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Last-minute proration takes big cut

How does 2 percent equal 24 percent?

It’s not new math; it’s proration.

More to the point, an additional 2 percent proration in the annual state education budget declared in the last two weeks of the fiscal year, which is just what happened Thursday by Gov. Bob Riley.

“The, biggest problem is the timing of this,” said Dr. Mark Bazzell, superintendent of the Pike County Schools. “What this really means is that we’re going to take a 2 percent cut for every month (of the fiscal year) in this one check.”

It’s a 2 percent reduction in state funding, times 12 months, all accounted for in one month: in other words, a 24 percent cut in state funding.

“We’re going to be getting about 75 percent of our state allocation for September,” Bazzell said. “We’re in decent shape for September, so we’re not going to have any cash flow issues. But there are a lot of school systems out there who are having to seek lines of credit just to make payroll.”

The governor’s announcement on Thursday increased the 7.5 proration declared earlier in the fiscal year, cutting this year’s spending from the education trust fund by another $113 million. He cited BP’s dismissal of the state’s claim for payment as one of the key reasons for the need to declare additional proration.

Riley said the Education Trust Fund, the main source of state money for public schools and colleges, would have received $116 million if BP had paid the claim this month, enough to avoid proration increases or across-the-board budget cuts, both caused by lower-than-expected tax collections.

Regardless of the reason, local school officials said the move means a significant loss of funding. In the Pike County system, the cut means the loss of another $260,000 or more in funding; in the Troy City Schools, $221,318.

“That’s a big hit,” said Dr. Linda Felton-Smith, superintendent of the Troy City Schools.

“We had already anticipated and planned for the $69,162 per month we lost (due to the 7.5 percent proration). Now, we’ll have to take the money from local reserves to offset this cut.”

For fiscal year 2010, Felton-Smith said the Troy Schools lost more than $1 million in state funding to proration.

However, she said sound fiscal planning during the past 14 years has allowed the city schools to accumulate nearly $9 million in reserves, enough to operate the system for seven months without state funding if needed. “That’s good, because if we did not have those reserves, we would be looking for a line of credit right now. Instead, all we have to do is transfer the money to our operating account, and we will make payroll on time,” she said.

“However, if we continue dipping into reserves to cover proration, we eventually won’t have the reserves,” she warned.

Both superintendents already are preparing for the proration in the upcoming fiscal year, although none has officially been called. Both districts already have approved the fiscal year 2011 budgets, and boards will have to make adjustments if proration is called. Superintendents already are working on those plans.

“We’ve already been told we can anticipate at least 3 percent,” Felton-Smith said, “because the money going into the Education Trust Fund is not coming in at a rate needed for the budget. That would be primarily sales tax revenue and income tax revenue.”

Bazzell is forecasting more aggressively. “I’m anticipating and planning that we will have an additional … 3.5 to 5 percent proration next year,” he said.

“Locally, with our increases in enrollment and with our local economy doing a little bit better (we were about 1.7 percent above last year in sales tax revenues this year), if we can hold on to that trend and continue to grow locally that will help.”

“But from a state perspective, unless things can turn around …”

Bazzell, who has been in education for more than 30 years, admits these have been some of the toughest times he has faced as an administrator. “I’ve been through a lot of proration, but these last three years have been the toughest I’ve seen. We’ve been blessed that we haven’t had the difficulty some folks have had because several years ago we started putting away resources and, other than deferred maintenance, I’m hoping that students and faculty aren’t feeing the impact and are continuing to be able to do their jobs.”

At the Troy City Schools, Felton-Smith echoed that concern, saying working to maintain focus in the class in the priority in times of proration. “The needs of our students for a quality education will not change because of proration.”