Hoover school board passes $10.4 million deficit budget for fiscal 2016

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The Hoover school board tonight passed a $168 million budget for fiscal 2016 that includes spending $10.4 million more than school officials expect to receive in revenues.

School board members made it clear that new Superintendent Kathy Murphy has to find ways to address the school system’s continued string of budget deficits but said they are willing to give her time to do that since she has been on the job only 3 ½ months.

Murphy said she feels very uncomfortable presenting a budget with a $10.4 million deficit but needs time to figure out ways to address the issue. Personnel costs make up the vast majority of school system’s budgets, and staffing levels for the current school year were set in April before she was hired.

The 2016 budget passed tonight includes 60 new employees, even though enrollment is down by about 60 students this year to about 13,840. Thirty-two of those new employees are support personnel, and many of them are custodian positions brought back in-house after two years of contracting out custodial services.

Another 23 new positions are teachers, including numerous foreign language teachers, Chief Financial Officer Cathee Antee said.

Murphy said work already has begun to figure out how to staff Hoover’s schools at a more sustainable level. She also wants to study expenditures for overtime, travel, cell phones and technology and examine potential ways to increase revenue, she said.

The bottom line is that Hoover’s revenues are declining, and the gap between revenues and expenditures is widening.

Certain characteristics have made Hoover a unique and excellent school system, such as smaller class sizes and a wide array of extra-curricular and academic activities, Murphy said. But school officials must be able to pay their bills, she said.

“We’re really at a point where our community needs to say to us what you expect from us and are you willing to fund that?” Murphy said.

It’s unfair to have high expectations for a school district but not be willing to fund it, she said.

“You either have to have an increase in revenues or decrease in expenditures and/or both.” Murphy said.

School board President Derrick Murphy said the superintendent needs a full fiscal year to evaluate the school system’s needs and to find efficient and innovative ways to balance the budget.

“We have new leadership, and we have a leader that wants to get this thing done right,” Derrick Murphy said. “With state and federal funding continuing to be reduced every single year, that’s something you can’t control, but we can prepare for it, and she’s going to prepare for it … I feel certain we’re going to make some changes next year.”

School board member Craig Kelley said the school board is certainly aware of the budget deficit. “When she’s been here long enough, we’re going to expect cuts, and the last cuts will be in the classroom,” he said.

Board member Stephen Presley reminded the board that former Superintendent Andy Craig told the board a year ago that it might take three to five years to get the budget balanced.

“Everyone understands that we have got to get this budget under control,” Presley said. “Something’s going to have to change here, and when it changes, everybody’s OK with it unless it affects them. Things have got to change.”

Cooper agreed with the superintendent that the Hoover community at large needs to decide what its expectations are and whether additional sources of revenue might be needed to sustain those expectations.

He also said there likely are ways the school system can provide educational services with fewer personnel than in the past.

Antee agreed, noting that online classes offer opportunities to decrease personnel costs.

During tonight’s budget hearing, Antee noted that all of the Hoover school district’s revenue sources are expected to decline in fiscal 2016, which starts Oct. 1.

Local revenues are predicted to drop 2 percent to $81.7 million, while federal revenues are expected to decrease 1.7 percent to $6.3 million and state revenues are expected to drop less than 1 percent to $68.5 million. Total anticipated revenues of $157 million are 1.4 percent less than the revenues budgeted for fiscal 2015 and down from $170 million in 2008.

Revenue received per student has fallen from $13,715 per student in 2008 to an expected $11,288 in 2016, Antee said. The amount coming from the state’s foundation program has dropped from $4,488 per student in 2008 to an expected $4,237 in 2016.

Transportation operations are expected to cost the Hoover school system $6.7 million in fiscal 2016, but the state provides only $4.9 million, leaving Hoover to cover a $1.8 million shortfall, Antee said.

The expected expenditures of $168 million for fiscal 2016 are up $1.3 million (or less than 1 percent) from the 2015 budget.

The Hoover system expects to begin fiscal 2016 with $83.3 million in its fund balance, and the expected $10.4 million revenue deficit is predicted to lower that balance to $72.9 million by Sept. 30, 2016. That would be enough to cover five months’ worth of expenses.

Antee said the big question that needs answered is what level of fund balance is appropriate for Hoover schools?

Kelley said the purpose of the fund balance is not to support operational budget deficits but to help the school system have money in reserves in case the state declares proration and cuts funding.

He also strongly encouraged Hoover residents to let their state legislators know how they feel about proposals to take money from the Education Trust Fund and use it to support the state’s general fund.

See the complete fiscal 2016 budget for Hoover City Schools.