The latest financial projections of large deficits at Marietta City Schools surprised many parents and employees earlier this week and have left many citizens wondering how did things seem to get so bad, so fast.
On the surface, the answer is relatively simple: The primary revenues for Marietta City Schools are flat.
The district's property taxes show little growth and declining student enrollment means less money from the state.
Yet district spending is up, and if Marietta City Schools continues to run this business model, a $7.7 million deficit awaits in 2007, says chief fiscal officer David Combs. That large deficit would begin accumulating in 2004 with the schools operating $250,000 over budget.
"If nothing changes this is where we'll be," Combs said after a review of finances with The Times on Tuesday. "Things have to change or else the state comes in and makes the changes themselves."
The disagreement between administrators and some community members is where to make those changes. School officials want to close North Hills and Reno elementaries, redistrict students and reduce staff. Some community members agree with those changes, but others feel the cuts are too drastic and hurt the district's smaller community schools.
But even if school board members approve district reorganization on Monday the city schools could still face a $4 million deficit in 2007. That possibility means making more cuts or finding a way to raise more revenues, school officials say.
The surprise of such dire financial problems is leading many citizens to question how the district got so behind, so quickly. A year ago, Marietta's five-year budget forecast projected a surplus of $140,956 in 2007. While that isn't a large amount of money, it pales in comparison to this year's projected $7.7 million deficit in 2007.
Combs said the unfavorable combination of flat revenues and higher expenditures is part of large projection differences, but he also pointed to a philosophy change in figuring the school's five-year forecast.
"At that time (last year), their projections were overly optimistic," Combs said, who began his position with Marietta schools this year. "Their assumptions expected growth in revenues, but what we know now is that there has been no growth."
For example, Combs said the past forecast anticipated a 7.4 percent increase in tax revenues. In reality, tax revenues increased only 0.4 percent this year. Because the economy continues to be sluggish, Combs said he uses that 0.4 percent growth to estimate future tax revenues. Combs does increase tax revenues a little more for the 2004-05 school year because of anticipated additional taxes from the Wal-Mart and Lowe's expansion. But even that isn't much money (about $30,000 a year in real estate taxes), because the project has a 10-year 75 percent tax-financing agreement that sends a portion of the taxes to make road improvements.
The new five-year forecast also predicts decreasing funds from the state as student enrollments continue to decline, Combs said. His numbers estimate a 40-student decline per year.
In the last decade, Marietta City School have lost nearly 700 students, an average 70-student decline each year. Current enrollments show about 3,300 students. Combs said school officials estimate enrollment figures to bottom out at about 3,000 students.
On the expenditure side of the school budget, Combs said other optimistic projections were made last year.
"The previous forecast took some assumptions that there was going to be some cuts, but some of those cuts were unrealistic," Combs said. About $2.6 million was projected to be shaved with the old budget plan, mostly through salaries and benefits.
"This year, the board wanted to see what happened if business were to continue as usual," Combs said.
Combs said his forecast is cautious, but also more realistic. The budget forecast won't assume any cuts until the board actually votes them through, he said.
Another budget miscue from last year was this year's more-than- expected $730,000 (36 percent) spike in health insurance costs. School officials had estimated only a $300,000 increase.
In 2003, Marietta City Schools will pay about $5.4 million in employee health and retirement costs. The district pays 90 percent of an employee's health insurance premiums and 95 percent of a single employee's premiums.
This month's announcement of possible school cuts from state would put Marietta even closer to an impending deficit. The proposed cuts would reduce Marietta's state school money by $215,000 this year. Combs said the possible cuts are not figured into his budget, as state legislators are trying to find other areas to cut instead of schools.