Sales tax revenue may save Blount County Schools from losing state funding | News

Sales tax revenue coming in higher than projected this spring may save Blount County Schools from losing nearly $5 million a month in state funding starting in October.

BCS plans to ask the County Commission to approve a change this month to the general purpose school budget that wouldn’t alter the amount the district spends but would change the source of money.

The district planned to use more than $1 million from its undesignated fund balance for costs related to COVID-19. The budget amendment would rely on $580,000 of that coming from an increased sales tax revenue estimate instead.

Local funding rule

Without that infusion of area revenue, BCS would fail a “maintenance of effort” (MOE) requirement from the state, which is designed to keep local governments from cutting education spending.

Area revenue in the BCS general purpose budget totaled $42.58 million for the 2019-20 school year. However that was expected to be only about $42 million this year, with decreases expected in sales tax revenue, mixed drink taxes and investment income.

Accounting mistakeThe district’s fiscal administrator, Troy Logan, took responsibility for an accounting mistake while preparing the 2020-21 budget, according to a memo sent to school and county officials last week.

During a meeting Tuesday, Sept. 1, with the commission’s Education Committee, he explained that there are two ways to measure MOE, which requires that local revenues equal or exceed the previous year’s.

Logan realized that local funding to BCS would fail the test based on total funding from year to year.

However, when he calculated whether the BCS budget would pass the MOE test on a per-pupil funding basis using enrollment data, “I simply used the wrong year,” Logan said. If enrollment had declined, the budget might have passed the MOE test with less money than the previous year, but last year BCS enrollment rose.

Logan discovered the error when he uploaded the budget to the state.

Without a change, the state could withhold BCS funding under the Basic Education Program (BEP) starting in October.

“That would be devastating,” Logan told commissioners.

That pool accounts for about $48 million annually — 52% of the BCS budget.

Without that money, Director Rob Britt said BCS couldn’t meet its payroll.

The budget amendment Logan prepared would decrease the amount of revenue coming from the fund balance by $580,000 and increase the amount expected to come from the local sales tax by the same amount.

When Logan prepared the budget this spring, officials were estimating a 10% decrease in sales tax revenues because of shutdowns and decreased shopping related to the coronavirus.

Recently the actual revenue came in and was down only 2.5% in July and up more than 9% in August, Logan said.

That “supports an increase of nearly $500,000,” the memo states. “I’ve got to make it $580,000 to get there,” he told Education Committee members. “That’s the only way to pass it.”

He repeatedly emphasized his mistake in the calculation but said, “in the end we’ve got to meet maintenance of effort.”

The Blount County Board of Education is scheduled to consider the budget amendment at its meeting Thursday, Sept. 3, and if it passes, the county Budget Committee would consider it next.

“I sure am glad I was wrong on the tax estimate,” Commissioner Mike Akard quipped, referring to his comment this spring that the sales tax revenues would be even worse than predicted.

Several commissioners and school board Chairwoman Debbie Sudhoff voiced support during the meeting for Logan, who has worked for the school district 20 years, and understanding about the error.

“I appreciate your owning it and offering a solution for it,” Commissioner Nick Bright said.

Attendees at the committee meeting in the courthouse were spread out among chairs and benches. “You do a whole lot better social distancing than my kids at school,” remarked Commissioner Dodd Crowe, who teaches eighth grade at Carpenters Middle School and chairs the committee.

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