An in-depth analysis of public school budgeting reveals the serious challenges facing the Caldwell County School Board and Superintendent Dr. Don Phipps
By Michael M. Barrick
LENOIR, N.C. — From not filling positions left open by attrition to floating the idea of closing Oak Hill School, Caldwell County Superintendent of Schools Dr. Don Phipps has found himself in a cost-cutting mode since the first day he became superintendent of the Caldwell County Schools nearly two years ago. And, while these moves have many in the school system and community concerned and upset, Phipps says that putting all options on the table to address the system’s financial crisis “is all about transparency.”
These and other decisions are necessary because the school system has been spending money from its Fund Balance (savings account). Presently, it is working to cut $2.5 million during the next two years to eliminate drawing down the Fund Balance. Dropping enrollment and the state budget impasse are all working together to stress the school system’s finances.
Referencing the recent idea of closing Oak Hill, one of four K-8 schools remaining in the county, Phipps says, “I had to mention it to the board to be honest. There are some things that have been done in other districts, such as elimination of art and music programs. They don’t want to go there. Some things they don’t have the appetite for, which I’m glad for, but I had to put it on the table.” So, he shares, closing Oak Hill was floated as a solution because “It is the school that we have 9.3 total positions above what the state allocates money for.” He continues, “Are there other things we can look at? Yes. As we have prepared for the building of this budget, our district-level team has considered many options to include in our budget discussions. We wanted to provide our board with as many options to consider.” He continues, “We are proposing many things and the Oak Hill conversation is one that we need to have. Not an easy one, but a necessary one.” He adds, “We are not discussing other facilities at this time.”
He adds, “I am not proposing anything at this time, I am simply putting up ideas to cut costs to help us be more efficient and we had to talk about it publicly.” He adds, “There’s a budget meeting on the 23rd. We will decide on Oak Hill. At this point I don’t know.”
How did this happen? — School Budgeting 101
As a former school board member, I heard rumblings last year that the new superintendent — Dr. Phipps — was slashing and cutting vital people and programs. So, I called him. In a series of interviews, including a two-hour session he called “School Budgeting 101,” Phipps took me through the same presentation he shared with school board members in January. While Phipps acknowledges he has had to make cuts that he would rather not, he has been left with no other options, he argues.
According to Phipps, the primary cause is “the number of students we’ve lost over the years. We had 13,200 at one time. We are down 2,000 from that. That’s the key.” The reason that’s the key is because the state funds school on the number of students enrolled. And, while the number of students has dropped in the school system as the county experiences a declining and aging population, the number of unfunded positions by the state remained.
Also, since 2014, the school system has lost $1,253,836 in Low Wealth funding. According to the Public School Forum, “Low-wealth supplemental funding is provided to systems whose ability to generate local revenue per student is below the state average.”
The other primary source of funding for the county’s schools are county taxpayers. According to the Public School Forum “2020 Local School Finance Study” Caldwell County ranks 37th in the state for “Relative Effort.” This measure, which combines “Actual Effort” with “Ability to Pay,” arguably casts a favorable light on local education spending by the Caldwell County Commission. While Caldwell County ranked 73rd of the state’s 100 counties in the “Actual Effort” ranking, that “reflects the actual dollar effort of communities to fund schools, without taking into account property wealth.” Ability to pay “is a measure of a county’s per student fiscal capacity to support public schools.” In short, considering it’s tax base, the county is contributing more spending per pupil than a majority of North Carolina’s counties.
Other funding sources include the federal government; public and private grants; and, funding for capital outlays such as child nutrition and the Wrap Around program.
Yet, the funding has not covered the school system’s spending, so it has dipped into it’s Fund Balance the last three years. In 2016-17, the system spent $532,531 of its savings; in 2017-2018, the amount increased dramatically to $3,591,481. Less — $2,509,653 — was drawn out in 2918-19. For 2019-2020, $5,481,830 was appropriated by the School Board for the fund balance. Of that amount, approximately $2,435,308 has been spent, leaving a balance of $3,046,522. While North Carolina law does not require that school systems maintain a fund balance, the Local Government Commission (LGC) recommends that systems maintain a fund balance of 8 to 13 percent of the system’s total annual budget. The system’s current budget is $117,000,000 so at least $9.4 million should be in the Fund Balance according to the LGC.
The plan, says Phipps, is to quit drawing from the fund balance by the end of this coming school year, meaning a total of $2.5 million in further cuts must be completed this year and next. Phipps explained, “We are where we thought we would be at this time. We haven’t had anything that was unexpected that would make us be in a deeper hole.” Still, complicating the school system’s ability to project revenues is the state’s political environment. School systems across North Carolina are operating on last year’s budget figures because the North Carolina General Assembly and Governor Roy Cooper have failed to agree on a budget.
Still, regardless of outside forces, Phipps says the school system must “get out of the cycle of spending the fund balance. We want to get to the point to where we are not.”
Correcting the course
Staying within the budget will not be easy. Phipps says, “We’ve done everything we can through attrition. I hope to continue to do that.” And, he asks that the public not lose sight of the intended outcome. “I believe the end result is going to be a lean, efficient school system that will be the premier system in the state. That’s what I’m looking for.”
To get there though means more personnel cuts. That is because 88 percent of the system’s costs are personnel-related, from salaries to benefits. And that is why he put closing Oak Hill on the table now. He explains, “We have to have a budget to the county commission by May 15. I would like to have it in early- to mid-April. We don’t have the luxury of time with us still operating on last year’s budget numbers. The failure of the state to pass a budget makes it hard to plan.”
Phipps acknowledges that considering a school closure in a close-knit community is unpopular. “There is an emotional reaction.” says Phipps. “People are passionate. I think that’s normal and expected. I wouldn’t tell folks not to respond emotionally. It’s very authentic and natural.” He continues, “Yet, we have to look at the big picture. I know that’s hard to do. People have really strong feelings. I think we need to explain the situation and move on the best we can with the feedback we get.”
Other measures to cut spending are under consideration. “We talk about transportation. We’ve looked at combining routes of six different schools. I realize there are concerns because of the age difference of the students traveling on the buses, but we can take mitigation steps such as putting cameras in the buses.” He pointed out that such route combinations already are used in the county. It’s worth the consideration he explains. “That could bring $200,000 from the state because of an increase in our transportation efficiency rating.” He qualified those remarks by saying that he couldn’t guarantee $200,000 in savings, but is confident the school system can get close and certainly won’t without trying. ”If we get $200,000, that starts shaving off some of that $2.5 million. So long as we’re decreasing that, we feel like we’re moving in the right direction.”
The decision to not fill vacated positions has significant savings potential, says Phipps. In 2018-19, 37 positions went unfilled; in 2019-2020, 44.5 positions have been left unfilled. Meanwhile, the Education Center is not exempted from the cuts, as four positions went unfilled last year, and 1.5 positions have not been replaced this year. In all, says Phipps, this approximates savings of $1,158,194.
Phipps continues, “We are down 80 positions already (in the last two years). We’ve been able to do it without laying off people. We go back to the enrollment of the school and determine how many positions are alloted from the state. We’re not spending out of local funds for extra positions. We’ll continue to do that. We’re looking at every department. And allow those departments to function. We’re looking at everything.”
Phipps admits that the cuts mean that everyone is being asked to do more with less. But, he insists, the school system must work within the amount of money it is allocated, avoid using the fund balance and reduce the overall budget. Still, Phipps says that he is determined not to compromise quality for savings and is determined to provide needed resources for students and staff.
Phipps is confident that the job will get done. “We need to be good stewards of taxpayer money.
“We can do that by putting out a product, being responsive, and being accountable for the results we get.” He also has confidence in the Board of Education. “These are difficult things to get through. It has to be done. I’m glad we’re at a point that we can get it behind us and not worry about deficits. The things we’re having to get there are hard to do. Every single decision that’s being made is difficult.”