Tennessee officials had little to say on Wednesday about the potential loss of state education funding that Oak Ridge school officials have said could cost the school system $1.87 million per month—and lead to a temporary school shutdown on Oct. 1.
“We are starting to have meetings with various people regarding this situation, but at this point, we don’t have anything to report,” said Kelli Gauthier, communications director for the Tennessee Department of Education.
Oak Ridge education officials have said the school system failed to meet a state maintenance of effort test that requires local funding to remain at least the same from year to year. If the city fails to cover a $250,000 shortfall in local revenues by Oct. 1, the schools would lose the state money—known as Basic Education Program funding—and the district would have no choice but to temporarily close, local education officials said.
But city officials are skeptical that the Tennessee Department of Education would withhold all the BEP money, which is about one-third of the school system’s funding, if it withholds any. Oak Ridge City Manager Mark Watson said the city is not delinquent yet.
Covering the $250,000 shortfall could require the equivalent of a 2.5-cent property tax rate increase. Watson said it’s too late for a tax increase this year.
The state maintenance of effort, or MOE, test adds up county taxes—property, sales, and mineral severance taxes—and local revenues that include investment income, leases and rentals, certain maintenance and operations funds, and the general fund transfer from the city.
The two-tier MOE test first checks whether local revenues have remained at least the same from year to year. If they don’t and there has been a drop in enrollment, then the revenue-per-pupil has to stay the same. Oak Ridge, which has had a drop in enrollment, failed both tests, said Karen Gagliano, director of business and support services for Oak Ridge Schools.
School officials pin the blame for the shortfall on an Oak Ridge City Council decision to withhold about $766,000 from the school system in May 2012 as part of a dispute over how to spend new tax revenues generated in Anderson County under a 2006 sales tax referendum. That dispute centers on about $250,000 in new revenues collected in Anderson County outside Oak Ridge, although the exact amount generated varies from year to year. School officials said they forwarded the money to the city for five years under a “gentleman’s agreement†for debt repayments on the $66 million renovation of the Oak Ridge High School, but that agreement is no longer in effect.
School officials said the original shortfall in the state’s MOE test was even higher—$393,000. But through budget adjustments, they were able to cut it to $250,000.
“We’re trying to do everything that we can to lower the city’s burden,†Oak Ridge Schools Superintendent Bruce Borchers said.
Watson said the city has been providing the same level of funding to the schools, or about $13.9 million per year, but it is expected to make up shortfalls elsewhere, including when federal funds are cut or when sales tax revenues drop, such as when a Kmart store in Clinton closes.
“The last recourse is us,†Watson said. “It gets to us to make up that differential if we’re the last man standing.â€
Sam Hopwood says
The SB chair has not had much sucess in getting city council or the city manager to join him in panic mode. This is a good thing. Our sterling school system is going to be just fine. The sacred cow will continue to moo, graze and deposit large cow chips. At the appropriate time council will once again bail out the SB. GO VOLS…. BEAT OREGON!!!
Side bar: Where is John Smith when you need him……
Angi Agle says
I’m trying desperately to get John Smith to run for City Council. Maybe if you joined in asking, he would?
Sam Hopwood says
Oh, if only I had that kind of clout!! 🙂
richard says
probably correct about things settling down and being fine…but what is the cause of this mess and the bickering between the City and SB over the City “withholding” funds and about Sales Tax for paying the HS Debt?
Sam Hopwood says
It’s a long story, to long for me to go into, but suffice it to say that the SB started withholding sales tax that they receive from the county which the city says was supposed to be forwarded to the city to help pay for the HS renovation. The city then started withholding that amount from the schools budget that the city provides. Neither side has budged so far and that is where we are. My view is that the SB is wrong and the city right. Who knows how it will finally end up.
Dave Smith says
“But city officials are skeptical that the Tennessee Department of
Education would withhold all the BEP money, which is about one-third of
the school system’s funding, if it withholds any.”
Mr. Huotari, who are the city officials who are skeptical, in addition to the City Manager? On what are they basing their skepticism?
If a city employee misplaced or lost $1.87M would that be grounds for dismissal, even if it was school system money?
I’m just wondering.
johnhuotari says
Dave,
Mark Watson was the primary source and the first to express skepticism. It was my general sense after talking to a few city staff members, including Watson, that they were skeptical because they say Tennessee law gives the state education commissioner discretion to withhold all or part of the BEP funding, and they seemed to find it unlikely that the state would withhold all of the BEP funding based on a $250,000 shortfall.
Mark Watson asked me rhetorically during my interview with him last week if the state would penalize the school system with a loss of $1.87 million per month in funding over what he said works out to a $25,000 per month shortfall (based on a 10-month school year). He didn’t seem to think they would.
As I’m sure you know, school officials have a different perspective, and the state has not said much about this yet.
I have some additional information I haven’t reported yet and will try to include that in a story that I will post today (Friday).
Thank you.