The Franklin County Finance Committee’s move to deny the Board of Education’s 7-cent property tax increase request has left board chairman Kevin Caroland pondering what he fears will be needed to balance the system’s budget — painful cuts and severely reducing a savings account balance.
The committee approved, in a 4-1 vote Wednesday, to send the school system’s budget request back to the Board of Education to determine its budget without the additional revenue.
Voting against the funding request were committee members Eddie Clark, John Woodall, Sue Hill and David Eldridge.
Dr. Rebecca Sharber, the school system’s director and a Finance Committee member, cast the only vote to keep the 7-cent tax increase. Committee member Anthony DeMatteo was absent from the meeting.
Caroland said Thursday it’s back to the drawing board with the school board starting over to develop a new budget draft without the additional revenue.
“We’re going to have to make decisions on how to get there — cuts or dipping further into our fund balance,” he said.
The board will be reworking the budget at its next meeting on July 14 at 6:30 p.m. at the school system’s administration building, 215 S. College St., Winchester.
Caroland said the system’s financial decisions will be extremely difficult because the budget has been cash-strapped, and the fund balance — essentially a rainy day fund to take care of unexpected expenses — will be near the state minimum requirement.
Cindy Latham, Franklin County deputy director of finance, said recently that the school system budget totals $42.39 million, and 3 percent of that amount — $1.271 million — is required by the Tennessee Department of Education to be held in reserve status to meet state budget requirements.
Caroland said depleting the savings account to $1.27 million leaves little headroom to take care of any major expenses that the system may face.
He referred to a roof at Sewanee Elementary School that required about $600,000 to fix last year. He added that money was used and hasn’t been replaced, and if the board were to have something go wrong on a larger scale, the fund balance could be completely eroded away, leaving the system in a bad financial situation.
“It’s just not a good place to be,” Caroland said.
He said the Finance Committee, in essence is forcing the school system to live with the state minimum $1.27 million. However, he said the commission has a $5 million reserve fund balance remaining from when the county sold its hospital, plus the taxing ability to raise revenue if needed.
“We can’t do that,” Caroland said, referring to the Board of Education being able to raise revenue. “We’re dependent on (the County Commission) to get more money.”
He questioned a discrepancy between the school system and the county’s reserve funds, the $1.27 million versus the $5 million left over from the hospital sale.
Caroland said it hardly seems fair that the commission can stand firm on keeping the $5 million but expects the school system to get by on 25 percent of that amount.
“They have ($5 million) in their fund balance and can raise taxes, and they want to protect that but tell us to be at the state minimum,” Caroland said, adding that the scenario hardly seems fair to the school system.
He said the school system has had to continually dip into its reserve funds to balance its budget, and the money is running out.
Caroladn said the 7-cent tax increase is more than the board would like to see in a single fiscal year. He added that property taxpayers would probably not notice a 2-cent tax increase over a several year period.
The end result is the school system has had to and is continuing to deal with a financial shortfall.
“It’s being depleted to where it will take 5 to 7 cents a year to maintain (our operations),” Caroland said. “You can’t run on a platform of never having a tax increase and be progressive,” Caroland said.
He said the school budget will probably be balanced at the state minimum, and a tax increase greater than the requested 7 cents will be needed next year.
Caroland questioned why the Finance Committee didn’t approve to forward the request to the full County Commission to consider.
“They always do that,” he said. “The County Commission should have at least had the chance to vote on this.”
Clark told the Finance Committee Wednesday the request is premature and isn’t necessary at this time.
“In my opinion we don’t increase taxes to increase fund balances that are not needed yet,” he said. “We might have to do it next year, but I don’t think we should do it yet.”
The ideal reserve fund number, according to school board members, would be $3 million.
However, an option the board was looking at to reach that number would have involved a 33-cent tax increase — an $82.50 annual property tax increase on a $100,000 home, or $6.87 added to a monthly mortgage escrow account payment.
Instead, the 7-cent tax increase would cost an additional $17.50 annually — $1.45 monthly — upping the current $667.50 property tax bill on a $100,000 home to $685.