“We are watching, waiting and being as proactive as possible,” said Beth Brock, Madison County school board chair, as board members discussed how the district might be affected by the state’s pension crisis and budget cuts.
One thing, the board chair said the district will not do, is panic.
“Luckily for us, we have been very cautious and fiscally conservative the past few years. We have consistently ended our years with balanced budgets and done our best to be fiscally-minded. We have built up a contingency that covers us in these moments,” Brock said to those attending the school board’s work session last Thursday.
However, she noted sadly, Madison County is in the minority among the state’s schools.
“Other schools have not been as fortunate as us,” Brock said.
Numerous other districts in the state are already slashing services or raising taxes in order to alleviate the burden of the cuts and absorption of a rate increase to the County Employee Retirement System (CERS) next fiscal year, she noted.
However, Brock said, while Madison County may fair this stormy sea better than others, the school board is determined to be as proactive as possible.
Last Thursday, board members heard from Madison County Schools Chief Financial Officer Mark Woods who identified how the school system could potentially be impacted by the CERS increase.
According to Woods, the 50.7 percent rate increase would equate to an approximately $1.3 million dollar hit to the school’s budget.
Under the three-year phase-in option, Woods said that the first year would see an increase of 10 percent or $128,000 for the district. In the second year the school system would increase to 45 percent or $576,000. By year three, the school system would take on another 45 percent and $576,000 burden.
Woods broke down for board members how exactly the rate increase would impact the school system’s budget and costs.
According to Woods, under one of the proposed plans, the school system’s fiscal year 2018 contribution (with a proposed 1.5 percent increase) would go from approximately 18 percent to 19 percent, plus salary costs of $13,000,000, would equate to a district expense of $2,450,000. In fiscal year 2019, with a proposed 28 percent contribution rate, and if salary costs remained the same, would go up to $3,810,000 in district costs.
Woods noted that the proposed number is likely to be higher as the school system will most certainly see an increase in salaries as the faculty and staff are hired for the new Boonesborough Elementary School and if the district continues to grow at its current rate of enrollment.
However, Woods noted that if legislators decided to move CERS into its own pension system, the school board could see its rates climb even higher.
Woods also speculated what could happen to the Kentucky Teacher Retirement System (KTRS), including a conversion from a defined pension to 401K or the shifting of the entire match burden to local districts or the phase-in of a required service agreement.
Superintendent Elmer Thomas said during the work session that all of Madison County school system employees made their payment and that the district also held up their end of the bargain on pensions.
“We did what we were supposed to do,” Thomas said. “I don’t know where we come up with $1.3 million in our budget. That is an abnormal amount to require a school district to find in their budgets.”
Woods lamented that CERS was not properly funded by the state and told board members that instead of putting the money in the pensions, that money was spent on projects which yielded very little gains.
“There were some bad investment choices and here we are,” Woods said. “The school system did nothing wrong. They just didn’t hold up their end of the deal.”
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Woods also brought the school board up to speed on other pressures the school district may face in the coming months thanks to the early September note by Governor Matt Bevin which may cut 17 percent from most state agencies. The governor announced the potential budget cuts last month after state economists predicted the state was headed for $200 million shortfall in the 2018 fiscal year. The state ended its 2017 fiscal year in June with a $138 million shortfall.
While the cuts do not affect SEEK, the state’s school funding formula, other areas of education would take a hit under the $22.8 million budget reduction plan submitted by Education Commissioner Stephen Pruitt last month.
The commissioner submitted the plan, along with a three-page letter explaining why he would not propose the asked-for $69.5 million in cuts to the $4 billion state education budget.
Under Pruitt’s proposed budget, Woods told board members, cuts would be made to textbooks and instructional devices for classrooms and as well as a $4.5 million reduction in professional development opportunities for teachers.
Woods said, under the cuts, the school system’s general fund would likely have to absorb nearly half of the expenses.
The district’s family resource centers would also be vulnerable under the proposed $4.5 million cut.
Woods said because the district’s family resource center staff are contracted employees, the school system’s general fund would take a hit as the school absorbs the cost of the employees’ salaries at an estimated cost of $139,000.
Board members were hopeful under the sobering news and the other uncertainties that await the district in the future.
In addition to the impact of the state pension crisis and cuts to the education budget, the growing district could very well drop in enrollment as families and students move to charter schools expected to open in 2018-19.
Despite the somber work session, board members and Thomas are hopeful that legislators will work towards a fair solution.
The superintendent said he has been in contact with several local representatives over the past few weeks about the pension crisis.
“We have been working closely with our local legislators and I plan to continue that work and hopefully we can all work together to ensure that Madison County students continue to receive the best education and opportunities we can provide,” Thomas said.
Brock said she appreciated the care that Commissioner Pruitt took in developing his recommended budget reductions.
“He did not want to compromise the education our students would receive and made cuts to where it would not directly affect the classroom,” Brock said.
School board members said they are still confident the school system will be able to navigate through the uncertain future.
“We wanted to have all the information we could and that is why we had this work session. We don’t want to be caught off guard, but it also important to remember that all of this is still speculation and proposals. We are going to keep moving forward and we have the upmost confidence in our commissioner and legislators,” Brock said.
Woods said the school system is keeping a close watch on their expenses at the moment until more news of the pension crisis surfaces.
Reach Ricki Barker at 624-6611; follow her on Twitter @RickiBReports.