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Levy County’s largest service business has been hard hit by economic downturn.
The board that oversees the operation has been advised that its assets valued at $2,427,803,027.00 just last year have slipped in value by 7 percent and will slide a total 18 percent by the end of next year.
That means the revenues are likely to drop by as much as 50 percent at the current rate of return on those assets. The out-of-town parent business has told the local unit it cannot provide an infusion of cash because the overall income is down, dragging down its revenue picture.
The Levy County operation is on its own to find a solution. But there’s more bad news.
The dim financial forecast says the customer base is shrinking as well. The shrinkage will continue through next year.
Reserves have been spent down. Capital funding that could be transferred to operations, was moved. But there’s nothing left to draw down.
“That strategy is not sustainable,” the chief financial officer said.
Every expense has been examined and cut. A four-day week has been considered.
But, Levy County Schools, as a service operation, the biggest chunk of the budget — about 80 percent — goes to personnel expense and it is getting a lot of attention.
Furloughs, pay cuts, the elimination of some highly paid personnel and marginally qualified personnel, and the possibility of replacing more expensive professional staff with new, inexperience hires are all being considered.
Complicating the situation is a jumble of federal and state regulations and requirements — onerous red tape, some say — that must be met in the operations.
There was some hope that the federal government’s stimulus plan would provide help. But that comes with strings limiting how the money can be spent: new employees, add-ons, and supplements.
There is no loan to be had.
There’s no bailout.
“We have to adjust the revenue stream,” the financial officer said.
While that is Bob Clemon’s assessment, the question of whether the residents of Levy County will provide a cash infusion to keep the schools operating at the current levels remains to be seen.
Here’s the financials.
The Revenue Stream
The school board levied a 7.7410 millage on property in the past year, bringing in $13,820,025. That income was derived from property taxes paid on $2,427,803,027.00 value of property in Levy County.
But Levy County Property Appraiser says property values are being adjusted to reflect the market’s effect and property values are down over 10 percent overall.
In addition, Barker points out that the school board taxes are on the property’s value minus the first $25,000 homestead exemption. Other exemptions, such as a second $25,000 exemption, seniors, disability exemptions, do not factor into the levying of school ad valorem taxes on property.
In the current year, the millage is 7.742, which includes 1.75 mills in the capital improvement tax. So the operating millage is 5.992.
The local millage was due to raise $13,820,025 for schools. But with tax collections running behind in the recession, that may not be collected.
So expect property taxes, if the millage remains the same to be down over 10 percent for the next year.
The school board, last year, earned $100,000 in interest on investments. This comes when the school board invests money it receives before it is needed to pay expenses: like property taxes paid in December that will be used for expenses in April. In addition, the Levy school district received another $515,067.87 in local contributions from other sources. However, the board is expected to earn less on its investments as the revenue stream slows or goes unpaid.
Another $515,067.87 was raised from what the budget labels “miscellaneous local sources.”
The total locally generated contribution for schools: $14,435,092.87.
The state’s contribution was $20,414,629 through the Florida Education Finance Program. With other allocations for state forest funds, racing commission, lottery, and other sources, the state’s contribution this year was estimated to be $30,103,841.
But money has not come in as expected. And as residents of Levy County know, expenses are up
“We’ve got a big hole,” said Bob Clemons, the Levy County schools financial officer. “We have a $3 million deficit.”
But the good news is the district will get through the year with some help from President Barack Obama’s economic stimulus package. “The good news is we got some relief here,” Clemons said.
The county will receive $7,938,655 in stimulus money over a two-year period — with half earmarked for use in this year’s school budget.
But that money is tagged for showing how the district will supplement or add to what it is already doing, Clemons said. “We will have to show how we use it,” he said.
However, it will be coming in and can be used to help soften the economic hit the district has taken. “We have to be careful not to replace our general fund budget with this,” he said. “It’s a tough call here.”
Clemons said the winfall is “great.” But he’s cautious. “There may be some costs we can shift, but personnel costs can’t be shifted.”
That amount is calculated on a complex algorithm, Clemons said
That’s one reason you may hear the Legislature saying they gave the same amount of money to schools, even giving them $28 more per pupil, but Levy will actually receive $71 less per pupil.
“Levy County lost $2.2 million out of our budget,” Clemons said.
It hurts most because state funding is a chunk of change for the county.
“Out of $69 million, $45 million is general fund money,” Clemons said.
“We will have to adjust our revenue stream,” Clemons said.
That means the board is likely to look at how much it will have to raise property taxes to keep schools operating.
But Clemons cautions: some things the board was able to do in schools when rising property values gave them more revenue, will have to go away in this new streamlined budget.
That $45 million figure he mentions is important because the district appropriated $45,576,336 for student instructional programs with $25,351,379.41 tagged for instruction.
Salaries for teachers, support staff, administration — employees is $28,781,933.64, and add to that another $7,856,662 for benefits.
The total in personnel costs: $36,638,595.64.
The lion’s share of personnel costs goes to instruction: $22,814,518.84.
“Eighty percent of the budget is people,” Clemons said.
That, says Clemons, is why there is so little wiggle room in cutting district expenses. “There have been some people released for next year,” Clemons says referring to the notices sent to 45 teachers notifying them their contracts will not be renewed.
“We have to align our budget to the new reality and the new reality (is) there’s not enough money.
“We cannot continue on the path that we are on.”
He calls the financial situation facing schools the perfect financial storm. “Here’s the thing: We’re all going to have to adjust. We are used to a level of service — and we all want that — they demand that — but we cannot pay for it.”
One reality: student population is dropping. Fewer students means one number in the algorithm computing what the district gets from the state is lower.
The district lost 185 students this year from the 2007-08 school year. The state survey of attendance found 6,158 students attending school last fall. And, when the state surveys attendance in the fall, Clemons expects it will find fewer students in school than attended this year.
“When you have fewer students, you have less money,” he said.
Despite that, Clemons proudly notes that the district did not lay off anyone in the current school year.
In addition, the district has been trying to meet the requirements of the class size amendment passed by voters. It mandates that classes will only have a certain number of students.
The district got some breathing room on that when the Legislature, in implementing the amendment said it would use school wide figures for class size.
For example, the Legislature could have required the district have 1 teacher for every 22 students in a class. But some classes, like high school electives may not have 22 students in a class, but every other class with more than 22 students would have to have an additional teacher hired to teach the students. Like a class of 35 would require two teachers.
Under the Legislatures more relaxed rule, a school with 400 students having a ratio of 22 students to 1 teacher would only be required to have at least 18 teachers.
“We are in compliance school-wide,” Clemons said. If the compliance went down to the classroom level, the district could be required to hired more instructors. Or it could face the decision to cut less popular classes.
More money needed
The new reality Clemons is talking about holds the most distasteful thing the public wants to hear: more taxes need to be levied on property.
The Legislature, recognizing that, approved allowing school boards to raise another 0.25 mills of tax this year and to submit it for voter approval in 2011.
The state, recognizing the new reality, has set the minimum required local effort, as it is called, at 5.314. That is more than the current 5.244 required local effort levied by the Levy County School Board.
If the district’s millage is less than the statewide average, the board has the authority to levy another .748 mills.
The millage for capital improvements drops from 1.75 mills which the district levies, to 1.5 mills by state mandate.
Bottom line, the board can levy 7.562 mills without the additional .25 the Legislature authorized for next year. If it chooses to go for the additional .25 mills, the total would be 7.812 mills.