By ALICIA LEONARD
Walton County School Board (WCSB) member Gail Smith succinctly summed up the overall mood of the board the evening of June 30, 2014 when she said far into the meeting, “we’re in deep caca” after learning there was close to a $400,000 unexpected hole in the general unassigned fund.
The budget amendment meeting, a usual occurrence as the district closes the books on the 2013-2014 year, sometimes drew harsh observations from residents, members of the Walton County Tax Payer’s Association(WCTA) and local teacher/union representatives during the meeting. Underestimated expense payouts for close to 90 charter school students and $125,000 moved to make the lunch program “break-even” pulled the general fund for the district below the state’s mandatory 3-percent reserve guidelines.
According to Walton School District Financial Director Mary Hobbs, the discrepancies were noted the last week of June, and Superintendent Carlene Anderson notified board members on June 27 that the general fund balance had fallen to possible emergency amounts. As the books were continued to be worked through, funds were found that brought the balance of the general fund up to past 2 percent of reserves. Falling below 2 percent is considered an “emergency” situation for a district.
“We just underestimated the loss of the revenue we were going to have to pass onto them,” said Hobbs, speaking about the funds payed out to charter schools for their students. Transportation cost increases also factored into the falling balance in the general fund, as well as much higher than anticipated payouts to substitute teachers and bus drivers. The district had 62 unexpected Leaves of Absence this past year. Attorney fees for the impasse negotiations, as well as the cost of covering Anderson for the suit involving a teacher suspension cost the fund an additional $60,000.
Board member Sharon Roberts asked Hobbs, “What’s the bottom line
here?” Hobbs responded, “there is still a lot coming in as we close out the year, but we are estimating the unassigned fund balance will be $1,437,000.” That would put the fund balance somewhere around 2.2 percent.
Roberts asked, “so, you found some from between Friday to today?” Hobbs
responded “yes,” and Anderson responded, “it’s not so much finding, but putting items in the right place.”
Anderson added, “we are expecting a small amount of revenues, but we are not expecting any more expenditures.”
Roberts said, “my question is how did we get to this point. At the beginning of the year you are given parameters to follow, and now we’re outside of the parameters, so, can someone, anybody, explain to me how we got this?”
Anderson responded that the big ticket items such as the charter student expenses and the transfer to food services were behind most of the fund’s decrease. “Last year we had to supplement the food service program by $350,000, so I think $125,000, although I don’t like to supplement it at all from general operating, we’re going in the right direction.”
Hobbs told the board that the district had received the tax deed sales of almost $300,000, but this was included in the balance the board was looking at. Anderson told he board “I’m hoping to cut two million in expenditures” for the next budget cycle. “I know that’s lofty, but that’s what I’m looking at.” If Anderson is able to realize those cuts, it would bring the unassigned fund balance for the next budget cycle to around 3.7 percent.
Hobbs said they had received the tax certificates from Patrick Pilcher’s office and they had increased 13.2 percent over the estimated revenue. The board could not get too excited over the increase, because the Legislature will increase Local Required Effort (LRE) if a county exceeds their expectations in local revenue. The more brought in locally, the less the state supplies for the district.
Smith said “customarily when we get to this point each year. How we spent, how we budgeted, years ago our fund balance was huge and every year it seems to get littler and littler, and now we are to the point it’s significant in the sense that we’re told it can’t be less than three and it’s now less than three. Quite honestly, it’s been dwindling.” Smith continued, “shouldn’t we consider some safety net, where we revisit, because this is kinda late to be discovering this. If we have protocols in place and maybe we do, but history looks like this happens, and happens and happens and now we’re in deep caca.”
Hobbs said, “we were so close to the 3 percent that any kind of unforeseen
expenditure – ” before Smith responded, “but we’ve been having that conversation about we’re right on that teeter/totter line and if anything happens we’re going to be slipping over. But, I guess my question is if this has been historically happening, then we need to do business differently?”
Board Chair Faye Leddon reminded members she had asked Anderson when working on next years budget if there was some place to set aside a type of “rainy day” fund. Anderson responded under new budget rules there was a place to set something aside and “it would be my desire, and it may not be doable this budget cycle, but I would like to see the board have three million set aside, in order to handle these things that always seems to happen at the end of the year to a small degree. This year it was to a little bit of a larger degree.”
Roberts said she wanted to address what had been said, “Mrs. Smith you said a while ago that it’s basically that it happens. No ma’am it doesn’t just happen and you not know that it’s coming. Mrs. Hobbs, every day when you pull up the screen, you can tell where we are in the fund balance. This is not something that slipped up on you overnight. And, you’re just now telling this board this? Once a month we get a financial statement and we’ve been well within our 3 percent. There is no way that these unassigned fund balances, on the last day has jumped up to what I’m being told that it is. Now, it just does not happen that way.”
Hobbs responded, “how do you foresee sub costs?” Roberts replied, “Mrs.
Hobbs, subs are not paid at the end of the year, they are paid all during the year and you see those expenses come in as they are paid out. Now, you may sell the rest of this board that but you will not sell me on that. There is no way you could have foreseen this coming, and inform this board of the state that we’re in and it’s completely unacceptable. We gave you all a balanced budget to follow and it has been exceeded. And in my mind, it’s criminal.”
Anderson responded that if it was criminal it has been so for many, many years and under the former chief financial officer, they had budget amendments at the end of every year. “When you have a budget this large, you will have budget amendments, the difference being in the past we have had a fund balance to cover this,” she added.
Roberts responded, “when that occurred in the past we knew it was occurring. But this, when we learned about it last Friday, you thought you had a .5 but then you found a 1.6 and now today it’s 2.2. Ladies and gentlemen of this board, and the folks sitting here, you’ve heard me six or eight months ago question the superintendent and I told her that I could no longer trust her to make sound decisions for the Walton County School District, and here we are.”
After more discussion, resident Susan Harris questioned Hobbs at great length about her qualifications to hold her position without a
degree in accounting and the budget itself. Harris added, “I’ve never spoken to Sharon Roberts outside of this room, and if I saw her on the street I probably would not recognize her, but I think what she said, I think this is criminal to have a $100 million dollar, and not have somebody with an accounting degree doing your budget for you. That is a disaster.”
WCTA President Dr. Don Riley said he was concerned with the “last-minute” frenzy around the fund balance issue and added “there are people in the financial field who are credentialed and experienced in what you are dealing with. This wheel has been invented.”
Pay outs to collegiate high school, an expense the district picked up last year, as well as fluxes in changing school students counts are other issues Anderson cited in budgeting. Roberts responded, “there is no way you have not known this for some time.”
Other issues discussed were the possibility of where future cuts would come from included possibly not replacing staff that are retiring or leaving, and program and service cuts, but none were outlined more than others. Anderson and the Board both responded that cutting teacher positions, non-instructional positions and programs were all something they were not supportive of and would work to keep them from happening. The board is the only body that could reduce the workforce for the district.
Leddon added, “I am unhappy we are here, but as we start the new budget, I think as a board we need to come up with some things to prevent this from happening again.” Roberts responded that the board needed accurate information to predict coming trends in expenses.
“Without accurate information, inaccurate decisions are made,” Roberts
Davis said the board may have to overestimate the amount of student
payouts to keep this from happening in the future.
The board moved 3-1 with Roberts being the nay vote to pass the
budget amendment. They also moved to pass personnel recommendations 4-0.
The first budget workshop for the 2014-2015 year is scheduled for July 7 at 5 p.m., with a tentative budget to be set by July 24. To see more about the district and times for meetings and workshops, go to www.walton.k12.fl.us.
By ALICIA LEONARD