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KCSD budget tweaks come with criticism of lawmakers

Legislature continues to thwart own law on school funding, says Wilson

Posted: April 19, 2018 5:10 p.m.
Updated: April 20, 2018 1:00 a.m.

As lawmakers in Columbia continue working on a proposed state budget for Fiscal Year (FY) 2019, so, too, does the Kershaw County School District (KCSD). During the Kershaw County Board of School Trustees’ meeting on April 10, KCSD Dr. Frank Morgan and Chief Financial Officer Donnie Wilson presented the administration’s latest update to a proposed budget of its own.

This time, Morgan and Wilson changed some of the numbers to fit proposals coming out of the S.C. Senate.

“The senate budget does change some of the requirements, but also cuts our revenue between $400,000 and $500,000, so we had to go back and try to keep what we had in there, but maybe scale some things back a little bit,” Morgan said. “I think there’s still some evolution here; the senate’s going to pass a budget and then they’ll go to conference committee.”

Morgan said he believes the budget that comes out of the conference committee will be more like the S.C. Senate’s than the S.C. House of Representatives’. He also said he thought that, despite not receiving a millage increase, local revenue may be higher than initially projected.

According to Wilson, one of the biggest changes to the budget when first proposed under the S.C. House figures was a mandatory 2 percent raise for teachers. That, in addition to step increases, would have increased teacher salaries -- the largest line item in the district’s budget -- in Kershaw County by a total of 3.5 percent.

“What the senate did was they decreased that from 2 percent down to 1 percent. They picked up some of that difference and added back into the base student cost,” Wilson said, who reminded trustees that the S.C. House version had no increase to the base student cost. “When the senate came out with their version, it was half of that, the mandate; then they added $60 to the base student cost.”

Wilson said that would bring the base student cost to $2,485. However, he also said that is $533 per student short of where it should be, according to the S.C. Education Finance Act (EFA).

“But they do that every year, through their budget process, with a proviso so they don’t have to honor it,” Wilson said. “I cannot underemphasize the importance of, someday, getting back to that or either throw the thing out completely and start over. It is absolutely meaningless the way the budgets are done these days.

In an email Wednesday, Wilson said he estimates that since the legislature came up with the formula 41 years ago as part of the S.C. Education Finance Act in 1977, it has only fully funded the base student cost 10 times.

“They’ve completely ignored it … they’re not even attempting to come close to it,” he said during the April 10 meeting.

During the last nine years, Morgan said, the district has lost about $80 million in state revenue due to the legislature not fully funding the legally required base student cost. Wilson said that is nearly equivalent to a full year’s budget. The FY 2019 budget he and Morgan proposed on April 10 totals $87.1 million, a 3.3 percent increase from the current budget.

“We wouldn’t be having the discussions with the county every year in terms of what we can do in terms of increasing local revenue, but it is what it is … this is the new normal. As much as we hate to look at it this way, this is the way it’s going to be. They’re making no attempt whatsoever to comply,” Wilson said.

He reminded trustees that costs continue to rise so, as the legislature continues to exempt itself from meeting the legal base student cost requirement, that gap continues to widen.

“Understand, that number (the base student cost) is based on the minimum program, it’s not the bells and whistles, it’s based on what’s required … and they’re not meeting that. They’re just not going to do it,” Wilson said.

“It’s just logical to think that the bigger the gap gets, the less chance there will ever be an attempt to come up to the (legal level),” Trustee Don Copley said, a statement with which Wilson agreed.

“The legislature seems more interested in saying, ‘Here’s what we’re going to give you and here’s what you will spend it on,’” Morgan added.

Wilson said the situation is similar to what the state has faced with roads funding -- that the state put off funding road improvements for so long, he believes South Carolina may never catch up to its neighbors on that front.

On a positive note, Wilson said the S.C. Senate version of the budget will fund a proposed increase in the state’s retirement fund through S.C. Education Improvement Act funding. Wilson said this means the district will receive a full 100 percent of the funds necessary to deal with that increase instead of only 80 percent it would have received if that money had come from EFA funding.

Wilson also said he increased the projection for ad valorem and delinquent taxes by approximately $100,000, for a total $209,170 increase over the current fiscal year.

“Looking back at the last several years, the increase or growth in the mill value has been approximately 2 percent. I still don’t know what it’s going to be and won’t know until the (county) auditor finishes her work and sends it to the department of revenue, which usually takes place sometime in July,” Wilson said, which is after the new budget year begins.

With that in mind, Wilson said he based the new figure on a conservative estimate of only 1 percent growth. He pointed out that increase is not to due to an increase of millage (taxes), but, rather, an increase in the value of a mil.

With the S.C. Senate numbers, the district now believes total general fund revenue will increase from the current fiscal year by $1.98 million, or 2.3 percent.

However, since the S.C. Senate budget includes the $400,000 to $500,000 reduction in projected revenue compared to the S.C. House version, Wilson outlined changes to the expense side of the equation. In addition to the mandated 1 percent teacher salary increase, which will cost the district $360,000, it will also have to deal with a mandated 1.5 percent step increase for teachers, which will cost another $540,000. In addition, the district itself is proposingan additional 1 percent increase and 1.5 step increase for all other employees, for an additional $250,000.

When the S.C. House version of the budget came out, the district proposed moving working retirees from Step 13 to Step 23. Now, the district is proposing to cut that move in half, taking such employees to Step 18 at a cost of $115,000.

“There are two reasons for that. Number one, the numbers decreased,” Wilson said. “Number two, we still don’t know, 100 percent, how many of the folks (who) will be retiring June 30, how many will be allowed back without a salary cap. That’s still an unknown to us. So, we’re going to increase the number of working retirees, we just don’t know to what extent at this point.”

South Carolina is scheduled to end the Teacher and Employee Retention Incentive, or TERI, program on June 30, which could cap working retirees’ income to no more than $10,000 anually. TERI employees are those who retire from the S.C. Retirement System, but have elected to continue working with the same agency they worked for in the same position they previously held. Participation is generally for a period of five years or less.

Kershaw County and other school districts have been trying to get the legislature to hold off on shutting TERI down for at least one year, if not keeping it running for the foreseeable future.

Wilson said if for some reason the district does not have as many retiring employees come back to work as projected, the money that would have covered those employees will be shifted to increasing the working retirees’ steps, up to Step 23.

The new budget proposal also includes one additional secretarial position each at Camden and Lugoff-Elgin high schools, three special education teachers and one additional English for Speakers of Other Languages (ESOL) teacher, adding a 5th Grade teacher to the Continuous Learning Center staff, an additional 1 percent match to the employer pension fund and a 7.6 percent increase in the employer portion for health insurance. The last two items, Wilson said, are “pass-throughs,” meaning the state is giving the district additional funding in those amounts ($680,000 and $376,000, respectively), but then the district must expend those amounts on the pension fund and health insurance.

Later, Trustee Kim DuRant questioned the hiring of the Camden and Lugoff-Elgin secretaries, which will cost the district $80,000, in light of North Central area schools not having a dedicated nurse. Morgan said that during the board’s March 27 meeting, Camden and Lugoff-Elgin high schools were “hit hard” during the 2008 recession, and that the additional secretaries are needed in order to handle clerical issues attached to increased safety measures planned for those schools. North Central area elementary schools share a nurse who is actually based at Pine Tree Hill Elementary School.

Wilson said adding a nurse would cost between $60,000 and $65,000, depending upon their credentials.

Morgan also said that the budget proposal is the district’s proposal, and that trustees can move to make changes and that they will, ultimately, approve the budget.

Wilson and Morgan’s new version of the budget also deals with two linked items -- moving expenses tied to technicians (IT personnel) to the general fund, creating a $450,000 expense there, while eliminating $400,000 from maintenance.

“I think we’re in the 14th year of our technology initiative. Since we began the one-to-one initiative … we have been farming out, basically, all of the repair work,” Wilson said. “We have technicians that have been with us for 14 years, but they are paid through an outside source and then we pay them. All of them have realized … there are some of them who are some of our best technicians and have been with us the longest, who are now getting a little older and realizing the importance of having benefits and retirement that they do not have through these other companies that we pay.”

Wilson said the technicians have asked for some time to become actual district employees.

“We have lost several that we did not want to lose, and our fear is now we’re at a point … we had the one-to-one initiative and then we’ve had other technology issues that weren’t even thought about years ago, but our technicians have grown up with us and now understand the cyber issues, the cyber attacks…. The bottom line is, we have stabilized our technology department; we’d like to keep it stable,” Wilson said.

The question of how to bring all those technicians into the district is being answered, he said, by a deferred maintenance line item.

“For the last several years, the board has allowed us to designate a half a million dollars for deferred maintenance out of the fund balance and we’ve been very fortunate in that we have been able not to use all of that,” Wilson said. “This past year, it was $500,000 out of the fund balance -- $400,000 from maintenance and $100,000 going to remedial supplies.”
Wilson said that money doesn’t need to be a part of the general fund anymore. He said there are other funds that can be used for emergencies -- his example was the simultaneous failure of 30 HVAC units -- from the district’s annual bond issue. In addition, Wilson said the technicians were, essentially, being paid out of that fund, anyway, so it is essentially a swap.

He also said all of Kershaw County’s neighboring school districts have all of their technology staff under their general funds.

Finally, Wilson noted that while a 3.3 percent increase in general fund expenses does not match the 2.3 percent increase in general fund revenues, he expects there will be up to a $798,457 overage from the current fiscal year budget that could carry over to FY 2019. He cautioned that it will likely not be quite that much, but that the projection is what allows him and Morgan to propose the spending listed out in the budget.

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