School superintendent: District cannot continue to deplete 16th section fundingPublished 12:21am Sunday, January 20, 2013
Among the New Year’s resolutions for the Natchez-Adams School District: Right a budget gone wrong.
The district’s top leaders and the school board will begin work toward that goal in earnest next month. It’s a process that will likely take the next six months, they say.
But it’s a necessary step; not just because doing the right thing is the right thing to do, but because alternative plans in place for years are beginning to fail.
In December, district Business Manager Margaret Parson told the school board that a financial plan the district has been using as a backup to decreased state funding for four years would soon be just an empty bank account.
She was referring to the district’s 16th section interest funds, of which the district has spent $7.3 million since 2001.
The account’s balance is currently $484,334.
If the district continued using the 16th section funds the way it has been, the monies would be gone by this time next year, Parson said, and there would be no backup.
That won’t be the case, though, Superintendent Frederick Hill said, since there’s a better way to budget.
16th section lands
Sixteenth section land is public acreage that was set aside when Mississippi was first surveyed in order to help fund education by allowing school districts to collect interest and revenue by leasing those lands.
The lands can be leased for farming, hunting, agriculture or oil and gas exploration. Leases are awarded by competitive bid at public school board meetings.
A portion of the account must remain untouched by the district, while the interest can be spent.
More than 640,000 acres of 16th section land — or public school trust lands — generate more than $45 million each year for 107 school districts, according to the Mississippi Secretary of State’s Office.
For the NASD, money is generated from more than 8,000 acres of 16th section land scattered throughout Adams County.
Revenue received from hunting, fishing, mineral and agricultural leases and the interest from the fund can be transferred into the general fund and spent on anything with approval from the board of trustees.
Sixteenth section revenue received from the interest fund makes up approximately 2 percent, or $696,400, of the district’s overall annual budget of $39,822,109.
Money generated from non-renewable resources like oil and gas exploration cannot be spent.
Those funds are transferred into a trust, which can’t be used by the district. Only the interest generated off those funds can be spent, according to state law.
The district can borrow money from that trust to pay for certain things like building new buildings, repairing or maintaining buildings or transportation. Any money borrowed from the trust has to be paid back with interest.
The majority of the $7.3 million in 16th section funds transferred since 2001 have been used to alleviate cash flow problems caused by state cuts to education as well as unforeseen costs, Parson said.
According to the Mississippi Adequate Education Program — a Mississippi Department of Education funding plan that calculates how much state funding local districts should receive — the state under-funded the NASD by $1.9 million for the fiscal year 2012-2013. That’s the most the state has underfunded the district in eight years.
Even though he admits the severe impact state cuts have had on the district, Hill said the district’s dependency on the 16th section lands cannot continue.
“What we need to do, and are going to do, is plan our budget for next year as though 16th section doesn’t exist,” Hill said. “We were certainly fortunate to have those funds to get us through for a while, but if we have an opportunity to fix it, that’s what we need to do.
“We need to ensure that we are budgeting and planning in a fiscally responsible manner.”
And while the district’s reliance on the 16th section funds was continually mentioned throughout the years, board member Thelma Newsome said it was difficult not to use the funding that was available instead of planning different alternatives.
“Mrs. Parson had been telling us this situation would be forthcoming, but as the state had continued to cut us we tried to basically keep things intact without facing the reality of the situation,” Newsome said. “But we reached a point where we were going to deplete what we had if we continued spending, and now we have to make the tough decisions.”
The spent monies weren’t wasted, board President Wayne Barnett said.
“I think we’ve spent the money wisely, and we did so instead of raising taxes,” Barnett said. “But now that the money is dwindling down, and it’s not being replenished like it used to, we’re going to have to find some ways to not rely on that 16th section cushion.”
The amount available from the principal fund, Parson said, has declined because of the lower interest rates given to the district by banks.
Parson said the district once received interest rates as high as 5 percent for the trust, compared to the 1 percent it currently receives.
“That’s just the nature of the economy we’re in,” Parson said. “We’ve been fortunate to have those funds available instead of raising taxes, cutting programs or terminating people.”
After spending an unexpected $164,000 on transportation and $142,461 on repairs to the Morgantown Middle School gymnasium floor this year from 16th section funds, the current balance of the fund is $484,334. In comparison, last year the fund had $965,287 available in January.
“Those are expenses that were unexpected, and we had the 16th section funds available to use for that,” Hill said. “But again, part of that responsible planning is budgeting for those kinds of unexpected costs through other revenues so we’re not dependent on the 16th section.”
Currently, Hill said the district has cash flow and budgetary issues because it was hiring personnel, funding programs and then looking for the money to make it all happen.
As part of an operating budget development plan presented to the board last week, Hill said the district should begin with examining the available funds and then make decisions on programs or personnel changes.
But simply planning to spend less, Hill said, won’t be the golden solution to fixing the problem. That’s why Hill is working to compile a list of needs and wants from each school principal and department chair within the district before sitting down to review the areas where cuts can be made.
“Obviously they know they’re not going to get everything they want, but that feedback from them is absolutely necessary,” Hill said. “Once we have that compiled, we’ll sit down with the board in February and begin more in-depth discussions regarding the budget for next year.”
Another part of the plan includes discussing future projects for the district.
The district plans to open a magnet school at the former Robert Lewis Middle School for the next school year. A magnet school is a separate school within the district that would pull the top students from other district schools and enroll them in a more academically rigorous curriculum. The schools can be focused on math, science, arts or any other specialized program, but also teach the core lessons.
RLMS is sitting empty this year, and though experts have said portions of the building need serious renovations, some portions are available for use without added cost.
In addition, a new program the district must implement is Common Core State Standards — a set of curriculum expectations adopted by the state department of education that schools are required to follow.
While both projects and others will help move the district forward, Hill said he would also have to prioritize those based on feasibility and available funding.
“The magnet program for example will still be part of the plan because that’s something that won’t require major construction and most of the students will be coming from within the district,” Hill said. “The financial part of the magnet program is not a hurdle we have to jump.”
Those discussions regarding programs and budgeting are something both Barnett and Newsome said they are looking forward to seeing implemented.
“I think it will give the board a better understanding of where the district is on a financial level and let us know what we can spend and what we can’t,” Newsome said. “I’m sure there are going to have to be cuts, but once we see the report Dr. Hill is compiling, I think we’ll be able to pinpoint the areas where we can trim the fat so to speak.”
While neither board member wants to see cuts to programs or personnel, both Newsome and Barnett agreed those areas would be examined first before even discussing a tax increase.
“I would like to see cuts in our budget because we cannot continue to go back to the taxpayers and ask for more money,” Barnett said. “Every time you cut something it creates a disadvantage somewhere, but we literally have citizens who cannot pay any more money in taxes.”
The board will receive more funding from local taxes this year after increasing their requested funding from the county’s ad valorem tax dollars by $565,000. For this fiscal year, the district proposed that 29.3 percent, or $11,686,653, would be paid for with local taxes.
The other main revenue sources for the district come from state and federal dollars.
And while Hill said he is confident the district can eventually wean of 16th Section lands completely, the process will require diligence and fiscal responsibility from everyone in the district.
“I think the goal to not use the 16th section funds is very realistic simply because we know it’s so low,” Hill said. “It’s just a matter of making the decision not to use those funds anymore and living within the means of our budget.
“We’re going to adhere to the amount we have budgeted to spend.”