System says state funding shortfall will require total rate hike of 1.754 mills

Inflation is about to envelope your school taxes, with the rate going up 1.754 mills — a $8.2 million new bite out of your wallet.

It was supposed to be a meeting to increase the millage rate three-quarters of a mill. But that notion evaporated quickly as the Fayette County Board of Education Monday took a look at potential state cuts announced late last week and decided to set new public hearings to increase the millage by 1.154 mills instead, and to consider having employees responsible for co-pays on medical and dental insurance.

If approved Aug. 28, the new Maintenance & Operation (M&O) millage rate would increase from 18.596 mills to 19.75. The millage rate had been advertised at 0.4 of a mill less.

The Monday morning called meeting was supposed to be the third of three public hearings on the millage increase, followed by a vote to set the millage at 19.35 mills.

The decision to forego the measure and consider increasing the M&O millage at a higher level than discussed earlier came after Gov. Sonny Perdue announced a $1.6 billion reduction in spending for state departments.

Cuts in money received by the Fayette County system in state Quality Based Education (QBE) funds amounts to $2.25 million, said Superintendent John DeCotis.

The likelihood of those QBE dollars being cut is a virtual certainty, said Comptroller Laura Brock.

The board discussion also included the plan announced by Perdue late last week to withhold the Homeowners Tax Relief Credit, a move that would amount to a $3.5 million hit to local school system revenues if the governor is able to make good on his austerity plan.

The combined effect of the QBE reduction and the Homeowners Tax Relief Credit would amount to a $5.8 million shortfall for the school system, Brock said. The outcome of the discussion Monday addressed approximately $3.5 million of that sum.

An increase in the M&O millage by another 0.4 mill, from 19.35 to 19.75, would add an additional $1.843 million over the original proposed increase from 18.596 mills to 19.35, a rate that would generate an additional $3.466 million in tax revenues to fund the recently adopted $197 million budget.

A second expense-saving measure discussed Monday called for school system employees to begin a co-pay on medical and dental premiums, likely to begin in January, amounting to $1.3 million in savings for the second half of the 2008-2009 budget cycle.

School board attorneys will have to rule on whether requiring employees to pay for a portion of their insurance violates their contracts, DeCotis said.

If enacted, the measure would cost employees $71 per month for their portion of the medical and $22 per month for dental, amounting to a total school system savings of $1.3 million for half the budget year.

A third measure surfacing at the Monday meeting called for implementing a 5 percent reduction in the operations budget, expected to generate approximately $400,000 in savings. Still other funds might be accessed by transferring approximately $700,000 from the bond fund. The start-up money was originally transferred from operations when the bond was being set up a few years ago. With bond payments well underway, those start-up funds could be transferred back into the operations, Brock said.

As for the debt service millage rate on school bonds, board members are expected to raise the rate from 3.55 mills to 4.17 mills, a difference of $2.899 million, or 0.6 mill.

Brock several weeks ago explained that the bond amortization schedule for 2008-2009 calls for payments totaling $20.71 million. If left at the current rate of 3.55 mills the resulting revenue would bring in $17.31 million, leaving a revenue shortfall of $2.899 million. That amount, she said, could be made up by increasing the bond millage by 0.6 mill.

Public hearings on the new proposed millage will be held at the school system office Aug. 21 at 8:30 a.m. and 6:45 p.m. and again Aug. 28 at 8:30 a.m., when both millage rates will be set.