Millions in cuts already made, but more are coming as WCPS mends budget woes

Wayne County Public Schools’ interim superintendent and a financial operations consultant have gotten the district’s 2020-21 budget in line — and come up with a preliminary 2021-22 spending plan that does not include the across-the-board reduction in force or cuts to teachers’ supplements many feared might be necessary to fix WCPS’ budget woes.

However, should the 2021-22 plan come to fruition, more than 100 local teachers will still lose their jobs in June.

Dr. James Merrill and School Operations Specialists president Aaron Beaulieu said getting the district back on solid financial footing demands a balanced budget. To get there would require the non-renewal of 110 contracts for first- and second-year beginning teachers, continuing the district’s hiring freeze and widespread cuts in line items from supplies and travel to contract services and $90,000 in library books.

The cuts that were necessary to get the 2020-21 budget in line will need to continue and to expand in 2021-22 to not only keep a balanced spending plan, but also to begin to pay back the $5 million in loans the district now owes the state and School Nutrition Fund, they said.

The state loan, which officials agreed to in June, made it possible for WCPS to make payroll and to pay the final installment of the 2019-20 teacher supplements.

Beaulieu told the board that moving forward, members must be looking at the budget at regular intervals, and be prepared to approve adjustments in spending and other line items to deal with everything from changes in state and federal funding to fluctuations in local funding sources — from sales tax revenue to fines and forfeitures funds, which are designated for county schools.

“(Budgeting) is a year-round process,” Beaulieu said. “Not just in April and May.”

In the future, board members should prepare to have a draft budget in their hands by May 1 and deliver an approved spending plan to the county commissioners by May 15 — every year.

Beaulieu said expenses are hard to predict, which is why keeping a sharp eye out — looking not just at expenditures, but at revenue sources, too — and keeping a safety net in place are necessary to keep a budget balanced.

“Ultimately, that is why you have a fund balance,” he said.

Monitoring expenses is going to be particularly important for Wayne County, he added, as changes in charter school enrollments and the district’s own numbers, which affect the available funds, are also a consideration.

“You don’t have a cushion,” Beaulieu said.

In addition to the budget documents, Beaulieu presented the board with a budget calendar, which it later approved, setting out the expectations for budget planning for an entire year, with adjustments made initially to deal with the delays caused by the district’s budget crisis and COVID-19.

Beaulieu said that while educational issues are important, money is a factor in decisions, too.

“Budget drives what you do,” he said.

Personnel costs — benefits and salaries — comprise roughly 85 percent of the budget, which means keeping control of those line items is particularly important. Developing spending formulas based on available funds and positions keeps the budget balanced.

“(Hiring decisions and salary increases or bonuses) should be rooted in those formulas,” he said. “It should not be just because you like someone.”

Beaulieu said the district’s debts to its own School Nutrition Fund and the state mean tightening the belt is a necessity.

“You have no room to go into the red any further,” he said. “You sit here with some tremendous obstacles.”

He said that the spending plan includes a line-by-line accounting of every program and expenditure, as well as available dollars for those programs.

Beaulieu said that moving forward, the district has to keep close watch on one very important category — the state allotment. He said Wayne County is funded by the state for 850 regular teaching positions — that does include positions that are associated with certain federal or state programs — so when budgeting, the district has to take into consideration increases in benefits costs. The state does not factor those increases into those costs, so a district has to account for and make adjustments accordingly when those benefit costs increase.

Not doing so means WCPS would be immediately overbudget — even without an increase in personnel. Most districts, Beaulieu said, budget for 80 percent of their allotment to allow for those cost increases. Wayne County sits between 86-87 percent.

The district also has to take into account changes in state and federal funds. This year, for example, WCPS is slated to receive $10.8 million in state low-wealth funds and disadvantaged student funds.

Beaulieu said districts leave a cushion to cover shifts in those funds. This year, the state took half of a projected increase in low-wealth funding and designated it for COVID-19 expenses. Those COVID funds, he said, come with strict rules for use.

Counting on funding that is later cut or restricted also can create a shortfall.

“You have to create a cash-flow situation,” he said.

Relying on carryover balances can get a district through a crisis, but it is not a long-term solution. Eventually, those balances go away and the expenses remain.

“You are robbing Peter to pay Paul,” he said.

One of the areas that the district is going to have to watch carefully, Beaulieu said, is School Nutrition, an “enterprise fund.”

“It is designed to make money and to support itself,” he said.

But right now, the revenues from school nutrition are not offsetting its costs and should that trend continue, Beaulieu said, there will have to be personnel cuts to keep the expenses flush with revenues.

Beaulieu credited Central Office staff — especially assistant superintendent Dr. David Lewis — with working diligently to do the work on fixing the budget concerns.

He said while School Operations Specialists might have helped create the new spending plans, the district staff, including WCPS’ recently hired school finance officer, will have to work with them in the future.

Merrill said the budget will be a continuing effort.

“There is still a long way to go,” Merrill said.

THE CUTS

Merrill said the initial cutbacks in July and September also include more than a million dollars in cuts in the Central Office, among which are not filling a vacant public relations assistant’s job at about $51,204 a year; cuts to travel for assistant principals, principals and the superintendent; cuts to training and supply funds; $552,000 in cuts to operations contract services; and an additional $125,000 in contract services in the Maintenance Department.

Merrill said the budgeting had to focus not just on one-time cuts, but also on eliminating recurring expenses to make sure the district’s spending stayed in balance.

“You couldn’t just remove it for one year,” he said. “You had to eliminate it from the budget.”

That means many of the cuts, including personnel, will not be reinstated next school year, he said.

In the first round of cuts in July, Merrill said the district took the actions he outlined in his first appearance before the board to discuss the district’s budget needs — cutting media assistants and moving them to open instructional assistant positions for a savings of a recurring expense of $570,000; reducing the number of assistant principals by four (through attrition) at a savings of $355,410; and cuts to the Athletic Department budget (a one-time cut based on reductions caused by COVID-19) of about $111,988.

By far the largest savings occurred from increasing class sizes, which was projected to result in the ability to cut 50 positions, but only resulted in 32 positions saved, for about $2,080,000.

Merrill said the primary reason the first round of cuts was insufficient centered on the plan to eliminate the need for teaching positions by increasing class sizes in grades 4-12, reassigning existing staff to vacancies as they occurred and capturing some vacancies and eliminating the positions. The problem was, that because so many of the vacancies were in critical positions that had to be filled, the plan only netted a savings of 32 positions — well below the necessary 50 to realize the savings.

Also, Merrill said, far fewer vacancies occurred at the high school level, so increasing class sizes and staff reductions needed to be phased over two years.

All told, the cuts resulted in a savings of $5,040,690, with recurring cost savings of $3,367,716.

The problem was, Merrill and Beaulieu said, that was not enough. August payroll showed the 2020-21 budget was still in the negative — so additional cuts had to be made in September.

Also affecting the deficit were increasing benefit and retirement costs for employees — 85 percent of the district’s budget is spent on personnel — long-term obligations on maintenance service and performance contracts — including Cenergistics, a utility savings company, Brady Mechanical and Solar Systems, which markets and maintains solar systems in schools, and a 20-year obligation With Trane Comfort Systems. (The school district recently received permission from the county commissioners to use some of its facilities funding to exit the Cenergistics contract (at a cost of about $483,800) and to pay the two Brady bills and this year’s payment on the financing to fund the Trane contract.)

Merrill added that the district had zero federal carryover funds — they had all been spent — so there was no cushion to absorb some of the past over-spending or recurring costs.

At first, when the state announced that the district would be receiving an additional $1.6 million in low-wealth funding, about half of those funds were later designated as COVID-19 money, which put severe restrictions on how they could be used.

That meant less flexibility for using the extra low-wealth funding to help balance the budget.

Ongoing utility expenses, as well as increased need for sanitation and maintenance services because of COVID 19, also contributed to the inability to cut enough to balance the budget.

So, in September, an additional $1,457,174 in reductions, $1,022,174 in recurring expenses, were proposed, including cutting an additional 15 positions (through attrition or not filling vacancies) as well as $45,000 cut in supplies, eliminating the library book lines item just for this year as well as reduction of four maintenance worker positions.

MERRILL SAYS COUNTY NEEDS TO DO BETTER

In his discussion of the district’s budget challenges, Merrill also cited another factor — disparity in local funding.

Wayne County, he said, is the 21^st largest district in the state, but the funds provided by the Wayne County Board of Commissioners put its financial support at 90^thin North Carolina.

In other words, near the bottom. And that matters, Merrill said.

The local per pupil spending average for 2017-18 was $1,714. In that same year, Wayne County’s spending was $1,036.

The discrepancy makes a difference, especially when the district has to stretch local funds, which are used for facilities maintenance and building projects. Making those dollars work means that some maintenance and other concerns have to be moved from year to year, which means old, expensive-to-maintain buildings eat up lots of the available funds, with no options to improve conditions for students.

Those stresses fall on other areas, which makes it difficult to balance the available funds with the district’s needs.

Creating a better learning experience for children is everybody’s job, Merrill said.

“There is room for this county to provide better care for its schools,” he said.

For more on Monday’s meeting — including the latest on the district’s superintendent search and reaction to a report released by the Department of the Air Force — follow the New Old North here and on our Facebook page @newoldnorth