HOPE – An Arkansas Department of Education expert trained the Hope Public Schools Board in a Thursday evening workshop session on the reality of static state finances for public education, and the increasing need to stay up-to-date with budgeting and finance practices as local school districts become more responsible for their fiscal future.
ADE Fiscal Services and Support Coordinator Cynthia Smith said she prefers for her job to be one of front-end guidance and support with local school districts rather than remedial through the “fiscal distress” process.
“There are a lot of districts that will need help,” Smith said.
The Hope Public Schools is not currently in that situation, and Smith said she wants to keep it that way.
But, there are areas where the district needs to remain vigilant, she said, pointing to the district’s declining financial reserves.
Smith said the HPSD has lost some $1.1 million in state “foundation” funding since the 2014-15 school year. Foundation funding is the base funding given each school district stemming from enrollment, which is currently $6,899 per student, Smith said.
She said the foundation rate is expected to increase slightly to $7,018 per student in FY 2021.
Smith said Hope has lost 241 students since 2014. As a result, she said there is a two-fold impact, where the direct loss of state funds is coupled with the need to spread local tax revenues farther.
“Your tax dollars have to go farther,” she said.
And, in part, because “foundation” funding has declined from lost enrollment, the district’s ending balances from revenues have declined from $4.6 million in Fiscal Year 2017 to a projected FY 2020 ending balance of $2.3 million.
That means the HPSD must shepherd its tax base carefully, Smith said.
Total property value assessments taxed at a 34.7 mil rate produce some $6.5 million at a current 98 percent collection rate, Smith said. That also means debt service, which is calculated on 9.7 mils from the total 34.7 mils, will generate some $1.8 million per year at a 96 percent tax collection rate, she said.
The district currently pays some $1.2 million annually in debt service.
“Do not live off your excess debt service,” Smith warned. “Too many schools are living off it; and, you need to be aware of what can happen.”
She recommended the HPSD establish a reserve account for any excess debt service funds that can be applied to later debt service needs.
Changes in funding sources will be spare, Smith said. Other than the slight increase in “foundation” funds, a bump in English Language Learner funding from $345 per student to $352 per student is the only other funding increase anticipated in overall state-based funding through FY 2021.
Smith said some “categorical” funding will also have new requirements attached, such as a budget for Enhanced Student Achievement (ESA) funding which shows achievement has been accomplished with the funding.
“You are going to have to use that to get your test scores up,” Smith said.
Matching grant funds under ESA must also be evidence-based, but will include student transportation funding in FY 2020 and 2021.
Smith also warned that a minimum salary requirement for teachers set by law must eventually become entirely funded by each district, as will an increase in the state minimum wage law which rises from $10 per hour to $11 per hour in January, 2021.
She said salary increases of five percent or more for any individual employee must be reviewed by the school board and submitted to ADE by law. Smith said districts may now elect to pay a health insurance benefit for full-time bus drivers, which will create local costs not assumed by the state. And, districts which increase base salaries for licensed personnel must also increase their health insurance contribution rate by the same percentage.
Smith said, by law, school districts can no longer retain more than 20 percent of their current year “net legal balance,” but must make transfers from that balance to prevent cash accumulations.