See the local revenue numbers at center of school funding dispute

Note: This story was updated at 11:35 a.m.

It might be difficult to understand the concerns about Oak Ridge Schools’ funding and the state maintenance of effort test without seeing the local revenue numbers.

So, Oak Ridge Today has posted a copy of a maintenance of effort spreadsheet provided by Karen Gagliano, Oak Ridge Schools business and support services director. This spreadsheet includes budget adjustments that helped reduce the local revenue shortfall from the original $393,000 to a smaller $250,000.

Oak Ridge education officials have asked the city to cover that smaller shortfall to avoid a loss in state funding of $1.87 million per month and avert a school shutdown on Oct. 1. It’s the equivalent of a 2.5-cent property tax rate increase, although it’s too late for a tax increase this year.

Oak Ridge City Council members are prepared to meet in a special session next week to try to resolve the issue, although they have asked school officials to provide documentation explaining the request and copies of any formal notice from the Tennessee education commissioner that he has agreed to withhold all of the state funding for Oak Ridge Schools starting in October.

The two-tier maintenance of effort, or MOE, test is used to compare local revenues from year to year and ensure that they remain at least the same. If they fail that first-tier test and there has been a drop in attendance, then the second tier of the test checks to see whether per-pupil spending stays the same or increases.

Oak Ridge failed both tests this year, Gagliano said.

In a Thursday e-mail, she said the schools have reduced the local revenue shortfall to $250,000 through changes made to property, sales, and mineral taxes that the school system will make internally to the Fiscal Year 2014 projected revenue budget. The changes are based upon actual FY13 revenue received, Gagliano said. (The changes are shown in spreadsheet in the notations where amounts have been added or subtracted.)

The correction at the bottom of the spreadsheet pictured above—the $250,000 mentioned in the fourth line from the bottom—refers to the requested general fund transfer from the city, Gagliano said.

“Those changes would make the second tier of the formula pass, with a per-pupil revenue for FY14 equal to FY13,” she said. Per-pupil spending in both years would be $6,290.

Gagliano said the state compares the Amended Budget 2012-2013 column to the Budget 2013-2014 column.

The amount of the shortfall, $250,000, is roughly equivalent to the amount of money that’s at the heart of a dispute over how to spend new revenues generated in Anderson County outside of Oak Ridge under a 2006 sales tax referendum. Municipal officials say the money should continue to flow through the schools to the city for debt repayments on the $66 million renovation of Oak Ridge High School, but education officials say the money was forwarded for five years under an unwritten “gentleman’s agreement” but should now be used for school operational expenses.

“School districts do not use operational funds to buy buildings,” Gagliano said.

The 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.

School officials pin the blame for this year’s shortfall on an Oak Ridge City Council decision to withhold about $766,000 from the school system in May 2012 as part of the dispute over the new sales tax revenues in Anderson County.

During a Monday night Council meeting, Oak Ridge Board of Education Chair Keys Fillauer said he warned Council then that maintenance of effort would be a problem and that what was occurring was illegal.

“Now, it’s come back to happen,” Fillauer said.

Oak Ridge City Manager Mark Watson has said he doesn’t think the $766,000 was necessarily withheld since it was still used for educational expenses, and he 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.

On Monday, Fillauer said he was disappointed by a newspaper column written by Watson and published that day, and the fact that Council hadn’t publicly discussed the maintenance of effort issue.

“I am convinced that if it is not resolved by Oct. 1 and the (state) Basic Education Program funds are withheld at approximately $1.8 million per month, we will have no other option at that time but to close the schools,” Fillauer said.

See the spreadsheet as a PDF: Oak Ridge Schools Maintenance of Effort 2014.