Challenging school budget cycle may be on horizon

With a troubled economy tightening public budgets across the country, Nashville’s public school district is not expected to be exempt from making tough financial decisions in the coming year.

Add to that the fact that the district pulled more than $19 million from its reserve funds last year for recurring costs, the newly acquired authority on the part of the state Department of Education to have sway over all district financial resources, and intense public interest in ensuring that additional resources promised to schools by a new rezoning plan are kept at a high priority. It’s not unreasonable to anticipate a stormier budget process than usual.

Steve Glover, the new finance chair for the Board of Education, said Friday that this year’s budget cycle “very likely could be” more challenging than in previous years.

“Taking a proactive role and looking at reductions now … may in fact ease the burden in the next year,” Glover said.

District officials will, this week, begin talks about the budget for this school year. While that budget was passed this summer, changes could be necessary if tax revenues for the district continue to come in lower than predicted.

And even if funding the already approved budget for this current school year were not a concern, the budget cycle for the 2009-2010 school year would probably be a challenging one due in part to reserve funds already pulled for recurring expenses.

More than $19 million of recurring expenses — costs that come up year after year — for the current school year are being paid from the district’s reserve funds. And last year, a total of about $6 million was pulled from the reserves for recurring costs.

Considering that the district’s reserve funds do not typically increase very fast, district officials said before the budget was passed that the situation would have to be monitored closely. Using non-recurring funds to finance a recurring cost means that an increase in funding will be needed the following year to prevent reserves being tapped again.

There are a variety of laws and recommendations addressing use of reserve funds. State law stipulates that school districts can’t budget any fund balance that is not more than 3 percent of the total operating budget. And Metro’s finance department has a policy specifying that a reserve balance of 5 percent of total funds should be maintained in reserves.

MNPS’s reserve balance is still well above those requirements — 5 percent of the district’s operating budget would represent about $30 million, and 3 percent about $18 million. The approximately $19 million in reserve funds authorized for this current school year came at a time when the district’s reserve fund balance stood at just over $60 million.

This current year also marks the first time that the Tennessee Department of Education has authority over MNPS’s financial resources, due to the district’s “Restructuring I” status under federal No Child Left Behind laws. The state can legally make decisions about any spending planed by MNPS.

That doesn’t mean the board won’t have to make its own decisions, as school board members still have the responsibility to approve the budget — and state officials say the DOE won’t get involved until the board does its work.

“During the process, we’re not going to be right in there every step of the way,” DOE spokesperson Amanda Maynord said Friday. “We’ve … taken a hands-off role, and want to make sure that the district’s running the district.”

While Maynord said that lines of communication are open, and acknowledged that state employees are embedded within MNPS, the state’s role in the budget process will consist of reviewing the final plan once it has been approved by the board. The state will ask that spending be prioritized to “best serve students,” Maynord said, particularly in line with recommendations made by last year’s state-funded audit of the district.

Rezoning means spending will be closely watched

Next year’s budget must also include additional resources for a recently passed school district rezoning plan. Metro Council member Jerry Maynard is among those who have publicly expressed concerns about the board taking on the resources promised by the plan in a year that is already tight.

At a meeting last week of the Metro Council Education Committee, Maynard said he anticipates the state to be strapped financially in the near future, and expressed concerns about funding for the rezoning plan.

Maynard isn’t alone. Other opponents of the rezoning plan say they believe the plan will either save the district no money at all, or that it will come at a cost to the district. According to initial estimates from MNPS, implementation of school improvements promised by the plan could cost about $4.7 million. Savings to the district as a result of the plan are estimated at $1.2 million. That number is lower than what had previously been anticipated, and rezoning opponents say that as further details of plan implementation are fleshed out, anticipated savings could dip even further.

Implementation of the plan — and investment in the additional resources the plan promises — will be closely watched by the community. Marilyn Robinson, president of the local chapter of the National Association for the Advancement of Colored People (NAACP), has said her organization is still working with the national NAACP and the NAACP’s Legal Defense Fund to assemble information that could contribute to a possible lawsuit stemming from the plan and its implementation.

When asked about community concerns related to the plan and the tight MNPS budget, Glover said many of the numbers quantifying costs and savings have not been fully calculated, and that rezoning spending may amount to a shifting of resources from transportation to classroom expenditures.

“[Were] there some additional costs with the plan? Yes. But it may be that we can shift resources around,” Glover said. “It represents about three-quarters of one percent of the total budget.”

Meeting this week will set stage for this year’s budget cycle

With the most recent school budget passed by Metro Council just a few months ago, it’s early for budget talks.

There are already concerns, however, not just about budgeting for next year, but for the current year.

Sales tax revenues were in the neighborhood of $1 million less than this year’s budget projects for the first two months of this school year, Glover has said. It’s still early in the school year, and sales tax revenues are only a portion of the local revenues the district receives. Another major source of local funding for the district, property tax revenues, are not expected to be as volatile as sales tax figures, officials say.

With the blessing of Metro Finance Director Richard Riebeling, Glover has called for a meeting today to “proactively” consider options for cutting costs this school year, if tax revenues for the district continue to come in lower than the budget predicts. The meeting is slated for 4 p.m. at the district’s 2601 Bransford Ave. central offices.

Glover has repeatedly emphasized that he doesn’t know whether cutbacks this year will be necessary. Trimming the current school year’s budget could, however, ease the funding cycle for the next school year.

When asked if Metro Nashville Public Schools might consider a hiring freeze similar to what has been adopted by Metro government as a whole, Glover did not dismiss the possibility.

“I don’t think we can remove any option off the table,” Glover said.

Funding for Metro schools must pass through several channels. The process begins with Nashville’s public school district and Board of Education, which put together proposed budget figures for presentation to the Mayor’s Office. The Mayor’s Office then includes a proposal for school funding as part of a larger budget encompassing all of Metro government.