Despite big savings, schools furlough teachers

By James Salzer
 and Nancy Badertscher


The Atlanta Journal-Constitution

Gwinnett County school officials started the fiscal year with more than $100 million in reserves, but teachers are still being furloughed and a new series of textbooks may be delayed to cut costs.

Fulton County, which also had a fairly hefty fund balance last year, is also furloughing teachers. Meanwhile, Cobb County is using its reserves to make sure teachers don’t miss a day’s pay.

Gwinnett, Fulton and Cobb have an advantage many Georgia school districts lack in this recession: healthy reserves built up over years of rising property tax rolls.

In fact, some metro Atlanta school districts have fund balances that are more than twice what the state government expects to have at the end of this fiscal year, according to Department of Education records.

Critics argue that some districts may have built up the big reserves by collecting too much in property taxes over the years. Supporters of overhauling the state’s education funding system say their argument is bolstered by the disparity between the big reserves in many metro districts and the absence of a financial cushion in rural Georgia.

And some teachers wonder why they must take days off without pay when their school systems have big rainy day funds.

Susan Dietz, a language arts teacher at Central Gwinnett High School, said school systems with ample reserves should have spent some of those funds, rather than furloughing teachers for three days.

“The furloughs were terrible,” she said. “The work has to be done, and it’s important work. We don’t work for free so if that means dipping into reserves, then that’s what should be done.”

Districts with large fund balances say the budget situation for schools may not improve any time soon, and that they may need the money to ride out both declines in state funding and a stagnant property tax base.

“The reason we protect that reserve is to make sure if we ever get to the point where we are out of options, we still have it,” said Rick Cost, Gwinnett County Schools’ chief financial officer. “If there is anything we can do by cutting expenses to balance our budget, we want to do that first.”

Some metro Atlanta districts were able to build up reserves as their take from property taxes rose during the real estate boom. The growth in real estate taxes wasn’t as big in much of rural Georgia.

On June 30 of last year, the city of Atlanta system and Fulton, Cobb and Gwinnett county districts each reported fund balances of more than $100 million, although that included money set aside to pay bills already rung up. While final figures for 2009 aren’t yet available, state officials project those districts will have fairly large balances for the fiscal year that ended June 30 as well.

In contrast, state government, which pays a big chunk of the local education tab, could be down to $35 million in reserves by the end of this fiscal year, Gov. Sonny Perdue said in a recent interview.

Much of the $1 billion in reserves the state has spent in the past year has gone for education.

“They (school districts) have larger surpluses than the state has ever had,” said Perdue. “This is the time to use your savings account. That is what the state has been doing. Now is not the time for districts to hoard and say (to the state), ‘You owe us more money.’ ”

Gwinnett’s Cost said his system will report a fund balance of more than $100 million again for the end of fiscal 2009. That’s enough to run the system for a little more than a month in an pinch, he said. It would have cost $9 million to $10 million to avoid the teacher furloughs.

Cost said Gwinnett can use the money to cover expenses while waiting for property tax money to roll in during the fall. Without the cash, Gwinnett might have to temporarily borrow money, like some poorer systems do.

Cost said Gwinnett would rather furlough teachers and make spending cuts than spend the reserves right now. “Using the reserves, in my opinion, just delays making the call to cut expenses, it doesn’t eliminate it,” he said.

Cost also said spending down reserves could lower the system’s rating for borrowing, meaning higher interest rates on bonds sold to build schools.

Mindy Clark, parent of a 12-year-old attending Lanier Middle School in Buford, said she’d hoped the district would avoid furloughs, which she fears will discourage teachers.

“That ultimately can affect the kind of efforts you put into a job, and when you’re dealing with teachers, that could affect the education of our children,” she said.

Fulton County took much the same approach as Gwinnett.

Susan Hale, spokeswoman for Fulton County Schools, said her system considered taking $7.6 million from reserves so teachers would not have to be furloughed.

“But we didn’t know what was coming,” Hale said. “Every indication is things will get worse before they get better.”

State law says school districts should maintain reserves of no more than 15 percent of a year’s budget.

At the end of fiscal 2008, dozens of school systems had fund balances higher than 15 percent of their annual expenditures. A few had more than 40 percent of their annual expenditures. However, there is no penalty for having more. Most metro Atlanta systems were below the 15 percent threshold.

John Sherman, president of the Fulton County Taxpayers Foundation, said school districts that built up huge reserves when property values were rising shouldn’t have kept all the money.

“I think it should be returned to the taxpayers in the form of lower millage rates,” Sherman said.

In Cobb County, Brad Johnson, deputy chief financial officer, said his district tries to keep reserves at about the equivalent of a month’s worth of expenses.

“You don’t want to have too much because citizens will say you could be reducing taxes,” he said.

The fund balance, minus bills the system is obligated to pay, he said, will have dipped from $114.5 million at the end of 2007 to about $80 million this year. Cobb uses some of the money to pay expenses until property taxes come in. Then the reserves are replenished. Cobb’s school board decided it had enough in reserves to avoid furloughing teachers. However, before the state called for districts to furlough employees, Cobb had already cut salaries 2 percent to save money.

While districts like Cobb, Gwinnett and Atlanta have significant reserves, many Georgia systems have little or nothing to spare.

As many as 40 mostly small-town school districts are expected to report that they had nothing in reserves at the end of fiscal 2009, which ended June 30.

“There are a lot of systems around the state that are teetering on the brink,” said Joe Martin, a former Atlanta school board president who represented rural districts in their 2004 lawsuit against the state over education funding. “There ain’t no way they can make it through the year.”

Carole Jean Carey, superintendent in rural Warren County near Augusta, has been working to dig her system out of debt for years. She could not rely on skyrocketing property values — as many metro Atlanta systems did until last year — to bring in tax windfalls.

Warren County reported a negative $300,000 fund balance at the end of fiscal 2008. It has no choice but to is force teachers to take days off without pay.

“We don’t really have a reserve,” she said. “Last year just about killed us. But we revised, revised and revised (the budget). I am an expert at saying ‘no.’ ”

Martin said Warren County is the kind of rural system being hammered by state budget cuts without the ability to make up the difference from local property taxpayers.

It’s not just rural systems that are walking a financial tight rope.

Suburban Fayette County listed a reserve of $1.8 million at the end of fiscal 2008 —not enough to cover a week’s worth of expenses. Despite being one of the wealthiest counties per capita in Georgia, the system is having a tough time.

Declining tax revenues and rising costs forced the system to cut salaries by 4.5 percent. Now the furloughs mean another hit of 1.6 percent for teachers.

“You have to have a sufficient reserve,” said Joseph Jarrell, a world history teacher at McIntosh High School in Peachtree City. “There’s no way we’d have been given a 6.1 percent pay cut had there been a reasonable reserve fund. It wouldn’t have been necessary.”

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Some school districts end each year with substantial reserves while others are just getting by. Below are the end-of-the-year fund balances for fiscal 2008, minus money districts had already committed to spend:

District	Reserves
Atlanta	$87.2 million
Cherokee	$41.3 million
Cobb	$101.8 million
Clayton	$52 million
DeKalb	$11.7 million
Douglas	$30.7 million
Fayette	$1.8 million
Forsyth	$50 million
Fulton	$83 million
Hall	$13.2 million
Henry	$18.1 million
Gwinnett	$101.5 million
Buford	$5.3 million
Gainesville	-$3.5 million
Decatur	$4.4 million
Marietta	$12.8 million

Source: Georgia Department 
of Education

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How we got the story

When Cobb County decided over the summer to use reserves to avoid furloughing teachers, a reporter asked the state Department of Education to provide a listing of financial reserves in each school district. Reporters then interviewed officials in several school districts, teachers, parents, auditors, school funding advocates, taxpayer advocates, lawmakers and Gov. Sonny Perdue.