Hoover school board eyes $205 million budget with $15 million deficit for 2020

The Hoover school board is considering a budget in excess of $200 million for fiscal 2020 and projecting spending $15 million more than the school district would receive in revenues.

Superintendent Kathy Murphy is proposing to spend $205 million in the year beginning Oct. 1, while receiving $189 million in revenues and $830,000 from other sources, according to a budget proposal presented to the school board Thursday night.

However, the $205 million in projected expenditures includes $19 million in capital projects such as an $8 million 18-classroom expansion at Berry Middle School, which school officials hope to begin in October.

Other capital projects proposed include $3.9 million for heating and air conditioning upgrades, $2.5 million to replace part of the roof at Hoover High School, $2.1 million to renovate part of the old Bluff Park Elementary School, $800,000 for flooring projects, $600,000 for paving projects, $550,000 for architectural designs for a fine arts facility, $350,000 for window replacements, $180,000 for painting projects and $127,500 for miscellaneous capital projects.

“In an ideal world, you would prefer not to have expenditures exceed revenues by $15 million, but it is one of the reasons why our school district has money in reserves so that as we have needs, we meet the needs,” Murphy said. “It’s kind of like having a savings account and when you need to upgrade your home and/or make those purchases, then you have those resources there.”

The school district expects to begin fiscal 2020 with at least $103.5 million in reserves, but by the end of the year, those reserves would be down to $88.5 million, Chief Financial Officer Michele McKay told the school board.

Murphy said the school district is investing the public’s money wisely and is glad to have the money to invest, but as the school district moves forward and continues to focus on buildings and campuses, it’s a good time to have a discussion about increasing revenue streams or finding new ones.

PROPERTY TAX INCREASE

School board President Craig Kelley said capital projects are a key reason the district soon will be asking the public to approve a 2.4-mill property tax increase, which is expected to provide Hoover schools with about $3.6 million more per year.

A 2.4-mill increase would cost homeowners an extra $24 a year for a $100,000 home or $72 a year for a $300,000 home.

Kelley said school leaders always strive to keep a balanced budget, but they have to maintain the facilities they have and plan for future capital improvements. “It’s part of keeping a healthy school district,” he said.

The proposed $205 million budget includes spending $153 million from the general fund, $20.3 million from special revenue funds, $16.4 million from the capital projects fund, $13.3 million to pay off debt and $1.9 million in spending by booster clubs and parent-teacher organizations.

The $153 million in projected general fund expenses actually is less than the $155 million approved for the 2019 general fund budget a year ago. And the school district has to absorb the costs associated with a 4 percent raise approved by the state Legislature for school employees for 2020.

While the state provides money for some of those employees, local school districts pick up the cost for extra positions funded solely by the district. Hoover pays 100 percent of the cost for 297 of its 2,080 employees, including 203 teachers, 27 other certified positions and 67 support staff, school officials said.

McKay said the district was able to absorb that cost in the proposed 2020 budget, but she doesn’t believe it can handle another 4 percent pay increase in 2021. Such a raise likely would cost the district $4.2 million of its own money, she said.

Hoover also pays many of its employees above the state salary scale and must foot the bill for that itself as well.

STUDENT-TEACHER RATIOS AT RISK

McKay said school officials need to review their staffing models to see if they can continue with current student-teacher ratios. They may need to increase the number of students per teacher, she said.

Murphy said she knows maintaining low student-teacher ratios has been an important part of the school district’s mission since its inception.

McKay said the district also needs to review how it calculates building capacity. There are two ways to determine how many students can go into a building, Murphy said. One is to figure building capacity based on desired student-teacher ratios, and the other is to look at how many students can actually fit reasonably in the physical space in the classrooms.

Following the latter method might enable the district to delay some building expansions, McKay said.

Other factors contributing to the proposed 2020 budget deficit include a nearly $1.8 million increase in principal payments on debt, escalating costs associated with special education, expected increases in water and sewer costs, and a $258,000 decrease in federal funding associated with a slight decrease in the number of students qualifying for free and reduced lunches.

The school district’s debt payments for 2020 will total $13.3 million, including $6.5 million in principal and $6.8 million in interest. At the end of fiscal 2020, the district will have almost $157 million in debt.

The number of students in Hoover’s special education program has increased from 1,102 in fiscal 2015 to a projected 1,480 in fiscal 2020, McKay said. Costs associated with that have increased from $10.7 million to $17.9 million, she said.

The number of Hoover children participating in the federal program for free and reduced-price lunches increased from 3,472 in fiscal 2016 to 3,645 in 2017 but dropped slightly to 3,626 in 2018 and 3,639 in 2019, school records show. Funding for several federal programs are tied to those numbers.

OTHER BUDGET DETAILS

The $153 million in expected general fund expenditures includes $119 million for instruction and instructional support, $16.7 million for operations and maintenance, $7.6 million for transportation, $4.5 million for capital projects, $4.3 million for administrative costs and $1.7 million for other costs. About 85 percent of all expenses in the general fund would go toward salaries and benefits.

Of the $189 million Hoover schools expect to receive in revenue in 2020, 51 percent of it — or $98 million — would come from local sources. That includes $42.1 million from Hoover property taxes, $10 million from Jefferson County property taxes, $6.5 million from Shelby County property taxes, $5 million from the city of Hoover, $1.7 million from the Jefferson County Commission, $1.6 million from a Shelby County sales tax, $800,000 in interest and a $410,000 reimbursement from Medicaid.

Hoover schools also expect to get $84 million from the state, $7 million from the federal government and $66,500 from Homewood City Schools to cover tuition for Homewood students attending the Riverchase Career Connection Center.

Thursday night’s budget presentation was the first of two public hearings on the Hoover school district’s proposed 2020 budget. The second public hearing is scheduled for 4 p.m. on Tuesday, Sept. 10, at the Farr Administration Building at 2810 Metropolitan Way. The school board has an action meeting scheduled for 5:30 p.m. Tuesday and typically votes on the budget the same day as the second public hearing.

McKay said anyone with questions about the budget can call her at 205-439-1012 or email her at mmccay@hoover.k12.al.us. A budget summary can be seen on the school system’s website.