Orangeburg County School District officials say they’re working to deal with an unanticipated $8.7 million deficit.
Superintendent Dr. Shawn Foster said he and his staff are committed to reducing the deficit and bringing forth a balanced budget for the 2020-2021 school year.
“We are looking at staffing levels and looking at where things are and how we can fit individuals into those correct funding sources,” Foster said. “Those who belong in special revenue funds, we want to make sure they are on special revenue funds and not sitting on the general fund.”
“It will require me to do some shifting across the district with people,” he said.
The district believes it can reduce the deficit to $4.4 million using some previously untapped funds. It is also seeking assistance from the state and county.
School board members were told about the deficit during their Tuesday meeting.
District officials say the budget shortfall is due to miscalculation in tax rates that occurred during the school consolidation process when a transition committee helped combine three school districts into one.
As the district set the property tax rate for the 2019-2020 budget year, it believed it would receive $250,000 per mill. The district taxed property at 178 mills for operations and 42 mills for debt service.
“As we worked through the process in March into April, we started realizing there was something not right here with revenue," District Interim Chief of Financial Services David Loadholt said.
As officials tried to determine why collections were down, they began looking at the value of a mill.
Loadholt said it was eventually discovered that the Orangeburg County School Consolidation Transition Finance Committee had estimated the value of a mill for school operations at $281,000. The district decided to use a conservative value of $250,000 per mill.
Instead, each mill only brought in $201,000 for school operations, taking into account a 95 percent collection rate.
"This put you in a hole from the beginning, shorting you about 42 mills you were able to levy," Loadholt said. "That is what created what looked like an $8.5 million shortfall in revenue."
Also, when Orangeburg County had three school districts, each district had an operational millage and 25 mills for equalization that would fall on all taxpayers.
"In the legislation, the 25 mills was moved over to where homeowners did not pay the tax on the 25 mills anymore," Loadholt said. "So it did not take 25 mills to generate $7.5 million anymore. It took about 37 mills and that is basically what created the shortfall."
Orangeburg County Administrator Harold Young said the transition committee is not to blame for the mistake.
"The school district has fiscal autonomy and we give them the assessed value of the property for them to set the millage," Young said. "There is a calculation problem done on somebody's part, but that has nothing do with the consolidation committee."
The $281,000 per mill was a best guess of what property values would be, but the county was in the middle of a property reassessment at the time.
The report wasn’t created to set the millage, but to offer guidance as Orangeburg County’s three school districts were consolidated, he said. The school board was tasked with making the final decisions.
"It is their responsibility to set the mills based on what they need to levy and to make sure they keep account of where the funds are during the course of the year to see if a deficit is coming," Young said.
Young said the county did host a workshop in County Council Chambers in early spring 2019 led by the S.C. Department of Revenue. The school district's finance department as well as 17 municipalities were invited to attend the workshop on how to set a millage during a reassessment year.
During the school board meeting, Foster said "Consolidation is never an easy task.
"I don't know if pointing fingers in either direction will benefit or if that is even the proper approach. Every entity had good intentions and was moving forward with those intentions in mind for serving the students and this community."
Foster, who became superintendent on July 1, noted there was also some turnover in the county at the time of the transition, making for an additional challenge.
"You have every opportunity for things to be missed and or misinterpreted," Foster said. "I did not bring this in my truck with me. It was here when I got here. I didn't bring any solutions with me as well. Those solutions are here as well."
Following the financial presentation, OCSD Board Chair Peggy James-Tyler said, "We hope next time we know what a mill is."
After an hour and a half in closed session, district trustees approved eliminating classified positions due to the “severe financial constraints resulting from current and anticipated budget shortfalls.”
The board voted 8-1. Trustee Dr. William O'Quinn was opposed.
Assistant Superintendent for Communications and Business and Community Partnerships Merry Glenne Piccolino said the district is looking internally at areas that are overstaffed.
“Where we are able to transition an employee from an area where there was an overage into a current vacancy or utilize that employee to fill an organizational need, we are doing so," she said. "Doing so will allow us to eliminate the additional position while maintaining the employment of as many individuals currently in positions with OCSD as possible."
Glenne Piccolino said no specific positions are being examined but all areas are being assessed.
"The savings to the district will not be determined until we've had an opportunity to evaluate staffing levels in all areas to ensure that we are appropriately staffed throughout our organization," Glenne Piccolino said.
The district is now seeking to close the deficit with county and state assistance. The district has met with State Department of Education and county officials, as well as the local legislative delegation.
"We are currently researching different funding resources to assist in this shortfall," Glenne Piccolino said. "We are still receiving the remaining tax collections from the county that are due to the district. We will not know the final shortfall until the 2019-2020 audit has been completed."
OCSD Assistant Superintendent of Finance Brandi A. Gist said it has been discovered that the county owed the district funds from both the 2018-2019 and 2019-2020 fiscal school years.
Gist says the district received about $1.7 million in the month of August in tax collections from the 2019-2020 fiscal year as well as about $1.2 million that was due to the district from the 2018-2019 and 2019- 2020 fiscal years.
The district also received an additional $937,108 from various taxes collected by the county, sent to the S.C. Department of Revenue and reimbursed to the county.
Orangeburg County Treasurer Matt Stokes said the lag time in collections was due to the county transitioning to new financial software, as well as the coronavirus pandemic which resulted in reduced staffing at the treasurer's office.
"As of today, they have everything due to them," Stokes said.
Gist says the district could also use about $2.2 million of its $5.2 million sinking fund balance to help offset some of the deficit. A sinking fund balance is money set aside to pay off debt. Gist said lawmakers would have to approve use of the sinking fund balance.
The State Department of Education also says the district could tap into the state's funding flexibility funds to the tune of about $1.5 million, Gist said.
"If all our requests are approved by the state, we could reduce the deficit down to $4.4 million without the use of the district's sinking fund balance," Gist said. "There is the possibility of having to use the general fund balance to balance and close out the 19-20 school year."
Gist noted all the financial figures are preliminary and all avenues to close the deficit are being researched.
Gist said the district's auditors will come to the district the week of Oct. 21-25 and the final audit is due to the State Department of Education on Dec. 1.