For Immediate Release – July 10, 1998
Contact: James C. Brandt, President & CEO
(504) 525-4152, ext. 12BGR "Outlook" Examines the Jefferson Parish School Board’s Finances
The Jefferson Parish School Board is facing a situation similar to that of the Jefferson Parish Council—both see budget shortfalls on the horizon. With expenditures totaling $261.7 million and revenues estimated to total $256.8 million for fiscal year 1998, the board will have to draw from its "rainy day" fund to balance the books for the fiscal year. This action will drop the General Fund balance to an estimated $10.3 million by the end of fiscal year 1998, its lowest in the last three years.
Did the Board bring this deficit upon itself when it granted a teacher pay raise in the summer of 1997 without understanding the effects it would have on future budget years? "Granting these raises while relying on volatile sources of revenue was not good fiscal planning," says Jim Brandt, President and CEO of BGR. "Perhaps the more fundamental reason for the deficit problem is the imbalance of the revenue structure, with its heavy dependence on state revenue and sales tax, which is volatile, and little dependence on the most stable source, property tax."
Although the Board predicts a $274,000 surplus for the 1999 fiscal year, BGR’s report points out the many assumptions the Board is making to project that surplus. First is the assumption that the voters will approve a 4-mill property tax renewal that is on the
July 18 ballot. It also assumes $5.6 million in budget cuts approved on June 3, but not formally adopted by the Board, will be made. Without the additional revenue from the millage renewal and budget cuts, the Board will face a $8.9 million deficit.
Fiscal year 1999 expenditures are actually expected to decline to $261.2 million if the $5.6 million in budget cuts are adopted. Revenues will total $261.5 million, including half the $6 million in anticipated revenues from the 4-mill property tax renewal. The other half will fund capital projects.
Local revenue sources are projected to increase a modest 1.8 percent in fiscal year 1999, reaching $130.6 million. Sales tax revenue, which makes up 41 percent of the budget, will grow to $107.8 million. Property tax revenue, which funds only 6 percent of the budget, will increase to $18 million. This $18 million figure includes the $3 million in anticipated millage revenue. If the millage does not pass, property tax revenues will grow only one percent. State sources will experience a decline, one-half-of-one-percent to $130 million, as a result of the declining student base.
According to BGR’s report, expenditures are expected to decline one-quarter-of-one-percent, to $261.2 million, provided the $5.6 million in budget reductions are adopted. Salaries and benefits will be the major portion of expenditures, a combined $223 million. This translates into 85.4 percent of revenues.
The question is whether the short-term solutions, the medley of budget cuts, and the 4-mill renewal are the solutions to the impending deficits. It is BGR’s assessment that the millage proposal does not reflect adequate attention to the structure of the system’s deficit, the level of staffing, and funding. Salaries and benefits are expected to increase $25.5 million, while sales tax revenue and the state’s Minimum Foundation Program funding are expected to increase only $10.9 million.
In addition, BGR’s analysis points out that the two mills proposed for capital projects are not based on a prioritized assessment of construction needs. "The Board should devise a long-range funding plan that will cover reasonable increases to future budgets and should work to implement that plan. Further reducing the General Fund balance should not be a future course of action, as reductions in the last two fiscal years have reduced the reserve fund balance below the suggested level for the school system," according to Valerie Vindici, BGR Research Analyst, who conducted research for the report.
"The proposed budget cuts and use of the General Fund balance have given the Board time to plan, but the Board needs to take this opportunity to craft a comprehensive long-range revenue plan as well as a five-year capital improvements schedule," added Patricia Morris, BGR’s Research Director.
This report is the fifth in a series, "BGR Outlook on Jefferson," launched last year. A copy of the report may be obtained at branches of the Jefferson Parish Public Library or from BGR’s website at www.bgr.org. More information about this report is available at 525-4152.
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