For the second straight year, Lowndes County School District must borrow money to make December payroll.
Meanwhile, the district’s operating fund balance has nosedived to negative-$305,000, according to business administrator Kenneth Hughes.
Board members begrudgingly approved a resolution to borrow up to $2.6 million in a tax anticipation loan Friday afternoon during their last regular meeting of 2019. Four of the five board members voted for the measure after heated discussion, much of it aimed at Hughes. Jacqueline Gray abstained.
LCSD will immediately borrow $1.2 million to deal with upcoming payroll needs, Hughes told the board. It will borrow the additional $1.4 million in January only if limited cash flow deems it necessary, he said.
Hughes also told the board the district is “$2 million better off than we were this time last year,” noting that in December 2018 LCSD borrowed roughly $4 million in a tax anticipation loan to make payroll.
Hughes said only about 30 percent of ad valorem (real and personal property) taxes — the primary local funding source for the district — is collected between July and December, while the remaining 70 percent is typically collected in January and February. LCSD will fully repay the tax anticipation loan by Feb. 20 once the majority of local tax collections hit the books.
“The way to get out of this cash flow crunch is to build the fund balance up,” Hughes told the board. “We used to have a fund balance of $12 (million) or $14 million when I started here. … We don’t have that anymore.”
The district began the 2019-20 fiscal year in July with nearly $6 million in its operating fund balance and has spent that down into the negative, Hughes told The Dispatch after Friday’s meeting.
“That’s the reason we’re going to borrow money,” Hughes said. “We’ve been living on fund balance waiting on the ad valorem tax to come in. By February, we’ll collect $7 (million) or $8 million more (in ad valorem), pay off the loan and build the fund balance back to about $6 million again.”
The interest rate for the tax anticipation loan, Hughes said, is 3.15 percent. For $1.2 million, that’s $37,800. If the district borrows the whole $2.6 million, interest will total $81,900.
Board member Brian Clark, speaking to The Dispatch after the meeting, noted the interest payment alone amounts to one or two teacher salaries — a particularly valid point, he said, less than a year after the district eliminated 64 teaching positions to save money.
“I would much rather use that money toward staffing our schools than paying interest to a bank,” Clark said.
During Friday’s meeting, Clark, Gray and board member Jane Kilgore questioned Hughes on when he knew the district would need a tax anticipation loan for December and why he didn’t report that to the board sooner.
Hughes responded he had “mentioned it in October or November,” but none of the board members recalled it. Board Attorney Jeff Smith said he “vaguely remembered” Hughes mentioning the possible need for the loan.
“It’s a shock to me,” Clark told The Dispatch. “I had no indication we were going to have to borrow this money until this week.”
Robert Barksdale, LCSD board president, said he’s also unhappy about having to borrow for a second straight year to make December payroll. But he also noted financial progress since last year.
“It’s a problem right now, and I don’t know where we need to be in our operating fund balance to avoid it,” Barksdale told The Dispatch. “But last year we had to borrow substantially more, so we’re reducing that amount this year.”
Though Clark and Kilgore OK’d the loan, they voted not to accept Hughes’ financial report to the district for November. With Gray abstaining from that as well, that means the monthly financials were not endorsed by a majority of the board.
Debt service
While tax anticipation loans are a common tool school districts use to deal with lean cash flow in December, Starkville-Oktibbeha Consolidated School District spokesperson Nicole Thomas said 2016 was the last time it was done there.
Columbus Municipal School District hasn’t taken out such a loan since before 2012, board president Jason Spears told The Dispatch. In fact, Hughes — who was terminated there in 2013 before joining the LCSD staff — was CMSD chief financial officer the last time it was done.
Moreover, Spears told The Dispatch on Friday CMSD has maintained the roughly $4.5 million operating fund balance with which it began the fiscal year, even after transferring $700,000 from that fund to the district savings account.
CMSD and LCSD share the same tax collector, Greg Andrews, meaning the two districts receive their tax collections at roughly the same intervals.
The Dispatch couldn’t reach Andrews for comment by press time.
One glaring difference between the city and county school district is debt service — the county district is repaying debt on a $44 million bond issue from 2015 that funded building projects at multiple campuses, including a new Career Tech Center on Lehmberg Road.
The annual payments on that debt rose by more than $1 million to $3.7 million this fiscal year.
LCSD also used operating fund balance, which stood at $17 million in 2014, to fund other building projects without a bond issue.
Teacher transfer controversy
Aggravation over the tax anticipation loan spilled over into discussion regarding outgoing Superintendent Lynn Wright’s recommendation to transfer an elementary teaching position from Caledonia to New Hope.
The board ultimately approved the recommendation by a 3-2 vote, with Clark and Kilgore opposed.
Wright, who will be replaced by New Hope Middle School Principal Sam Allison on Jan. 1, said a Caledonia second grade teacher had retired this month. But instead of replacing her, he asked the board to convert that position to a kindergarten teacher at New Hope. He argued New Hope Elementary has 84 more students than Caledonia, but the schools have the same number of teaching units. To keep student-to-teacher ratios at an equitable level, the position needed to be moved to New Hope effective immediately, he said.
As a result, though, the Caledonia students who were in the retired teacher’s class will be redistributed among other teachers’ classrooms for the rest of the school year.
Clark, referencing 64 teacher position cuts this year and the district’s debt service bill, openly criticized the proposal.
“If we’re cutting teachers to make the bond payments, I have a problem with that … because our teachers are the boots on the ground,” Clark said. “… I want to make sure we’re not eliminating more positions because of cash flow.”
Instead, Clark moved to leave the teaching unit at Caledonia Elementary and create a new position at New Hope. That motion failed, with Barksdale, Gray and Wes Barrett opposing. Then the board approved Wright’s recommendation.
Specifically, Gray said she thought Clark’s motion sought to “micromanage” the administration.
“I think we should stay with our duties, which are to accept or reject the superintendent’s recommendations (rather than amend them),” Gray said.
Wright also recommended adding an academic coach for Caledonia Middle School, which he said was fully federally funded and the board accepted; and an assistant teacher unit at New Hope Elementary, which was tabled after the board learned the school already had a vacant assistant teacher spot in the budget.
Zack Plair is the managing editor for The Dispatch.
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