Gwinnett school officials say they are walking financial tightrope

By Patrick Fox

The Atlanta Journal-Constitution

Gwinnett County Public Schools came within a whisker of having to borrow money in August, and school officials say the year ahead looks just about as trying.

At a special oversight workshop on the district's finances Thursday, chief financial officer Rick Cost told school board members that the system's reserve for 2009 totaled $103 million in cash at the end of June. But that reserve dropped to $50 million at the end of July and to $1.5 million by the end of August.

The district has a monthly payroll of $82 million.

"What this shows is that on an [operating] budget of $1.3 billion we came within $1.5 million of running out of cash," Cost said.

With preparation of the 2011 budget looming next month, the audit hit school board members like a punch.

The school district, the largest in the state, is fighting new legislation that would prohibit school boards from furloughing personnel if its reserve fund is equal to or greater than 6 percent of that year's total operating budget. That would limit Gwinnett schools to carrying no more than $80 million in reserve.

Cost said ending the fiscal year with a fund balance is vital to meet payroll during the summer because property tax revenue does not begin pouring in until September. The county generally does not issue tax statements until mid-July, after the appraiser's office has determined the tax digest for the year.

"Between June and September ... we still have to meet an $82 million payroll each month with no hope of revenue coming in," Cost said. "That's the reason on June 30 we have a $103 million fund balance."

"Have we had any traction reaching people down at the Capitol to understand any of this stuff yet?" board member Daniel Seckinger asked School Superintendent J. Alvin Wilbanks.

The superintendent said staff members are holding a conference call with several local delegates in the coming days, and he hopes to have more to report after the meetings.

"It's quite frightening because the numbers are fairly absolute," board member Robert McClure said.

Cost said a summer margin is all the more important because threats of a shortfall could affect the school district's bond rating. Currently, Gwinnett is one of four school districts in the nation with AAA ratings from Moody's and Standard & Poor's. High bond ratings, Cost said, save the district millions in interest.

"We would be at serious risk of losing that AAA bond rating if our fund balance, our budgets, our financial statements ever changed [downward] from what we're presenting to you today," Cost said. "There's no question."

School officials are also bracing for a 7 percent to 8 percent reduction in the tax digest, virtually guaranteeing the district will be forced to cut back somewhere. This all follows last Friday's announcement that the district must close a $97 million deficit while also expecting to add 1,600 more students in the fall.