Hoover schools' expenses fall by $25 million due to COVID-19, construction delays

While COVID-19 has hit schools hard, the disease turned out to be a boost for the Hoover school system’s pocketbook, records show.

School officials had expected to end fiscal 2020 with $88 million in the bank, but lower spending associated with the school shutdown last spring and delayed start in August meant the school district now expects to end fiscal 2020 with almost $114 million in its fund balance on Sept. 30, Chief Financial Officer Michele McCay said. That’s more than a $25 million difference.

A large part of that is because of capital projects that got delayed, McCay said.

A $7.6 million project to add 13 classrooms at Berry Middle School had some delays, so there were accompanying delays in payments, she said. Also, school officials did not start demolishing part of the old Bluff Park Elementary School and renovating other parts of the building as expected in fiscal 2020, she said. The budget for that project is $2.1 million.

School officials also have about $2 million worth of heating and air conditioning control upgrades that have not yet been completed, and they did not spend $350,000 for window replacements at several elementary schools or do $780,000 worth of painting and paving projects that were planned, McCay said.

Most of those projects will roll over to 2021, she said.

Beyond capital projects, there were numerous other areas where spending was reduced because of COVID-19.

There were 2½ months of no payment for contracted instructional support, reduced professional development over the summer, and savings in transportation, child nutrition and utility costs, McCay said.

All of this has the school system in a much better financial position than anticipated. However, school officials would have preferred to avoid the shutdown and teach children like they normally do.

2021 PROPOSED BUDGET

McCay on Wednesday shared details of the school district’s proposed budget for fiscal 2021 during the first of two public hearings scheduled at the Farr Administration Building this week.

School administrators are proposing to spend $211 million while taking in only $193 million in revenues and about $750,000 from other sources, McCay explained.

If the budget is approved as proposed, school officials would pull $16.8 million from the district’s fund balance (savings) to pay for the rest of the expenses, which include $18.3 million in capital projects.

That would decrease the school system’s overall fund balance from $114 million on Oct. 1 to $97 million on Sept. 30, 2021. But the fund balance essentially serves as a savings account, and the money is meant to be spent on capital projects such as the ones planned, McCay said.

The school system is in good shape as long as it has about five months’ worth of operating expenses in reserve, she said. Those reserves now stand at about 10 months' worth of operating expenses and would be at seven to 7.5 months’ worth of operating expenses at the end of fiscal 2021 if the budget is followed, she said.

Overall planned expenses of $211 million for 2021 are $6 million greater than the $205 million approved in the 2020 budget. For the general fund, expenses are expected to climb from $153 million in the 2020 budget to almost $157 million in 2021.

Salaries and benefits account for 88% of the general fund budget, McCay said. That includes almost $115 million for instruction, $8.4 million for operations and maintenance employees, $6.5 million for transportation employees and $2.7 million for athletic, academic and extra-curricular supplements.

The cost of salaries and benefits increased by $6.3 million for 2021, mostly because of step raises due to greater experience levels, McCay said. However, the number of teaching positions proposed to be fully funded by the Hoover school district (without help from the state) would rise from 297 to 310 for fiscal 2021, she said. That represents 16.5% of all the teaching units and costs $20 million, she said.

The school system also provides $360,000 worth of instructional support for those locally funded teaching units, she said.

BUSES AND SPECIAL EDUCATION COSTS

Another big expense for 2021 is the proposed purchase of 18 new school buses to replace the district’s aging bus fleet, McCay said.

The Hoover school district has 177 buses, and 95 of them are more than 10 years old, she said. The school district did not purchase any new buses during 2010, 2011, 2013, 2015 or 2016, and there is a need to gradually replenish the fleet, she said.

The age of the fleet is not as big of a concern for city school systems as it is for county systems because city school buses tend to rack up fewer miles per year and city roads tend to be in better condition, school system spokesman Jason Gaston said.

Costs for special education services continue to rise as the number of students qualifying for such services has grown from 1,079 in 2014 to an expected 1,440 in 2021, McCay said. The cost of those services per student also has increased from $5,674 in 2014 to $11,813 in 2021, she said. Overall special education costs have grown from $6.1 million in 2014 to $17 million in 2021.

The school system’s annual debt service payments should stay at $12.9 million, McCay said. The system has not had to borrow new money for construction projects since 2007, instead choosing to use cash from reserves, she said.

The system has $151 million worth of debt, with payments stretched out until 2040 on the vast majority of it, records show.

McCay expects the cost of both power and water/sewer service to increase by .5%, totaling $3.85 million for power and $1.6 million for water and sewer, she said.

So far this school year, enrollment is down by about 385 students from this time last year to 13,480 students, McCay said.

REVENUES

Because the school system’s funding from the state is tied to enrollment, that could translate to a $3.2 million decline in funding from the state next year unless the state Legislature decides to provide school systems some type of waiver due to the impact of COVID-19 on enrollment, she said.

Superintendent Kathy Murphy said there is an effort under way to get the Legislature to provide at least level funding for school systems next year due to COVID-19.

Of the $193 million in revenues expected for 2021, $100 million (51%) comes from the city of Hoover, Jefferson and Shelby counties and other local sources, while $83 million (43%) comes from the state and $10 million (5%) comes from the federal government.

Local revenues proposed to go to the general fund include $45.2 million from Hoover property taxes, $12.4 million from Jefferson County property taxes, $5.8 million from Shelby County property taxes, $5 million from the Hoover City Council, $1.9 million from the Jefferson County Commission, $1.3 million from a Jefferson County sales tax, $950,000 in interest and $400,000 in reimbursements from Medicaid.

Revenues for the child nutrition program are expected to drop by $1.4 million due to COVID-19, with fewer students partaking of school meals, McCay said.

Participation in the federal government’s program for free and reduced-price meals for low-income families dropped from 3,639 students in 2019 to 3,335 students in 2020.

This is a concern because the participation rate is tied to federal funding of not only the child nutrition program but also other programs that serve low-income students, school officials said.

The federal government in late August announced it is providing free meals to all children regardless of income through the end of December, but parents still need to register their children for the free and reduced-price program if they qualify for it in order to participate in 2021, child nutrition director Melinda Bonner said.

COVID-19 FUNDING

The Hoover school system in 2021 expects to receive $4.25 million in one-time funding from the state and federal government for expenditures related to the COVID-19 outbreak, McCay said.

That money is being used to cover expenses such as Chromebooks for students in kindergarten through second grade, Wi-Fi for 10 school buses, take-home packets for students doing remote learning, tutoring, mental health services, personal protective equipment, cleaning supplies, a summer reading camp, nursing and health room supplies and improvements, salaries and benefits for health care professionals, isolation areas, bus modifications, thermometers, document cameras, instructional software and professional development.

The full proposed 2021 budget is available on the school district’s website and will be discussed again at a second public hearing at the Farr Administration Building at 4:15 p.m. Thursday.

The Hoover Board of Education plans to vote on the 2021 budget in a separate meeting shortly after the budget hearing. That meeting is expected to start around 5:30 p.m.

Both the public hearing and school board meeting will be livestreamed on the Hoover school system’s YouTube channel.

This story was edited at 11:33 p.m. on Sept. 10 to revise the number of months of operating expenses that could currently be covered by the school system's reserve fund. It is currently 10 months' worth of reserves.