Hoover school class sizes may increase if more funding not found, superintendent says

The Hoover school system may have to increase class sizes if it doesn’t find an additional source of revenue, Superintendent Kathy Murphy told the school board this week.

Money for the system’s operating budget is getting tighter, and potential raises for educators being proposed by the state legislators could bring more challenges, Murphy said.

Some state legislators are talking about giving teachers another raise in appreciation for the work they did to respond to the COVID-19 pandemic, said Michele McCay, the Hoover school system’s chief financial officer.

A 3% raise would cost the Hoover school system $4.3 million more per year, and $2.8 million of that would have to come from local funds instead of state funds, McCay said. A 5% raise would cost $6.7 million more per year, with $3.6 million coming out of local funds, McCay said.

That’s because the Hoover school board has been committed to lower student-teacher ratios and pays for about 311 teachers out of local money rather than money the state provides, McCay said. Additionally, Hoover’s pay scale for teachers and staff is 11% to 19% more than what the state offers, and that money has to come from local funds as well, McCay said.

In total, 28% of the salaries and benefits for Hoover schools in fiscal 2020 came from local revenues, McCay said.

Murphy said Hoover school officials are happy for teachers and staff to get raises, but it’s important to remember that those raises come with a financial impact.

“We’re very likely to dip into reserves to support salaries and benefits,” Murphy told the school board. “That’s never a position you want to be in. You do not want to use reserves for salaries and benefits, and very likely we’re approaching that point in time.”

PROPERTY TAX INCREASE?

It may be time to press forward with plans to ask Hoover voters to increase property taxes up to the maximum level allowed by the state, or ask the Legislature to allow Hoover to ask voters to go beyond the maximum level, as some cities such as Mountain Brook already do, Murphy said.

Hoover residents in Jefferson County now pay 72.6 mills of property taxes, and the maximum amount allowed by the state is 75 mills. A 2.4-mill increase would amount to an extra $24 a year for a $100,000 home or $72 a year for a $300,000 home.

If Hoover voters approved a 2.4-mill increase, Hoover residents in Shelby County would see their property tax rate climb from 66.5 mills to 68.9 mills. The difference between the two counties is due to different county taxes.

A 2.4-mill increase would generate an estimated $3.6 million per year for the Hoover school system, officials said a couple of years ago.

While every bit helps, that doesn’t go very far when monthly operating expenditures are $12 million to $13 million, Murphy said.

That’s why Hoover voters may want to consider going over the property tax cap, she said. Other options include increased contributions from the city of Hoover’s general fund, dedicated money from front-door fees from builders, dedicated money from internet sales taxes, or some combination of those revenue sources, Murphy said.

Internet sales taxes going to the state were up 61% this past fiscal year, Murphy said. Municipalities get a portion of that, but school systems receive none of that money, she said.

“There will be a point where we’re going to have to have larger class sizes and/or dip into reserves and/or have other founding sources,” Murphy said. “It’s that simple. Three options.”

RESERVE FUND

The Hoover school system has a healthy reserve fund right now, ending fiscal 2020 with $108 million in its overall fund balance, McCay said. Due to lower expenses associated with the COVID-19 pandemic and an increase in property tax receipts, the school system actually was able to increase its reserve fund by about $465,000 in 2020, she said.

Property tax revenues for Hoover schools increased by $6.7 million in fiscal 2020, which ended Sept. 30. Sales tax revenues fell by about $38,000.

The school system ended the fiscal year with about 7.5 months’ worth of operating expenses in reserve, McCay said. It’s in good shape as long as it has about five months’ worth of reserves, she said.

But operating costs are rising, McCay said. In addition to concerns about paying for salaries and benefits, costs for special education are escalating quickly, she said.

About 11% of Hoover’s student population now is identified as having special needs, McCay said. Since March, the school system tested 221 additional students as candidates for special education services, and 145 of them qualified, she said.

The school district spent more than $18.2 million on special education in fiscal 2020 but only received $9.5 million in federal funding for those services, McCay said. That means that $8.7 million had to come from local revenues, she said.

In addition to paying for special education teachers, the district has to pay for numerous services on a contract basis, special equipment and school buses to accommodate children with special needs.

STUDENT-TEACHER RATIOS

As for student-teacher ratios, Hoover’s current average is 11.78 students per teacher across the school district, including all teacher aides, central office administrator Ron Dodson said. Given known budget conditions over the next four to five years, the school district believes it can sustain 12.25 students per teacher, he said.

But to accomplish that, that means the general education student-teacher ratio will have to change from 15.75 students per teacher to 16.25 students per teacher, Dodson said. That’s because a greater number of special education teachers are being required to meet that growing population, he said.

If current trends continue, the school district will lose about eight general education teaching units per year unless it dips into reserves or other revenues become available to support those teaching positions, Dodson said.