Flawed tax rate formula costly for school systems
Jul 03, 2014 | 1235 views | 0 0 comments | 21 21 recommendations | email to a friend | print
An error found in the certified tax rate formula for Bradley County resulted in a nearly $1 million loss to more than just the local government.

Directors of the county and city school systems recently explained the mistake’s ramifications for public education at the local level.

“I would be concerned at the county level with a mistake of that magnitude. It hurt us. We can’t blow it off and say, ‘Oh, well, OK, we will get it fixed next year,’” said Director of City Schools Martin Ringstaff. “We made a lot of deep cuts, and our school board stepped up and made some deep cuts [we felt] would have affected the students.”

Bradley County’s current property tax rate is $1.8254 for each $100 worth of assessed property. The tax rate was supposed to be $1.8721 for each $100. The certified property tax rate was about 5 cents lower than it should have been.

A state bill signed into law after the most recent General Assembly allowed the county to move forward with the property tax rate change to $1.8721 for the next year.

The move was made possible by an amendment to the Tennessee Code Annotated, Section 67-5-1703, which includes the following allowance: “A levy of tax found to be based on an erroneous calculation may be revised prior to tax billing on certification of a revised calculation by the state board of equalization accepted by act or resolution of the governing body of the affected taxing authority without further notice.”

Although 5 cents does not appear to be a large discrepancy, the amount multiplied by the number of local taxable property adds up. The lower tax rate resulted in the county’s lower-than-expected revenues across the board.

Bradley County Mayor D. Gary Davis reported the amount split by the school systems would have been roughly $500,000.

“The portion that goes to schools is then divided by the Average Daily Attendance, which is a third for us and two-thirds for the county schools,” said city schools financial officer Brenda Carson. “We would have received 33 percent, which would have been roughly $165,000.”

The county school system would have received around $335,000. The money would have made several recent budget adjustments unnecessary.

This includes alterations made by the Bradley County Board of Education to the $69,310,500 budget proposed by Director of County Schools Johnny McDaniel. A total of $250,000 was cut from the line item for teacher salaries and money allocated for capital projects.

A total of eight teaching positions were eliminated from the Bradley County school system’s budget for the 2014-15 fiscal year.

McDaniel’s recommended budget included drawing the salaries of three special education teaching positions from the school’s fund for general teaching salaries, to account for a lack of funding which eliminated three regular teaching positions.

The county school board later voted to make the $250,000 allocation for capital projects, drawing from the fund for teacher salaries and eliminating five more teaching positions.

Carson reported the city school system’s budget was already set and approved for the 2013-14 school year by the time she realized revenue numbers were low.

Ringstaff explained initial low numbers resulted in the instructional monies used for items like textbooks, software and lab equipment to be frozen early this year.

“I don’t know what [the money] would have been used for,” Ringstaff said. “The reason I don’t know that is because principals were stopped from making those types of decisions in February.”

The numbers confused and startled both Ringstaff and Carson. The financial officer said there was nowhere else to cut.

“When we saw that was the way the property and sales tax were going to be this year, it had to be reduced, because our budget was more than what we were actually receiving,” Carson said. “We had to cut that. The only thing to offset it would be to actually reduce those two revenue line items and take the money out of fund balance to offset the reduction.”

She said the full impact of the low property tax revenue on the city school system will not be fully realized until the end of the 2013-14 budget. She said the issues caused by the certified tax rate error were further complicated by the low sales tax revenue found statewide.

The city system has also cut each school’s allocations by 10 percent for the 2014-15 school year in preparation of another poor revenue year. The change was made prior to the announcement of the error.

“At this point, our budget is approved. We can’t go back and redo next year’s budget now,” Carson said. “What we will do is wait and see. If next year’s budget runs along, hopefully we will begin amending it and place those revenues back in.”

While the changing property tax rate could mean the revenues will be higher than originally projected, McDaniel said there are no immediate plans to make amendments to the county school system’s budget.

If the school system does receive extra tax revenues, some might wonder if that means it could add back some of the teaching positions it lost.

“I sure hope so,” McDaniel said. “We have to go by what the budget allows.”

One uncertain piece of the puzzle is what the final school enrollment numbers will be in the fall.

The state dictates class numbers for students, and the school system has to ensure there is a required student-teacher ratio.

Despite the elimination of eight teaching positions when the county school board passed its budget, an unexpected increase in enrollment could require McDaniel to approach the school board to ask it to hire more teachers.

Rick Smith, the county school system’s business office manager, said the budget would have to be amended by the school board in order for the funds to be added into a specific line item like the one for teacher salaries.

If the local school systems amend their budgets, the expected increase in tax revenues could give the local school systems more money to address their specific financial concerns when the county begins collecting payments for 2014 property taxes this fall.

Despite the promise of a possible tax revenue increase, Ringstaff said a 10 percent cut at each of the city schools will be felt.

“[Principals] don’t get their budgets from us at the beginning of the year and say, ‘Yay,’” he said.

Carson added, “They get their budgets from us and say, ‘How do I make this work?’”

Ringstaff pointed out budget cuts are felt from the administrators of a school system to the students in the seats.

“One way or the other, students would have felt a budget cut,” he said. “Teachers feel it. We feel it. It is not good for education when you start looking at budgets and you try to find ways to dwindle them down.”