilson facilitated a nearly two-hour discussion about key factors affecting the budget, state and local revenues, and expenditures by department. A detailed, line-itemed report of each department’s expenditure requests was provided to the Board along with written highlights explaining the purpose of each expense. Assistant superintendents, principals, department heads, and directors were in attendance to answer direct questions from Board members. Below is information that was presented by Wilson during the meeting plus additional background information to assist in understanding the budget process and its history.
When did the FY ’13 Budget Process Begin?
Work on Bulloch County Schools’ (BCS) preliminary budget began in early February. Budget deliberations are now expected to extend into July, requiring the Board of Education to approve a spending resolution for the month of July.
What is the Timeline for Remaining Budget Process?
§ Continued Budget Review and Discussion (Board Meeting) - June 28
§ Preliminary Budget Submitted to Board for Approval - June 28
§ Advertise Tentative Budget - July 3
§ Advertisement of Bulloch County BOE Tax Digest - July 5
§ Final Budget Approval by Board - July 19
§ BOE’s Final Approval of Property Tax Millage Rate - July 19
§ Letter of Millage Rate Approval to Bulloch County Commission - July 20
§ Bulloch County Commission Millage Rate Approval - August 7
Are the District’s Finances Managed Properly?
BCS has been recognized nationally for the way that it strategically manages its finances. Despite a severe economic recession and the loss of more than $8 million in state and local funding over the past four years, Standard & Poor’s, the nation’s second-leading bond rating firm, still raised the school system’s bond rating to an “A+,” saving BCS and the community $150,000 in capital interest costs.
Many school districts around the nation are having their ratings downgraded due to massive budget cuts by their state governments and lack of financial stability within their communities. It speaks well of the Board of Education’s and Assistant Superintendent of Business and Finance Charles Wilson’s excellent fiscal management of BCS’s finances to be recognized by such a prestigious, national entity.
S&P and Moody’s are the two most popular corporate debt rating services, and their ratings are one of several tools that investors use to make sound investment decisions. S&P establishes ratings on thousands of school districts around the nation. The ratings are opinions about an organization’s credit risk and financial management.
Another national entity that has noted the school system’s financial management is AdvancEd, formerly the Southern Association of Colleges and Schools. In 2011 an eight-member team representing the organization commended BCS’s financial practices during an accreditation assessment.
What is the FY ’13 Budget Forecast?
In its current form, the budget’s operational requests (non-salary and benefits) are neutral; however, there is a $3.9 million shortfall due to the following:
- A projected two percent reduction in the property tax digest (-$340,000)
- Further reduction of the district’s Quality Basic Education Act (QBE) allotment from the State of Georgia (-$1 million). This is due to property wealth equalization formula adjustments by the state.
- A $3.1 million increase in salaries and benefits expenditures due to the following:
- The Georgia Department of Community Health’s (DCH) decision to shift non-certified employee health insurance premiums from the state’s budget to the budgets of local boards of education. For BCS the increased costs will be $684,000 in FY ’13, $1.4 million in FY ’14, and $2.1 million in FY ‘15*
- Increased employer-share requirements for the Teachers Retirement System ($486,973)*
- Salaries affected by employee step-increases ($700,831)*
- Increase in State Health Benefit Plan and Teachers Retirement System premiums/cost-sharing due to employee step increases ($92,670)*
- The addition of five and one-half teaching positions ($221,837)
- The omission of furlough days from the current version of the Budget ($450,000)
- Increase in Teachers Retirement System due to step increases ($147,533)*
- Other miscellaneous adjustments ($221,837)
*These expenses are mandated by the State of Georgia.
Why is There a Shortfall in the Proposed Fiscal Year 2013 Budget?
The $3.9 million budget deficit that exists in BCS’s General Fund is not a result of increases in departmental budget requests, as those are neutral. Instead, some costs once traditionally born by the state’s education budget are now being passed down to local boards of education. In particular, the QBE equalization formula funding loss and the DCH non-certified health insurance premium shift mentioned previously are additional local costs over which the Board has no control at this point.
Boards are now faced with making additional cuts or leveraging their local tax bases. The Bulloch County Board of Education is seeking the input of all its administrators on how best to reduce the current General Fund shortfall. Further reducing costs or raising taxes are the only ways to affect this fund. Following Thursday’s meeting, Charles Wilson met with central office administrators and principals Friday and Monday to discuss further ideas to reduce the budget for FY ’13 and subsequent years.
What Funds Make Up Bulloch County Schools’ Overall Budget?
The overall budget is comprised of seven funds: General, Debt Service, Capital Outlay, Capital Projects, School Nutrition, Special Revenue, and Reserve. Of these funds, the General Fund is where the majority of the school system’s expenses flow, and the one in which administrators and the Board have the only revenue control. Eighty-five percent of this budget is salaries and benefits. The General Fund and Special Revenue Fund capture the costs to deliver instruction and support to students.
- The General Fund is the main operational fund for BCS. Most state and local revenues are collected and disbursed through this fund. Salaries and benefits make up 85 percent of the fund’s expenditures. Textbooks, instructional supplies, facilities maintenance, and energy and fuel costs make up the remainder.
- The Special Revenue Fund is used to receive revenues from federal and state programs that support student instruction such as Title I and Title VI-B. Title I programs target improving academic achievement of disadvantaged students. Title VI-B programs serve students with special education needs.
- The School Nutrition Fund includes school breakfast and lunch sales and the associated expenditures.
- The Capital Outlay Fund was created by the Board in Fiscal Years 2007 and 2008 when state auditors invoked the 15 percent fund balance restriction on the District’s General Fund. The state limits the amount of excess revenues that may be held in a school system’s general fund. That amount may not exceed more than 15 percent of a school system’s total operating budget. BCS moved $5.8 million from the General Fund to create this fund. It has been used to offset capital expenditures that otherwise would have affected the General Fund (i.e. annual bus purchases and technology upgrades.)
- The Capital Projects Fund is used to track revenues and expenditures associated with construction projects and technology initiatives. Specifically it was used for construction of Southeast Bulloch High School, Statesboro High School, Nevils Elementary, Portal Middle High School, Julia P. Bryant Elementary School, Sallie Zetterower Elementary School and Mattie Lively Elementary School. It has also covered the installation of SMARTBoards and overhead projectors in all classrooms. Revenues for this fund are derived from bond sale proceeds and state capital outlay assistance.
- The Debt Service Fund is used to track the various bond issuances that supply funding to the Capitol Projects Fund. Its main source of revenue is education special local option sales taxes (ESPLOST).
- The Fund Reserve – The state allows school systems to maintain a reserve fund balance of no more than 15 percent of its total operating budget. Maintaining a strong fund balance assists school systems in weathering severe economic conditions.
What are Bulloch County Schools’ Revenue Sources?
· Federal Funding
Federal funding makes up only seven percent of the school system’s revenue. These funds are earmarked for certain programs, so there is very little flexibility. The main federal funding source is Title I, a program meant to enhance education offerings for economically disadvantaged students. These funds off-set the General Fund’s teacher salaries and benefits.
· State Funding
For more than 20 years BCS’s funding from the Georgia Department of Education has been based on a Quality Basic Education Act formula (QBE). The state pays each school system an amount of money for each student based on this formula. School systems earn money according to their full-time equivalent student count (FTE), recorded twice annually in October and March. For Fiscal Year 2012, the basis for our QBE formula allotment was $2,725, which is the revenue earned from the state for one regular high school FTE (full-time equivalent student). This amount is then “weighted” and added to in order to reflect any special needs of students and to allow for differences in cost between grade levels and classes (i.e. students who receive special education or limited English proficiency earn more money for the system because it costs more to educate students in these programs due to the mandates associated with them. Also a high school vocational lab class earns more funding than a regular high school class.).
There are five key “foundation formula” calculation areas that determine our QBE allotment: QBE base formula earnings, local fair share, austerity reduction, equalization, and transportation. These areas allow our school system to earn funds from the state for public education through a partnership involving state and local revenues. The cumulative effect of economic conditions (state-wide and local) over the past several years has resulted in a loss of $8 million to the District’s QBE allotment. The factors affecting these funding reductions are not expected to change, reflecting a shift toward local decision-making to address the loss in QBE funding.
These areas are determined in the spring of each year after the Georgia General Assembly has completed its annual session. The allotment sheet for the subsequent fiscal year is provided to all Local Units of Administration (LUAs), in our case the Bulloch County Board of Education. This allotment sheet indicates the amount of QBE state funding that is forthcoming prior to any mid-term adjustment. The data from the allotment sheet initially are calculated by taking the average of the Full-Time Equivalent Students (FTE) counts times the base cost per FTE times the program weights, adjusted for direct and indirect costs and adjusted for teacher training and experience.
There are 19 individual QBE programs classified within two broad program areas, General and Career Education Programs and Special Education. Since different programs vary in cost of operation, each of the instructional programs is assigned a different program weight. These weights reflect the costs of teachers, aides and other instructional personnel; instructional materials; facility maintenance and operations; media center personnel and materials; school and central office administration and staff development.
As a basic local funding commitment for education, all Georgia’s boards of education are required to levy the equivalent of at least five mills in property taxes on their county’s 40 percent equalized property tax digest. BCS’s total earnings from QBE are then reduced by the current year’s local fair share. All districts then have revenues equal to the “local five-mill share” (LFMS) deducted from their total QBE earnings, and the state pays the balance of the earnings. In the event that the combined local fair share for all school systems exceeds 20 percent of the sum of the statewide QBE formula earnings, then the local fair share is reduced by district in a pro-rata fashion, ranking all 180 school systems according to property wealth per student. Property taxes make up the primary source of revenue for local school systems. These funds are used for the operating budget, whereas Special Purpose Local Option Sales Tax (SPLOST) funds can be used for capital expenditures like buildings and technology, but not salaries and other operating expenses.
· Local Funding
The primary source of local funding is local option sales taxes (LOST) and property taxes. LOST funds are unique to Bulloch County, as most school systems do not have this revenue stream. Bulloch County’s position as a regional education, shopping, and employment provider enables the County to collect these revenues from residents and non-residents alike. LOST revenues allow us to keep property taxes lower because they generate the equivalent of 5.75 mills of property tax.
Property taxes are levied by the authority of the local board, but there is a 20 mill constitutional limit. Our current millage rate is 9.95 mills; however when you factor in the equivalent mills for LOST collections, we are at 15.70 mills.
What is the General Fund’s History?
Will the Board of Education Raise the Millage Rate?
As of yet, the Board has not discussed increasing the millage rate. In June 2010, the Board adopted a Fiscal Year 2011 Budget that required raising the maintenance and operations rollback millage rate of 9.45 mills to 9.95 mills, an increase of 5.29 percent. The increase went into effect in October 2010, and property owners saw an increase of $20 per $100,000 in property value. It had been seven years since the Board had sought an increase, and the student population had grown by nearly 15 percent in that time. Prior to the increase, in accordance with state law, the Board held three public hearings for input. The Board heard and responded to questions and comments raised by the nearly 20 citizens who attended.
How Has Bulloch County Schools Reduced Expenditures?
BCS has used long-term cost-reduction strategies, a strong Reserve Fund balance, federal stimulus funds, and a staff attrition formula to reduce costs; however, these strategies are no longer enough to close the gap between revenues and expenses over the next five years given the recent developments in state funding loss, mandatory state program cost increases, state-to-local cost shifting, and continued local tax base value erosion, mentioned previously. The State of Georgia is wrestling with similar budget woes, which is why BCS is experiencing these reductions and cost in state education funding.
According to State Allotment Sheets, Georgia will serve 1.66 million kindergarten through twelfth-grade students in Fiscal Year 2013 and will invest $7.1 billion to educate them. This funding is 18 percent less than in 2009. Governor Nathan Deal signed the state’s Fiscal Year 2013 Budget into law May 7, and it will take effect July 1. According to the Georgia Budget and Policy Institute, QBE continues to be underfunded, a trend that began in 2001. State economists believe that it will continue to be underfunded for years to come.
What Are Key Elements Within the State’s Budget That Affect Bulloch County Schools?
- Ten instructional days were added back to the Georgia Pre-K Program. Bulloch County’s Pre-K Program will now be a full instruction day for 170 days beginning August 1 and ending May 16.
- As listed above the most significant increase in expenditures will be due to the increase in non-certified employee health insurance premiums. The Georgia Department of Community Health, that administers the State Health Benefit Plan for employees of boards of education across the state, is increasing non-certified employee health insurance premiums over the next three years (FY’13 – FY’15), in an effort to normalize participant cost in the SHBP. This change will have an accelerated negative effect on the District’s reserve fund balance.
- Decrease of our QBE allotment by $1 million. Local property prices have declined, causing Bulloch County’s tax digest value to decrease, effectively decreasing the amount of taxes collected by the Board for operating purposes; however, despite the poor economy, state benchmarks peg Bulloch County as having one of the wealthier tax bases in the state. As a result, the state wants counties like ours to leverage their own tax base to properly fund local education.
What Does the Georgia Department of Community Health’s Increase in Insurance Premiums for Non-Certified Staff Mean for Bulloch County Schools?
The increase will be $1,800 per non-certified employee per year. This means the Board will be paying $8,952 per non-certified employee by FY ‘15, instead of $3,552, which is what the Board pays now (up from $1,953 in FY’10). Non-certified employee health insurance costs are not legally the requirement of the state, and the Georgia DCH no longer views its previous supplements to local school systems as being sustainable. Therefore, these costs are being pushed down to local school systems and the communities they serve.
Currently the Bulloch County BOE has 750 non-certified personnel, 525 of whom participate in the SHBP. The DCH does not need approval by the state legislature to make such a decision. One option the Board is investigating is a private-market approach to providing group health insurance for non-certified personnel.
Can the Board just reduce General Fund Expenses to compensate for the entire $3.9 million shortfall?
At its low point in 2009, the General Fund had already lost nearly $9 million in state and local funding. Also, sixty-five percent of this budget’s revenue comes from the state, and personnel comprise 85 percent of the budget’s expenditures. To match these cuts and the current shortfall would mean drastically eliminating personnel which would cause us to exceed the state’s class-size maximum limits and dramatically cut funding to key academic programs.
How has Bulloch County Schools Reduced Staff?
Assistant Superintendent of Human Resources Kevin Judy presented a proposed 2012-2013 staffing formula for teachers to the Board during its meeting June 7. In 2010 the Board implemented a staffing formula plan for teachers in order to further reduce expenditures by $5 million. That plan called for eliminating 79 positions (102 system-wide) through natural attrition (resignations and retirements) by the end of 2011. As of now, BCS has effectively reached that goal.
Eliminating staff through attrition does affect class sizes. In July 2011, the Board approved for the school system to request a class size waiver from the Georgia Department of Education. The Board approved a similar request in 2012 as well. BCS utilized the waivers to raise class sizes in several special education classrooms and in two gifted classes. As yet the school system has not needed a waiver for any general education classes, but there will be a need in some special education classes again. Waivers approved by the state authorize the superintendent to increase state mandated class-size maximums from one to five students for the requested school year only.
Bulloch County is one of the fastest growing counties in Georgia and the nation. As a result, the school system now serves a student population of nearly 10,000, with a growth pattern of 200-250 students per year.
Can the Board reduce the number of Central Office and school administrators to save money?
Bulloch County Schools now comprises 16 campuses, a student population of nearly 10,000 students and an employee base of more than 1,300. Bulloch County is one of the fastest growing counties in the nation, and the school system is growing by 200-250 students per year.
As BCS continues to grow, to effectively manage both school system operations and state and federal mandates, it requires the hands-on management of assistant superintendents assigned to each major area of operations (human resources, technology, business/finance, and teaching/learning). BCS currently has four assistant superintendents, and these positions are paid for by the state. The school system has cut three assistant principal positions, an assistant superintendent position, and is continuing to evaluate non-instructional positions for elimination.
Will the Budget Include Furlough Days?
In the Budget’s current form, furlough days are not included because a total budget picture has not yet been developed. This is needed before administrators can accurately assess what furlough discussion should occur. If furlough days are added to the Budget, administrators will consider scheduling them in January and during post-planning, so as not at affect student instruction days or interfere with pre-planning which is crucial this year as the state’s new Common Core Curriculum standards are being initiated. Each furlough day saves BCS $233,840. Compared to other Georgia school systems, Bulloch County has had the least number of furlough days. Some Georgia school systems have had as many as 10 in a single school year. The administration is currently reviewing the possibility of additional furlough days and the reduction of instructional days.
How can the Board afford to build new schools and invest in technology?
School construction and technology costs are solely funded by a separate education special local option sales tax (ESPLOST). Three have been passed in recent years. The first, approved in 2003, ran 2004-2008; the second approved in 2005, runs 2009 – 2013; and the third, approved by 92 percent of voters in 2009, runs 2014 – 2018. By law these funds can only be used for construction, technology and any new equipment purchases for new construction.
Is the budget deficit the result of a need to staff, furnish and maintain the four new schools?
No. The new schools replaced existing, aged facilities, and BCS is currently attritioning staff. Also, all furnishings for the new schools fall within each school’s construction budget. All construction-related expenses, furniture and technology for the new schools were funded by education special local option sales tax (ESPLOST) revenues, which by law may only be used for this purpose. As far as maintenance, with newer, more energy-efficient schools and other conservation efforts, BCS has reduced its energy costs by more than 20 percent in select schools and is implementing these practices in additional schools to achieve such savings district wide.
Why can’t the Board just use its reserve funds?
The state allows school systems to maintain a reserve fund balance of no more than 15 percent of its total operating budget. The Board had that maximum in reserve but beginning in Fiscal Year 2010 the Fund Reserve has been used to cover expenses over revenues and reduce the impact of the local and state reductions in funding. With the recent changes in state equalization funding and non-certified employee health care costs, the fund will now be depleted sooner.
What is QBE and its equalization formula funding?
QBE is the Quality Basic Education Act funding allotments that school systems receive from the state to fund public education in their counties. QBE is comprised of five key foundation formulas (QBE, Local Fair Share, Austerity Reduction, Equalization and Transportation) that are used by the state to calculate each school system’s allotment. For more information about QBE, see pages three and four of this document.
Georgia attempts to equalize the inequities in property wealth per student that exist in the state. This is why BCS’s QBE funding was reduced $2.6 million last year, and it will be reduced another $1 million this year.
Despite the poor economy, state benchmarks peg Bulloch County as having one of the wealthier tax bases in the state. When the combined local fair share for all school systems exceeds 20 percent of the sum of the statewide QBE formula earnings, then the local fair share is reduced by district in a pro-rata fashion, ranking all 180 school systems according to property wealth per student. Those school systems in the lower 75 percent of districts, based on property wealth per student, qualify to earn equalization grants. 1
(Source: QBE Funding Formula – Georgia DOE).
What Has Been the Overall Budget Snapshot Over a Six-Year Period?
What is Being Done to Address the Anticipated Financial Situation?
At the June 7, 2012 Board of Education meeting, Board members and administrators engaged in discussion on how to resolve the school system’s looming financial challenges. Board members expressed their interest in cost reduction options for Fiscal Year 2013 involving feedback from school and district-level administrators. As a result, several leadership meetings and idea-gathering sessions have been held to identify cost reductions for Fiscal Year 2013, as well as for Fiscal year 2014 and beyond. The results of these efforts and proposed solutions will be addressed with the Board at the June 28 meeting.
- End of Budget Overview-
New Business – Consent Agenda
The Board approved the following: (1) Fundraising events at Statesboro High School; 2) the selling of surplus equipment from School Food Services; (3) an agreement with the Statesboro Officials Association to officiate all softball games for middle and high schools; (4) an agreement with the Statesboro Officials Association to officiate all football games for middle and high schools; (5) an agreement with the Savannah Volleyball Officials Association to officiate games for Statesboro High School; (6) Board meeting minutes for May 10, May 21, May 24, and May 30; and (7) Board member payroll for May 2012.
New Business – For Approval
Overnight Study Trips – The Board approved overnight study trip requests from the following: (1) Portal Middle High School Girls Basketball Team to Mercer University Tournament June 15 – 16 in Macon; (2) Statesboro High School Girls Basketball Team to Christmas Tournament December 20-22 in Warner Robins; and (3) Southeast Bulloch High School FCCLA Chapter to the Culinary Academy June 11-15 in Fort Valley.
Southeast Bulloch High School Request to Name Fieldhouse
The Board approved a request from the Southeast Bulloch High School Council to name the new field house within the school’s new athletic complex, the George Roebuck Field House. Roebuck coached both the boys and girls basketball teams at SEBHS from their inception until 1970. Roebuck was recognized by numerous community organizations in Bulloch County for his outstanding character and work with students. He was especially held in the highest regard by the citizens of southeast Bulloch County. The Council stated that Roebuck “was a man who understood that the true measure of success for a coach was in the development of boys and girls and not wins and losses.” The Council felt that since Roebuck spent countless hours teaching and mentoring students in the old gym, which has now been renovated as the new field house, that it should be named for him.