DOCUMENT RESUME RC 020 975 ED 406 082 Margolin, Arnold AUTHOR Fragile: Education in the Balance. West Virginia TITLE County School Boards: Deficit Experience, Fiscal Years 1990-1995. West Virginia Education Fund, Charleston. INSTITUTION Claude Worthington Benedum Foundation, Pittsburgh, SPONS AGENCY Pa. PUB DATE Jul 96 NOTE 55p. Statistical Research/Technical (143) Reports PUB TYPE Data (110) MF01/PC03 Plus Postage. EDRS PRICE *Budgets; Costs; *County School Districts; DESCRIPTORS *Educational Finance; Elementary Secondary Education; Rural Schools; *School Personnel; School Taxes; *State Aid; Student Transportation; Tables (Data) *Budget Deficits; Funding Formulas; Population IDENTIFIERS Density; *West Virginia ABSTRACT This report examines the financial ability of West Virginia's 55 county school boards to balance their budgets for fiscal years 1990-95. Data were gathered from annual financial statements of the county boards, annual state budgets, various state reports on education, and a survey of districts that did not incur any deficits. An overview of West Virginia's financial environment examines the following critical changes: new state funding of capital outlay for building construction and maintenance, resulting in widespread school consolidation; a program to reappraise property values for tax purposes; a new teacher retirement system; changes to the state aid funding formula, reducing the numbers of school personnel; proposed constitutional amendments to impose additional property tax levies; and major legal challenges to the state's school financing system. An examination of the 6 fiscal years, 1990-95, found that student enrollment and the number of school personnel decreased each year; a total of 78 deficits were reported during the period; the number of counties reporting deficits each year increased during the period; and 22 of the 55 counties did not report any deficits. The most prevalent factors contributing to deficits were changes in the school aid formula, lack of excess levies to fund schools, sparsity of population, transportation expenditures, and other required program costs. This report includes 34 data tables detailing school district statistics, a glossary, and information on the West Virginia Education Fund. (SV) ********************************************************************** * Reproductions supplied by EDRS are the best that can be made * from the original document. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ** * * * * * * * * * * * * * * * * * * * * ** * ** * * * * * * * * EDUCATION U.S. DEPARTMENT OP and improvement 0O Office of Educational Research O INFORMATION EDUCATIONAL RESOURCES ERIC) CENTE reproduced as O gorg-is document has been organization received from the person or originating a. made to improve Minor changes have been reproduction auality. P-4 stated in this docu- Points of view or opinions represent official ment do not necessarily OERI position or policy. "PERMISSION TO REPRODUCE THIS IAL MATERMATERIAL HAS BEEN GRANTED BY /;61 TO THE EDUCATIONAL RESOURCES INFORMATION CENTER (ERIC)." Education In The Balance West Virginia County School Boards: Deficit Experience Fiscal Years 1990-1995 Arnold. Margolin Education Policy Research Institute West Virginia Education Fund Charleston, West Virginia July 1996. WestVirginia County School Boards:Deficit Experience FiscalYears 1990-1995 Arnold. Margolin Edueation Policy Reseirch Institute VVeSt. Virginia Education Fund haileston; Weit Virginia July 1996' ©1-996 West Virginia Educaiiori Fund West Virginia Education Fund Jane. Dr. Applegate. II Li/ Mr. Thad Epps, Chairman Education Policy Research Institute Mr. C. R. "Bud" Hill, jr. Mr. Paul' Jenkins..., Research Review Committee Dr. Priscilla .Leavitt Mrs. Sharon Lowe Dr. Henry Marockie , Mr. Lewis N. McManus Mrs.Vivian G: Owens Mrs. Emily B. PapadOpOulos Mrs. Wanda SiMpkins Mr. L. Newton Thomas, J Mr. Jerry ThOrripson orthinkton Benedum Foundation, for Special thanks to the Claude: providing long-term financial support and technical assistance for The Education Policy Research Institute. ACKNOWLEDGMENTS It is a distinct pleasuresto recognize:the help and cooperation I received in the preparation of this report. .. During.the -course of the research, I benefited' greatly from the advice and counsel of ever)/ member of the Research RevieW Committee of the West Virginia Education Fund's Education PoliCy Research Institute. The Committee members' collective wisdom and constructive comments provided the necessary support and guidance to complete the study. Their unconditional commitment and total dedication to imp.rov- ing the quality of public eduCation serve as an inspiration to all West Virginians. A truly grateful expression of thanks goes to.Mr. Thad Epps, Chairthan of the Research Review Cortimittee, Whose insightful analysesand probing questions along the way kept the project focused. State Superintendent of Sehools, Dr. Henry Marockie, and his excellent staff were extremely generousiin sharing their expertise, providing: statistics and reviewing early draftS.of the study. In particular, Dr. Carolyn Arrington, Assistant State Superintendent, and Mr: Joe Panetta, birector of School Finance, deserve-special'acknowledgment for their volumes of assistance. I am indebted to the 55 County Superintendents, who tookthe time from their demanding positiOris to respond to surveys, make suggestions, offer solid critiques and provide new ideas concerning the issues addressed in the study. To.all my colleagueS at the. Education Fund, who graciously devoted quality time to examining drafts, and to Mrs. Barbara Joseph, for her superb editing skills, I express my deepest appreciation . Finally, every researcher needs a leader to provide him with a combination of subtle psyc-hology and direct truth-tellin. Through this-project, my leader has been Mrs. Vivian Owens, Executive Director of the West Virginia Education Fund.- kis a privilege to mention the'narneS of those above, all of whom made substan- tial cOntributiOns to this study, and absolve them of any errors or shortcothings in the final product.- Table of Contents *Introduction Historical Background The Financial Environment Funding of Capital Outlay (School Building Authority) PrOperty Reappraisal Prograrn New Teacher Retirement System 5 State Aid Funding Formula 5 .. Proposed Constitutional Amendments (Excess Levies) 6 Major Litigation 7 Contributing Factors 8 School. Aid Formula Changes 8 Absence of Excess Levies 8 Sparsity of Population 10 Transpoetation Expenditures 10 Other Required Program(s) Coits 10 County Survey*Results 12 Report Conclusions 13 Summary Observations 16 Tablei Number of Students, Professional and. Service Perionnel T-2 1 T,2 Unreserved County Fund Balances, June 30, 1990 2 Unreserved County Fund. Balances, June 30, 1991 T-2 3 Unreserved County 'Fund Balances, June 30, 1992 4 T-3 Unreserved County. Fund Balances, June 30, 1993 T-3 5 T-4 Unreserved County. Fund Balances, June 30, 1994 6 Unreserved County:Fund Balances, June 30,1995 T-4 7 8 .Counties Without Deficits,'Fiscal Years .1990-95 T-5 ' 7-5 9 : Public School Support Program 1990-91 through 1994-95 10 Cdunty. Boards of Education, Excess Levies, 1994-95 T-6 II County Professional Personnel, Fiscal. Year 1989-90 T-7 12 COunty Professional. Personnel, Fiscal Year 1990-91 T-8 County professional Personnel, Fiscal year 199142 13 T-9 14 CoUnty Professional Personnel, Fiscal Year 1992-93 T-10 County Professional Personnel, Fiscal Year 199344 15 T- I.1' 16 County Professional Personnel, Fiscal Year 1994-95 T-12 County Service Perionnel,.Fiscal.Year 1989-90 T,13 .17 18 COunty SerVice Personnel, Fiscal Year 199041 T-14 19 County Service Personnel, Fiscal Year 1991-92 T-15 20 Cotinty Service Personnel, Fiscal Year 1992-93 T-16 County Service Personnel, Fiscal Year 1993-94, 21 T- I 7 T-I8 22 County Service Personnel; Fiscal Year 199445 ' T,19 23 County Deficits, NuMber of Employees, Fiscal Year 1994-95 24 EXcess Levy Per PUpil, Fiscal Year 199445 T-20 25 Student Density Ranking, Sparsely Populated Countiet':199445 T-2I 26 Student Density Ranking, Counties Above 10 Students (psm) 1994-95 T-22 27 Counties Without an Excess Levy, 1994-95 T,22 28 Transportation Costs, Fiscal Year 1989-90 T-23 29 Transportation Costs; Fiscal Year 1990-9.1 1724 30 Transportation Costs, Fiscal Year 199.1-92 T-25 Transportation Costs, Fiscal Year 199243 T-26 31 32 'Transportation Costs, Fiscal Year 199344 T-27 33 Traniportation Costs, Fiscal Year 1991-95 T-28 34 County Boards of Education Unreserved Deficit FUnd Balances, Fiscal Years 1990 -95 T-29 Glossary ofTerms t T-30 iv About the West Virginia Education Fund. -r32 INTRODUCTION Superintendent of Schools, Dr. Tom McNeel. The purpose of this.reportis to exani- The "Final. Computations, Public ine the county school boards' financial School Support. Program" a document ability to successfully balance their prepared by the School Finance DiVision respective fiscal year budgets. The time Of the State Department of EducatiOn, period included in the study covers the fiscal years 1990-1995. last six figcaliyeats, 1990-1995, 'as the basis for observation. The speCific s The "Fair Share Dilemma a objective of the research is to identify the technical report prepared by Dr.:Mary H. most salient factors which appear to be Hughes of the West Virginia Education affecting the overall fiscal condition:and Fund, dated December, 1992., financial soundness of West Virginia's Responses to .a survey questionnaire, 55 county school boards. The examina -, sent to each of the 22 county school tion also seeks to provide some insight in districts which did not incur a deficit in determining why the number of-school. any of the six fiscal years included in the districts which have beenexperiencing study. The survey, designed to gather end Of the year defieits is increasing. additional information regarding signifi- cant financial strategies, included ques-. SOURCES OF. INFORMATION tions relating to (1) specific budgetary . The primary sources of data utilized for actions, (2) .avoiding deficits and (3) the research project included the, follow- decisions which helped generate the ing: greatest cost effiCiericies. . . The detailed annual financial State- "West Virginia State Budgeting For mentS and reports submitted 6y the Education," a paper prepared by. Profes- .counties to the State Department of sor Richard Meckley of West Virginia' Education for each of the six fiscal years, University, dated April 5, 1991. 1990,1995. The audited financial Statements of the counties for the fiscal years 1990- 1994. For fiscal year 1995, the amounts are 'from unaudited Statements: The State budget.for each fiscal year and, for the fiscal years 1992:1995, the "Comprehensive Annual Financial RePort," prepared by the State.Depart- merit of Administration.. The "Final Report of the GoVernor's on Education, " dated August CbrnMittee 15, 1990. The 21 committee members Were appointed in May, 1990 by Gover- nor GaSton Caperton.: Thereport, "Schools in. CrisiS Students at Risk," dated March, 1989. This report was prepared by a special task force on rural school districts. The: members were appointed by then State HISTORICAL BACKGROUND (BOone, Braxton, Clay, Doddridge, Gil'mer, Greenbrier, Hampshire, Hardy, In 1989-90 West Virginia's public Kanawha, Nicholas, Pendleton, Prestoh, school enrollment' stood at 319,660. Summers and Wood). In PY 1994, 17 Without exception, each subSequent counties recorded deficits, the:naost school: year haS witnessed a continuing during any of the six years included in decrease in the number of students the study. attending public sChool. In 1994-95, it The most recent year for which data is had declined to 305,432 a cumulative available; FY 1995, indicates 16 counties reduction of 14,228, or 4.45 percent: In. renorting a:deficit, or, approximately 29 1990-91, it was 315,327; in 1991-92, it percent of the State's 55 counties: They was 312,707; in 1992-93, it was 310,670; are BraktOn, Clay, Grant, Hardy, and in 1993-94, it was 307,167. Harrison, LinColn, Mingo, Monroe, Similarly, the number of professional NiCholas, Pendleton, Randolph, Ritchie, and service personnel employed in our Roane, Summers, Tucker and Webster. public schools has experienced a steady Tables 2 through 7 summarize the and consistent dOwnward trend. The specific deficit amounts reported for each number of professional personnel in respective fiscalyear 199071995, calcu- fiscal year 1990 (FY 1990) was 23,758; lated on a per pupil basis. by FY 1995 it had dropped to 22,454,. An examination of the six fiscal years, representing a decrease of 1,304, or 5.49 199.0-1995; reveals the following: percent There were a total of 78 deficits SerVice personnel employed in FY reported; 1990 was 14,503; in FY 1995, it was One county (Clay) incurred a deficit 13,868 a net reduction of 635, or 4.38 every year; percent. These trends are detailed in One county (Summers) experienced a Table 1., located later in this report: deficit in five of the six yearS; Based on a review of annual financial Four counties (Kanawha, Nicholas, Statements submitted by the 55 County Tucker and Webster) had deficits in Boards of Education to the State Depart- four of the six years; ment.of Education for the study's time Of the 16 counties with deficits in the span, it appears another trend may be most recent year (FY 1995), 14 of developing an increasing number of them were also in a deficit position at counties are ending their fiscal years. in theend of 1994 (Braxton, Clay, deficit financial positions. Grant, Hardy, Harrison, Lincoln, For:the State fiscal year ending June Mingo,. Monroe, NicholaS, Pendleton; 0, 1990 (FY:1990); there were five Randolph, Summers, tuckeri and counties that reported a deficit (Berkeley, :Webster); Clay, Kanawha, Taylor. and Wyoming). Of those 14 counties, the magnitude The next year, FY 1991, the number of the deficit increased in 11 of them more than doubled to 12 (Barbour, (Braxton, Clay, Harrison, Lincoln, Calhoun, Clay, Harrison, Kanawha, Mingo,.Moriroe; Nicholas, Randolph, Logan, Mercer, Summers; Taylor, Stimmers, Tucker and Webster); and, Tucker, Webster and Wyoming). In FY On the positive side of the ledger; 1992, 14 counties incurred a deficit there were 22 counties which did not (Barbour, Clay, Greenbrier, Kanawha, . have a deficit in any of the six.years. Logan, Mercer, Nicholas, Raleigh, (Table 8 lists them and their respee-, Summers, Taylor, Tucker, Webster, tive fund balanCesaf the end of fiscal Wood and Wyoming)..Again, in FY 1995). 1993, 14 counties experienced a deficit !For purposes of definition, the enrollment figures for each yearrepgsent the number of students on.which State funding . was based. During this period of declining:enroll- ments and decreasing employment -. -levels: . Why are an increasing number of county school boards struggling to balance their budgets?: What factors are contributing to the financial problems? Are there any common variables at Work, which would help :explain. what is happening among and between the 55 different counties? What can we learn:from the 22 countieS which have not experienced any deficits in the last six years? Can their success be replicated in the other. jurisdictions? . Are there structural problems inher- ent' to our. School:Aid Formula which possibly could be contributing to the -problem? A comprehensive analysis, specifically 'addressing the fiscal "and financial. Condi- tion of our school districts will provide some insight to these inquiries. More- over, it will; serve as a timely and rel- evant resource in our collective efforts to maximize the efficientmanagement of every.dollar we spend to finance public: education in West Virginia. mately $132.85 million from the State's THE FINANCIAL ENVIRONMENT general revenue fund (FY 1990, $7.74 .In order to increase our understanding million; FY 1991, $21.44 million; FY of the current fiscal condition of the 1992, $21.44 million; FY 1993, $23.44 . school districts, it is impOrtant to identify milliori; FY 1994, $35.44 million; and the nost significant changes (i.e., pro- FY 1995, $23.35 million). grams, policies, litigation and funding. formula revisions) that have altered West Property Reappraisal Program Virginia's global financial :environment PrOperty tax revenues are a major and the State's overall school finance funding source for schools in West system; These critical changes include Virginia. In FY 1994, the total property the following: taxes levied statewide were $670.6 Funding of Capital Outlay School Of this amount, $457.2 million :Building Authority) (68:2 percent) was distribUted to public Property Reappraisal Program :elementary and secondary edtication. The New Teacher Retirement System State received $2.5 million (.4 percent); State Aid Funding Formula counties received $160.3 million (23.9: Proposed Constitutional Antendinents percent); and the municipalities received (Excess Levies) $50.5 million (7.5 perOent). Major Litigation MoreoVer, as part of theca1culations in determining the total amount of State Funding of. Capital. Outlay (School,.. dollars 'provided to each county under the Building. Authority) School Aid Formula, the "local Share" must be computed (West Virginia Code, In 1988; the School Building Authority. 18-9A-11). Local shareTepreserits each was created (Chapter 18, ArtiOle 9D of. county's' financial contribution to public. the Code of West Virginia) to facilitate school costs based on the value of its real and provide funds for the acquisition, property. The local tax revenues are -construction and maintenance of elemen- subtracted from the bask foundation tary and secondary public school build- . coSts,(e.g., salaries, fixed.charges, trans-, ings.-As of lune:30, 1995; the. Authority portation, administrative casts, .current had committed to proNiide aPproximately expenses and improvement of instruc- $431.38 million2 in grants to county tional programs) to arrive at the amount, school boards. Thirty-nine new schools of State aid. have been opened, and 82 additions and Therefore, because the amount of 470 majOr renovations have beencom-: property tax revenues which are gener- pleted on existing facilities. ated each year is critical to the overall On March 18, 1994, legislation was financial syStern supporting statewide :passed Senate Bill No. 1008) which public education, the recently iniple ..dedicated up to $18 million in annual net mented property reappraisal program has profits Of the WeSt Virginia Lottery over had a profound impact on the relative a ten yearperiod, to fund bond isSues in amounts of education costs being borne an aggregate principal amount, not to by the State versus the individual coun exceed $160 million. ties. Prior to the eStablishment of this new The reappraisal program, which began funding mechaniSiri; the Authority July. 1, 1991, was Phased in over a three- received annual budget appropriations to year period. It required all tax assess- finance its building program: During the ments to be 60 percent of the Properties' Six fiscal years, 1990-1995, the. AuthoritY true and actual value, beginning. July 1, was appropriated a.total of approxi- . 'Independent Auditors' Report of the School Building Authori ty of West Virginia, Suttle & Stalnalcer, June 30, 1995, page .14. 'West Virginia.Tax Laws.,West Virginia Department of Tax and Revenue, 1993, page 85. 10