There is a lot of misunderstanding about how local school systems are funded in Georgia. Most people assume that local school systems handle tax money similar to how city and county governments operate.
But there are tremendous differences between how school funds are raised and spent and how other local governments are financed:
1. School systems do not have the range of funding sources that other local governments have. The City of Winder, for example, derives a large part of its financial resources from its utility system, various fees, alcohol taxes, etc. School systems don’t have utility systems to generate income. In addition, both city and county governments have sales taxes that can be used in their general budgets, but school systems do not. School systems can only use sales taxes for specific building projects, not general expenses. Locally, school systems can only levy property taxes for revenue.
Perfect storm brewing in Georgia school finance
Friday, May 25. 2012
2. School systems are heavily dependent on state funding, but the state has been cutting funds for nearly a decade. Even before the recession in 2008, the state had begun to cut its funding of local school systems. That has grown worse in recent years. And if you look at that in inflation-adjusted dollars, it is much worse than the real dollars spent. Over the last decade, the state has shifted more of the cost to local systems and there is nothing local school boards can do about that. Local city and county governments do get some state funds, but are not dependent on those dollars as school systems are.
3. School systems have very little flexibility in how they spend state and federal dollars. Money doesn’t come to local school systems in a big pile for local officials to spend any way they want. Most of the state and federal money schools receive are allocated for specific uses and those dollars cannot be shifted around very much.
When the recession hit, the federal government sent stimulus money to local school systems to help prop them up (it was a move designed to appease teacher unions in the North.) But those federal dollars just delayed the tough decisions that needed to be made by local school officials. Instead of starting to make cuts in 2009, systems used those stimulus dollars to keep the status quo. Now the stimulus money is gone and the economy is still in recession.
For Barrow County, this is an even worse crisis. This community is at ground zero in the housing bust. Because of that, the local tax digest has collapsed. While city and county governments have struggled with that, the falling digest has hit the school system much harder because school systems are far more dependent on property taxes than city or county governments.
Here’s an example of what has happened:
In 2008, Barrow County Board of Education chairman Mark Still owned a house that had a fair market value of $171,042 on the county tax digest and on which he paid $932.71 in school taxes that year. By 2011, that same house was worth only $119,569 on the tax digest and the taxes paid were just $699.82. That is 25 percent less in school taxes he paid on that property than he did in 2008.
The same kind of thing also happened to BOE member Mitch Churchill. In 2008, his property was worth $211,570 on the tax digest and he paid $1,232.62 in school taxes. By 2011, that same property had declined to $169,335 in value and he paid 13 percent less in taxes than he did in 2008.
Now multiply that kind of double-digit decline all over Barrow County and the school system is getting less property tax dollars now than it did four years ago. Even if the BOE raised the millage rate from 18.5 mills to 20 mills, both Still and Churchill (and most other Barrow property owners) would pay less taxes this year than they did in 2008 because of the dramatic drop in property values. (A rise in the millage rate does not mean a hike in taxes. If the rate goes up, but values go down, it’s a wash.)
For local school officials, this a financial storm brewing:
--Less state money coming in.
--Less local money coming in.
--More students coming in.
--Higher costs for fuel, insurance and other items.
What will the Barrow BOE do?
The plan for the coming year is for the BCSS to use up $4 million of its $9.5 million in reserves in addition to spending cuts to balance the budget next year.
But after next year, the storm becomes a hurricane. The system’s reserves will be low and it won’t be able to plug the gap from savings any longer. And it is very doubtful that the local economy will recover enough in the next 12 months to turn the revenues around. Add to that the fact that the state continues to cut its funding to local school systems even more. For example, the state is shifting the cost of non-certified personnel insurance to local systems, a move that could cost the BCSS a couple million dollars.
This problem isn’t just in Barrow County. Many school systems in the state are even worse off having less in reserves on which to survive. The only reason the BCSS has survived this long is that it has a history of conservative fiscal management and had built up over $13 million in reserves before the recession hit.
But few counties have seen property values collapse as much as Barrow’s have. Once the epicenter of a building boom, Barrow is now the center of an epic building bust.
That has hurt all local governments, but while city and county governments have struggled, they also have a far wider range of revenue sources on which to survive and much more flexibility to cut expenses. School systems don’t have such a pool of diverse revenues, nor can they easily cut expenses without violating state mandates.
Unless the state suddenly finds a pot of gold, by the fall of 2013 school systems in the state, including Barrow, are going to be in a real financial crisis. The number of furlough days will grow into double-digits. Popular school programs that are not state mandated could be cut. Athletics and other extracurricular programs will be affected and some may disappear.
It’s the perfect storm brewing, and it will be ugly.
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.
3. School systems have very little flexibility in how they spend state and federal dollars. Money doesn’t come to local school systems in a big pile for local officials to spend any way they want. Most of the state and federal money schools receive are allocated for specific uses and those dollars cannot be shifted around very much.
When the recession hit, the federal government sent stimulus money to local school systems to help prop them up (it was a move designed to appease teacher unions in the North.) But those federal dollars just delayed the tough decisions that needed to be made by local school officials. Instead of starting to make cuts in 2009, systems used those stimulus dollars to keep the status quo. Now the stimulus money is gone and the economy is still in recession.
For Barrow County, this is an even worse crisis. This community is at ground zero in the housing bust. Because of that, the local tax digest has collapsed. While city and county governments have struggled with that, the falling digest has hit the school system much harder because school systems are far more dependent on property taxes than city or county governments.
Here’s an example of what has happened:
In 2008, Barrow County Board of Education chairman Mark Still owned a house that had a fair market value of $171,042 on the county tax digest and on which he paid $932.71 in school taxes that year. By 2011, that same house was worth only $119,569 on the tax digest and the taxes paid were just $699.82. That is 25 percent less in school taxes he paid on that property than he did in 2008.
The same kind of thing also happened to BOE member Mitch Churchill. In 2008, his property was worth $211,570 on the tax digest and he paid $1,232.62 in school taxes. By 2011, that same property had declined to $169,335 in value and he paid 13 percent less in taxes than he did in 2008.
Now multiply that kind of double-digit decline all over Barrow County and the school system is getting less property tax dollars now than it did four years ago. Even if the BOE raised the millage rate from 18.5 mills to 20 mills, both Still and Churchill (and most other Barrow property owners) would pay less taxes this year than they did in 2008 because of the dramatic drop in property values. (A rise in the millage rate does not mean a hike in taxes. If the rate goes up, but values go down, it’s a wash.)
For local school officials, this a financial storm brewing:
--Less state money coming in.
--Less local money coming in.
--More students coming in.
--Higher costs for fuel, insurance and other items.
What will the Barrow BOE do?
The plan for the coming year is for the BCSS to use up $4 million of its $9.5 million in reserves in addition to spending cuts to balance the budget next year.
But after next year, the storm becomes a hurricane. The system’s reserves will be low and it won’t be able to plug the gap from savings any longer. And it is very doubtful that the local economy will recover enough in the next 12 months to turn the revenues around. Add to that the fact that the state continues to cut its funding to local school systems even more. For example, the state is shifting the cost of non-certified personnel insurance to local systems, a move that could cost the BCSS a couple million dollars.
This problem isn’t just in Barrow County. Many school systems in the state are even worse off having less in reserves on which to survive. The only reason the BCSS has survived this long is that it has a history of conservative fiscal management and had built up over $13 million in reserves before the recession hit.
But few counties have seen property values collapse as much as Barrow’s have. Once the epicenter of a building boom, Barrow is now the center of an epic building bust.
That has hurt all local governments, but while city and county governments have struggled, they also have a far wider range of revenue sources on which to survive and much more flexibility to cut expenses. School systems don’t have such a pool of diverse revenues, nor can they easily cut expenses without violating state mandates.
Unless the state suddenly finds a pot of gold, by the fall of 2013 school systems in the state, including Barrow, are going to be in a real financial crisis. The number of furlough days will grow into double-digits. Popular school programs that are not state mandated could be cut. Athletics and other extracurricular programs will be affected and some may disappear.
It’s the perfect storm brewing, and it will be ugly.
Mike Buffington is co-publisher of the Barrow Journal. He can be reached at mike@mainstreetnews.com.
There will be less next year because most of the people who have earned money to support you in the past are not earning that now!
As a Barrow educator, I can only see red in my personal budget for years to come if I stay in education. The writing is clearly on the wall that funding is drying up. Next year we will not be so lucky to not have RIF (reduction in force) throughout the system.
The wise educators in Barrow will either have supplemental income sources to carry them through, move, or find another profession. We lost several fantastic teachers this year. How many more can we afford to lose???