Last week CCPS superintendent Dr. Michael Murphy presented a preliminary budget to the public and the School Board in which he outlined an 8.5 full-time-equivalent teaching staff reduction that he says will be necessary to cover a $519K budget shortfall. Murphy said that shouldering approximately $1.387 M in budget reductions since FY08 (July 1, 2007) the school system has reached a point where further reductions cannot be made without impacting the quality of education being received by CCPS students.
Yesterday the Clarke County Supervisors reaffirmed their commitment to holding taxes for the coming year at current rates by directing staff to ensure that any proposed budget require no increase in the real estate property tax rate above the current rate.
The taxation freeze comes amidst a nationwide economic downturn with national unemployment rates at 9% and Clarke County forecasting a Fiscal Year 2012 budget deficit of approximately $1.5M.
In a recent article CDN outlined the budget debate between the Clarke County Board of Supervisors and the Clarke County School Board regarding the Clarke County Public School budget. Some community members have pointed to Clarke County’s budget suggesting that net unrestricted asset fund balances, currently valued at $14.2M be tapped to make up the school budget deficit.
On Tuesday, CDN asked Supervisor John Staelin (Millwood) to explain Clarke County’s budgetary philosophy with regard its net unrestricted asset fund balances. During the discussion Staelin and several other supervisors said that they strongly supported the county’s fiscally conservative approach pointing out that the net unrestricted asset fund balances provide the county with protection from unexpected financial obligations while also ensuring that the county does not have to borrow money in order to meet its fiscal responsibilities.
Budgets, of course, are complex documents and are the result of hours of deliberations and stemming from years of policy decisions. Supervisor Staelin’s explanation of line item fund balances provides a general explanation of what lies behind the numbers. As public debate over how best to spend taxpayer funding continues, it is likely that further contextual explanations may be offered both for and against specific funding priorities.
While some citizens may think of Clarke County’s $14.2M net unrestricted asset fund balance as a single bank account that Clarke County’s Board of Supervisor’s can dip into to solve “rainy day” problems, the reality is more complex.
“’Unrestricted assets’ may not actually be the best name for the account” said Joint Administrative Services Director Tom Judge. “There are actually lots of obligations against the money.”
In our discussion with Supervisor Staelin, CDN attempted to breakdown the various accounts that comprise Clarke’s unrestricted assets so that readers can draw their own conclusions about how the money is being managed.
One fundamental principle that Staelin makes clear in his budgetary overview is that the budget’s unrestricted assets are finite balances, not on-going revenue streams. This means that money taken from the accounts is not automatically replenished, rather can only be replaced through contributions by taxpayer contributions. As such, the Supervisors are generally reluctant to fund on-going expenses, like raising an employee’s salary, from a fund account with a fixed amount.
Budget Adjustment and Designation Specifics:
Liquidity Designation @ 12% $2.9M
This percentage amount is recommended by Clarke County’s auditors, Robinson, Farmer, Cox Associates of Charlottesville, Virginia, and is used to ensure that the county has adequate operating funds on hand to meet short term obligations like payrolls, operating expenses, etc.
Stabilization Designation @ 3% $737K
This account is Clarke County’s “rainy day” fund and is used to absorb unexpected revenue changes often originating in Richmond. For example, in 2010 the Virginia Compensation Board unexpectedly reduced $75K in funding to Clarke County the amount was absorbed by this fund.
Local Appropriation for Capital Projects $4.9M
This account holds funds that have been appropriated but not yet spent for a specific purpose. Generally, these funds are reserved to pay for the completion of multi-year projects. Over $3 million in amount comes from local funding that will be spent on Clarke County’s new high school. Because many school capital projects, including major repairs, are completed in the summer when students are not in school, the Supervisors budget the money for Fiscal Year One and allows the schools planning flexibility in using the money. Funds are often therefore actually spent in July or August at the start of Fiscal Year Two. The Supervisor carry over these construction funds year after year until the money is spent. The capital projects carryover contains $3.6M for the new high school construction project and related school projects.
School Capital Debt $1.5M
This money has been set aside to pay for future school capital expenditures. Initially, this fund was set up to hold contingency money that could be spent if some unforeseen item caused the Clarke County High School project to exceed its cost estimate. The Supervisors believe since the funds will probably not be needed for the new high school the money will be used to cover any additional funding required to complete the conversion of the old high school an elementary school or the refurbishment of Berryville Primary and DG Cooley. If these purposes do not exhaust the funds, the money will be used for some other school capital project like fixing a roof or parking lot, buying computers, etc.
Government Construction Debt $1M
This money has been set aside to pay for future general government capital projects. Clarke County maintains a ten-year capital plan that attempts to forecast the county’s long term capital spending needs, including items like improved communication equipment for Public Safety officials, replacement vehicles for the sheriff’s department, the construction of a senior center at the park, the replacement of the county swimming pool, new athletic fields, a new park office, the expansion of the maintenance facility, a recycling center and many other projects that are not easily bond funded and thus must be paid for with cash. Supervisors say that the cost of the known projects vastly exceeds the $1 million in funds currently available. The Supervisors try to add to this fund each year but also take money from it. The fund tends to rise and fall depending on the timing and size of projects. It will be reduced if the Clarke County Senior Center is built in the coming year and is the expected source of a good portion of the funds that the county will need if the $1.5 million budget deficit currently projected for Fiscal Year 2012 becomes a reality.
Property Acquisition $265K
Contingency fund to cover purchase of real estate, if necessary.
Conservation Easements $153K
Funds appropriated for purchase of property development easements.
Community Facilities $325K
Funds used for project like the Barns of Rosehill
Comprehensive Services Act Shortfall $263K
A fund is used to balance radical changes that can occur in the local cost of services for high-risk youth. The funds provide high quality, child centered, family focused, cost effective, community-based services to high-risk youth and their families. The amount of funds spent in this area each year varies so this fund is added to in years when the cost of services is less than expected and reduced when the costs are higher than expected. As the cost for support of an individual child can exceed $250,000 this fund can be quickly erased if just one high cost child moves to the county after the budget has been set for the year.
Senior Center and Park Office $400K
Funding specifically designated for a new senior center and park office. The total cost for the new Senior Center is projected to exceed $1.5 million, of which the Shenandoah Area Agency on Aging plans to contribute $500,000. Clarke County is still trying to determine where the additional funds for this project will come from.
Parks Master Plan 100K
Funding to support long term county park improvements.
School Operating Carryover $494K
Money returned to CCPS not spent in the previous fiscal year. The BOS has a written policy that states that these funds will be returned to the schools the next year but are to be spent on one-time expenditures rather than ongoing operational expenditures.
Government Carryover from Savings $397K
Money returned to various Clarke County departments not spent in the previous
fiscal year. The BOS uses these funds first when it faces unexpected expenditures on the General Government side of the ledger.
Energy Efficiency $200K
Funds dedicated for “green” energy solutions where procurement offers a payback
on investment. Alison Teetor, Clarke County’s natural resource planner, is prioritizes “green” projects that carry an initial investment cost but provide significant savigs over a short payback period.
Landfill Costs $50K
Funds allocated for a possible increase in Frederick County landfill usage fee.
FY11 Original Budget Surplus $354K
Unappropriated Fiscal Y11 funds which are projected revenues in excess of originally budgeted expenses. Since setting the budget the Supervisors have had to appropriate $403,578 to cover Commonwealth cuts in funds and unexpected expenses. The Supervisors say that once the approximately $4.9 million set aside to complete the capital projects that have been funded and started has been spent, the remaining funds will be used to cover the County’s expected $1.5 million Fiscal Year 2010 budget shortfall. Once the budget currently projected for Fiscal Year 2012 is expended the fund balance will be dramatically smaller. Theoretically, the balance will be decreased by the entire capital projects carryover, as well as the Fiscal Year 2012 deficit, during Fiscal Year 2012 and early Fiscal Year 2013.
As both Clarke County employees and taxpayers continue to struggle through unprecedented financial times one thing seems clear; Clarke County’s leadership has made a firm commitment to holding the line on spending and avoid borrowing to finance ongoing expenses like salaries and hiring.
“We’ve raised taxes every year for the last five years” said Supervisor Chairman Michael Hobert. “At some point you have to draw the line. We’re in the middle of the worst recession in our lifetimes. If you can’t hold the line on spending now, when can you do it?”
“We’re a fiscally conservative board and I’m proud of that” said Supervisor Staelin.