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Thursday, May 30, 2024

Board looks at ‘worst case scenario’ budget, tacks $10 million more onto shortfall

The New Hanover County Board of Education examined its “worst case scenario” budget on Monday. (Port City Daily/file photo)

NEW HANOVER COUNTY — The New Hanover County Board of Education got another grim look at their next budget on Monday.

READ MORE: NHCS facing ‘uncomfortable’ budget cuts this year

At a budget work session, the school board assessed the district’s positions and programs as it prepares to scale back expenses in the 2024-2025 fiscal year. In January, NHCS staff informed the board it would need to make significant cuts to balance its books as it grapples with low reserve funds and decreasing student enrollment. 

Last month Chief Financial Officer Ashley Sutton said the district was facing a $10 million shortfall in its fund balance, but on Monday, it was revealed the total deficit was closer to $20 million after factoring in ESSER funds. Distributed during the pandemic, federal ESSER dollars will expire in September, taking with it some support staff. 

On Monday staff and the board placed much of the blame on the state’s complicated allotment formula to pay out school districts. In New Hanover County Schools, state dollars account for 47.8% of the $390 million budget.

“With the funding resources we have, we cannot continue to fund without at least being aware of where the state’s going to limit us,” Assistant Superintendent of Human Resources Christopher Barnes said at the meeting. “And there’s a certain amount that we just can’t — the state has not kept up with what we feel like our district’s needs are. So somewhere in the middle is where we have to end up landing.”

Around 279 positions — 160 of which are teachers or teacher assistants — will need to be cut to balance the budget. This is the worst-case scenario, barring any additional funding from the county or natural attrition of employees as they leave or retire. 

What’s contributing to the lack of funding is state-mandated raises, which Sutton projects NHCS’s contribution — 81% of its operating budget — to increase by $8.8 million. This is accommodating for another anticipated raise of 4%, along with a 4% increase in benefits.

However, the state does not provide enough funding for every NHCS employee; some are paid from the local pot signed off on by the New Hanover County Board of Commissioners. 

For example, the state provided 9.4 assistant principal allotments to NHCS’s last budget cycle, meaning it will fund nine full positions with some extra change leftover. However, the district has 22 assistant principals, covering the difference with local funding. Those positions, even though not paid with state dollars, are also entitled to the same state raises and benefits, meaning the  additional costs will be tacked onto the local funding list as well.

The district tries to be resourceful in putting its more expensive positions, say for principals or seasoned teachers, into the state allotment. Entry-level positions — teachers starting at $48,000 without accounting for benefits — are paid for with county money.

However, Sutton explained the lower-rung teachers are getting the biggest raises, demanding more local funds.

It’s not just assistant principal positions where NHCS has to fill in gaps, though. Barnes explained the state allotment formula has worsened in one area specifically: state instructional allotment encompassing media coordinators, social workers, counselors and instructional coaches. 

Barnes reported the district gets one instructional support position per 210 kids and that the state funds 118 of this type of position, but the district employs 203, making up the difference with county money. 

Currently, the district provides a counselor, social worker and instructional coach to every elementary school, but many are funded through the near-extinct ESSER funds. If it were to just use the state allotment, all of the elementary schools would be unable to obtain all four instructional support positions.

Enrichment teachers — physical education, art, music — are only allotted at a rate of one per 191 students. This year, that factors out to 57 positions. A year ago, and before the current raises, it would have covered 75 positions.

“This is why we elected to start sharing at some of our smaller schools, simply because the state does not keep up with the needs of the district,” Barnes said on Monday.

Board member Pat Bradford asked what other districts do in a scenario where there’s not enough funding to go around. Barnes said he’s seen districts that are forced to abide by the state funding model if they can’t afford to supplement with local funds, particularly in less-affluent counties. 

“The state allotment is not adequate,” board member Stephanie Walker said. “We can’t go down to the state allotment, I don’t see how we can do that.”

Board member Josie Barnhart asked if it would be possible to connect students to instructional support services outside of the district through MOU’s with the county or other community organizations. It is unclear if this would be a more cost-efficient solution. 

Barnhart also pointed out the New Hanover County Endowment could be utilized, noting it’s moving to a rolling basis funding model. Walker was hesitant to rely on it though.

“The downside is there’s been a change in leadership,” Walker said. “We’ve had a person that’s been in our community listening to us and hopefully building some kind of rapport with the district and we’re letting them know what we need, but that’s not there anymore.”

Several board members were in favor of asking the county commissioners for more funding to cover at least some of the shortfall. 

However, North Carolina law says the state is responsible for funding the districts’ salaries and benefits, while local budgets are supposed to be dedicated to capital needs. As need has outpaced state allotment changes — which is also tied to student enrollment — most districts find themselves using local dollars more and more for positions.

New Hanover County, like the state, has chosen to fund NHCS based on its average daily membership. That’s in decline. Sutton said they are projecting a reduction of 400 students compared to what was funded this year, resulting in a $1.5 million impact on the budget. 

NHCS could try to negotiate a different funding agreement that doesn’t rely on enrollment counts. For example, in Brunswick County, commissioners are contracted to cover around 36% of the district’s operating budget. 

If more funding cannot be acquired, the NHCS board will need to make cuts or find other line items in the budget to eliminate.

Sutton also provided the board with a list of programs and their proposed budgets on Monday. One of the largest increases will be seen in transportation. Assistant Superintendent of Facilities Eddie Anderson explained the state was realigning its funding in the wake of the Covid-19 pandemic, resulting in a $1.1 million dollar expense increase, tagged for the local budget. Anderson said it has nothing to do with the district’s bus efficiency, which sits around 98%.

The district’s at-risk services would see a decrease of $1.2 million; the district said it would reduce its nursing contracts so that nurses would be shared among schools. This would result in cutting around 10 to 12 nursing positions. This pot of money also covers SROs, of which there is at least one at every school.

Another large difference is in the district’s maintenance program due to a $1.6 million increase in utility costs. More money for the district’s liability and property insurance plans will also be allocated. 

“We pay a lot of money in insurance,” Superintendent Charles Foust said. 

The district has a plan through Liberty Mutual, the only company that responded to the district’s call for RFPs. It pays $1.2 million a year for $4 million in coverage. Though Sutton said she was not aware of an increase in cost this year, the district has not been budgeting enough for the plans in the past few years, so more will be set aside in coming months.

Monday’s presentation was not the staff’s formal budget recommendation to the board; that will come in April. The board plans to have at least one more budget work session before then, though has not set a date at this time.


Reach journalist Brenna Flanagan at brenna@localdailymedia.com.

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