County, school board layout cases for budget decisions

Jun. 25, 2013 @ 03:47 PM

Monday night, hundreds of parents and teachers crowded into a room at Southern Piedmont Community College for the first and only public mediation meeting between the Union County Board of Commissioners and the Union County Board of Education.

Last week, commissioners approved their 2013-2014 fiscal year budget without the funding level requested by the school board. The next morning, school board members voted to initiate mediation.

Twenty minutes before the meeting began, a representative from the Union County Fire Marshal's office stopped people outside the room. It was filled to capacity and no more could be let in. Within were more than 230 people. Another hundred plus stood in the hallway. Those waiting grew to 200 by 5:30.

The meeting time came and went. Inside, all seats were filled. Most people were grouped together by T-shirts in the color of their particular school. Some held signs. Some brought their whole family. Some brought half their school faculty.

After nearly an hour of waiting, permission was granted to open a partition and double the room capacity, allowing those waiting in the hall the chance to watch the meeting.

Mediator Andy Little opened the meeting, explaining it was a chance for both sides to present their arguments to the public. Both parties had an hour and a half. All pertinent information would be given to the audience. Afterward, both boards would go into their respective executive session. If and when a compromise was reached, the details would be presented in open session.

This was not, however, a public hearing. There was no public comment period nor any opportunity for audience questions. There would be a chance for public comment during a meeting to approve the compromise, if one was reached.

Earlier, Little explained that these negotiations were a delicate balance between what each board wanted and a mutually agreeable compromise.

"They will have to sort this thing out together," Little said.

The case for UCPS

Attorney Richard Schwartz presented the schools' argument. It consisted of several parts — UCPS's goals, county money that could fund the schools, debunking "myths" county officials have argued about school funding and a substantial list of needed capital improvements compiled in 2008 that still have not been fixed.

Schwartz repeated a statement made by Commissioner Frank Aikmus at last week's commissioners meeting in which he said the commission saved taxpayers from a "tax-and-spend school board." Schwartz said the county is a "tax-and-stockpile" government.

He pointed to the county's fund balance of more than $51 million in unassigned funds it reported last year. Of that, $15 million is in excess of the 16 percent reserve required by county policy and 8 percent required by state law.

For the 2013-2014 budget, the county estimates it will have an excess of $7.7 million at the close of the fiscal year. County officials are conservative in their revenue estimates, Schwartz said. Using estimated revenues at the beginning of the 2011-2012 budget year and actual revenues at the end of the fiscal year, he showed that the county underestimated by $13.7 million.

The money to fully fund the schools' budget request was available without raising taxes, Schwartz said.

But the county would be justified if it did raise taxes, he said. Voters approved tax increases by approving six bond referendums from 1998 to 2006. In its first-draft form, a county-funded audit of UCPS last year suggested the county increase taxes to pay for school debt. That suggestion was deleted from the audit's final draft, Schwartz said.

Schwartz also refuted a county claim that school spending leaves only 8.7 cents of the 66 cent tax rate to fund the county. Each penny on the tax rate generates $2.3 million. Multiply that by 8.7 and it comes to $20.45 million. But the county budgeted $24.5 million for the Union County Sheriff's Office, $4 million for EMS, $37.4 million for human services, $5 million for emergency communications and several more items costing a million dollars or more.

UCPS faces cost increases in insurance and retirement for employees, payments to charter schools, maintenance and utility, state testing and other expenses mandated by law. Just to maintain current funding levels, UCPS would need $950,100. To account for new needs like a 2 percent cost-of-living raise for classified employees, mental health services and asbestos removal, the district needs $1.8 million.

According to N.C. General Statute 115C-408(b), a public school system's capital needs are the responsibility of the county government, Schwartz stated. The county paid for several capital needs studies for UCPS, the largest of which cost $400,000 in 2008. The studies found, explained and prioritized $283 million in capital projects. It suggested a timeline for completing each. None have been completed, Schwartz said.

Considering the technology upgrades, ADA compliance projects, roofs needing replacement and safety upgrades elsewhere, the county's appropriation for $3 million for capital improvement was "grossly inadequate." Schwartz said efforts to work with the county by UCPS officials were rebuffed. Instead, the county dictated to the schools how much money they would receive and what they could use it for.

County response

Union County Finance Director Jeff Yates presented the county's argument.

School funding is a responsibility of the state government, yet state funding has been reduced progressively over recent years. While the county continues to appropriate money for school capital and operations funding, the county cannot take on the costs that should be borne by the state.

Yates called attention to Schwartz's statements that the county had enough in reserves to fund all of UCPS's budget request. But using one-time money - like reserves in the county's general fund - to pay for reoccurring school costs like salaries, transportation and maintenance is not sound fiscal practice, Yates said.  He likened it to a household budget. Monthly bills should be paid for from regular income, not from a savings account.

But there is not enough current annual county income to pay for the UCPS request and all the other services the county is required to provide, Yates said.   

Higher taxes are burdensome to the residents of Union County. There is 7.1 percent unemployment. There were more than 57,000 client visits to Union County Social Services last year for help with basic needs like food, Medicaid, housing assistance and other reasons. Another 23,800 visits were made to the Union County Health Department for medical attention in 2012. And in the same year, 31.1 percent of students received free or reduced lunch while more than 71,000 meals were delivered to the sick and elderly.

Union County is not a rich county, Yates said. To raise property taxes means asking everyone, including those who need public assistance and own taxable items.

Because the economic slump brought down home prices, Union County residents are paying an effective tax rate of 79 cents. That is 123.6 percent of the state average, Yates said. Since property taxes make up 66.68 percent of the county's annual income, and residential taxpayers make up 85.43 percent of that income, the bulk of higher income would be paid by residents.

Yates maintained the claim that UCPS costs take up 57.22 cents, or 86.7 percent, of the county's tax rate. That left 8.7 cents, or 13.3 percent, of annual tax revenue to pay for count services.

The largest expenditure indicates the county's priority, Yates said. Since more than 56 percent of county money goes to UCPS, he said it shows that the county prioritizes education above all other services.

Compared to other counties, Union funds schools at 110 percent of the state average. That funding has increased even when state and federal money decreased.

Yates returned Schwartz's scrutiny of county funding by looking closer at UCPS budgeting. He noted that school officials use an incremental budgeting process instead of a zero-based model like the county. UCPS also increased funding in central administration more than instructional spending.

In his conclusion, Yates stated that the "social media focus has become more about fear-mongering and rhetoric verses the facts." The statement elicited indignant gasps from the remaining audience members.

With both presentations complete, it ended the public phase of the mediation process. Both board went into closed session, but no compromise was reached Monday.