ATLANTA — Years of weak tax collections have led some school districts to the brink of bankruptcy.
“This is really a crisis here, probably unlike anything schools have faced since the ‘30s,” said David Sjoquist, an economics professor at Georgia State University and an expert on state finances.
Five small districts began the current fiscal year with no money. They used all their reserves by the end of last year, leaving them broke except for what they could borrow. Education insiders fear the problem is spreading.
“We think we have some school systems out there we have some financial issues with, going forward over the next few years,” said Sen. Fran Millar, a Dunwoody Republican who chairs the Senate Education Committee. “We think it’s something that needs being monitored.”
He issued his warning during a meeting this month of the commission he co-chairs that is looking at the state’s funding of public education. The commission meets Wednesday to finalize its recommendations, but none of them call for a specific increase in basic funding.
The state has never fully funded the formula that specifies a teacher, principal, librarian, administrators and so forth for a given number of students. Although state spending on education has continued to climb in total dollars and on a per-student basis, it hasn’t matched the ratios the law requires of local systems. And local school boards have had to make up the difference.
As that difference has grown steeper in recent years, so have the struggles of local districts.
“I know a lot more of them are going to get closer to going into deficit,” said Lou Byars, the director of financial review at the Department of Education.
Randolph, Hancock, Talbot and Baker county systems and Dublin city system began the year with negative reserves. Dozens of others wound up with extremely low reserves, just a few days of operating cushion.
“There are a number of ones out there that I hear rumors that are having a very difficult time,” said Sis Henry, executive director of the Georgia School Boards Association.
Those rumors suggest the number of systems bleeding red ink across their ledgers is increasing and that some may run out of options before they run out of school year.
The State Board of Education has offered as many options as it has available. Making loans or grants isn’t.
The board has stopped granting individual districts permission to exceed legal ratios for students in a class or the number of days in a school year, the two biggest areas of financial impact. Instead, the board issued a blanket waiver of its own rules to every district.
Because most money goes to personnel, the most effective cuts are mostly furloughs, attrition and layoffs.
One option that leaves jobs intact is shortening the school year by making each day longer, but that has drawbacks, too.
“I think when you start increasing the day, you have to look very carefully about whether children are still getting what they need when children are in class at 4 in the afternoon and they’re in the second grade,” Henry said.
Districts have used these options and are tapping the next level of resources. Most have used loans to tide them over. So-called tax-anticipation notes are normally used to even out cash flow because most revenue comes in December when people pay their property-tax bills. These days districts are depending on a series of notes for the bulk of the year.
The Education Department’s Byars has heard speculation that some lenders have reached their limit and might not offer additional loans to some districts.
Final choices might include merging with other districts. Many city and county systems are now consolidated as a result of a previous money crisis.
Mergers have their own challenges, Byars said. South Georgia districts that have shared a high school to save money have seen dropout rates rise as students balk at long trips to class, he said.
Addressing the problem with more revenue isn’t a simple solution either, said Chuck Ledbetter, Dublin’s superintendent. That system wound up last year with a deficit for the third straight year.
“I talk to the legislators who are anti-tax, and I agree with them. I don’t want to pay more in taxes than I have to,” he said.
Dublin has cut 20 percent of its teachers and 18 percent of its support staff as well as furloughing its employees. Its cash-flow problem is compounded by two federal grants to provide help with targeted students, but the district has to spend the money first and then get reimbursed.
Ledbetter worries the effects of the financial problems on students won’t show up for 15 years when today’s students struggle in college and the work force. That could damage the state’s economic competitiveness, he warns.
“Two years ago, I think most educators were thinking, ‘We’re at the bottom, and it will get better.’ Now they’re saying, ‘This is the new normal.’ I hope not,” he said. “I hope it’s going to get better.”