'In the past three years our revenue has increased and our enrollment has decreased. And now I get a note that our expenditures are increasing at such a rapid rate that we have to borrow $21 million.'
– School Board member Julie Wade
THE NUMBERS tell the story:
• The Savannah-Chatham County Public School System costs about $31 million per month to operate. About $28 million of that is salaries and benefits.
•The district finds itself short $21 million to make payroll by October 15. They will borrow the money and repay it with interest by Dec. 31.
•The interest on that loan will be about $150,000 — roughly the same amount the district cut from social service funding in this year’s budget.
• The district’s School Nutrition Fund finds itself $1.5 million short. That money will be borrowed from the general fund.
• This past August, the School Board raised property taxes by 16 percent.
• Also this past August, Superintendent Ann Levett got a 2.1 percent cost of living raise along with the rest of staff. That brings her base salary to a whopping $247,592.50 per year, not counting perks.
That’s where the situation stands.
The borrowing of the $21 million just to make payroll is through an instrument called a Tax Anticipation Note (TAN).
A TAN is not unusual in the world of bureaucratic funding, and is often necessary to even out cash flow. Tax revenue only comes in once or twice a year, while staff has to get paid every two weeks.
But while a TAN is often routine, this particular TAN was anything but.
Board member Julie Wade says she found out about the financial mismanagement for the first time when she looked at the agenda packet for last week’s meeting.
“I’m like, oh my God, a $21 million TAN. That seems like a big deal and it’s the first I’ve heard about it. I’m very disappointed in the way this was rolled out to the board,” said Wade at last week’s meeting.
Wade said the Board was told earlier in the year by staff that they needed to raise the property tax millage rate “so we could make payroll in the fall.... The mill rate initially was rolled out to prevent this... to me this is not responsible stewardship of our funds.”
Wade says if it was known that the money from the summer tax increase wouldn’t all come in in time to make payroll, staff should have let the Board know.
The optics, as they say, are terrible.
So terrible in fact, that Wade and fellow Board member Michael Johnson actually voted against the TAN as a protest vote of the fiscal mismanagement by Superintendent Levett and staff, even though it involved paying employees.
“I want to put on notice to the district that we need to do better job not just for this year, not just for this time, but for future years down the road to make sure we have enough money in our account,” said Johnson.
“That way we’re not using taxpayer money to pay back a loan... that’s public money we’re going to have to pay to a private institution because we didn’t have the foresight to have the proper cash flow in order to pay all our bills and pay our people on the 15th,” Johnson said.
Board member Johnson is the incoming chair of the budget committee, and promises a more structured oversight of the budget process, along with some “deep dives” into school programs throughout the district.
Outgoing Board President Jolene Byrne, in one of her last meetings, was equally horrified by the TAN but ended up joining the majority in voting to approve it.
“I certainly can’t be responsible for 5,000 people not getting their paycheck in two weeks. So we ‘re going to have to do this. But I’m very alarmed that we’re here,” Byrne said.
“We have more income than ever before. The state’s giving us more money, the feds are giving us more money, and we have less students than we’ve had in many years,” Byrne said.
“So something’s truly not adding up here.”
You can say that again.
School district CFO Larry Jackson explained to the Board that, “Our payroll expenses have increased $2 million more per month than last year. And last year it was $2 million a month more than it was the year before.”
Part of the situation is due to the staff-wide 2.1 percent cost of living increase.
Two days later, Jackson and district staff tried to do more damage control by taking the somewhat unusual step of posting a response on the website.
The financial snafu is far from the only issue plaguing local schools; read Kristy Edenfield’s take in this issue about the ongoing — and perhaps surprisingly hostile — debate over what exactly constitutes recess.
But even if you don’t have kids, the activities of the local school system impact you. The quality of education here impacts the entire workforce, and therefore the entire economy.
Also, the public schools are the single largest component of local property taxes by far. Even if you’re a renter, this impacts you. A 16 percent tax hike, like the one just passed, could mean a similar rent increase.
Byrne thinks it’s time for a full, detailed audit of all school finances, to go beyond the annual external audit, and she’s right.
But that would have to wait for the incoming Board President, Joe Buck, to oversee. He takes office in January.
Meanwhile, if you’re a small business owner in Savannah who has to tightly manage your cash flow just to stay afloat — maybe putting off your own salary a few months because you don’t have the luxury of borrowing on a whim like the school district — all this must be maddening to watch.