Dothan City Schools is in the best financial shape it has been in several years – and that’s ahead of anticipated savings coming from consolidation, according to DCS Chief Financial Officer Mike Manuel.
At nearly $11 million dollars, the positive growth this past fiscal year can be attributed to Dothan’s sustained economy and cost-saving measures, he added.
Most of the school system’s local funds come from sales taxes and ad-valorem, or property, taxes from the city of Dothan and Houston County. With almost three months left in the 2019 fiscal year, which does not end until Sept.30, the system has already received over $14 million from local tax collections, about $2 million less than past three years have seen for an entire 12-month fiscal year.
In May, DCS received $811,941.63 from local taxes, 11.6 percent more than it received in May of last year and nearly 34 percent more than in FY 2016.
“We’ve had a lot of new businesses come in town, and housing, they’re still building houses around here so they’re pay taxes on that,” Manuel said.
The system has also been tightening its belt on expenditures, restricting the use of substitute teachers, managing a profitable Child Nutrition Program, and cutting spending from local funds in March.
For the first eight months of its 12-month fiscal year, the system operated with an excess of $4.6 million in revenue, $4.57 million over what was anticipated for the entire school year when the budget was presented.
Its general fund can afford 1.87 months in operating costs. The state government requires that the school board maintain at least 1 month of operating costs in its general fund at all times.
Last year, Superintendent Phyllis Edwards implemented procedures that resulted in a savings of almost 50 percent of substitute costs from the previous fiscal year. Now, substitutes are only allowed for classroom teachers and aides who have a 1-to-1 relationship with students. Any exceptions must be approved by the superintendent or her designee.
The savings the new policy provides is expected to offset the additional cost of having Kelly Services Education Staffing manage and staff substitutes for Dothan City Schools. The change will allow subs to be employees of Kelly Services for unemployment compensation and health insurance. The Affordable Care Act requires Dothan City Schools track each sub to make sure they do not work enough hours to qualify for health insurance coverage, which must be provided by the system.
The agreement with Kelly Services entails that each substitute for the system be paid 133 percent of the approved substitute rate for all classes of employees and 150 percent of the rate for nurses.
Manuel said an important reason for the switch was not financial, but an effort to unburden teachers with the task of finding a substitute for their class during a possible emergency.
Teachers will still be able to select their preference for substitutes through the Kelly Services system.
DCS will have to pay a percentage to Kelly Education Staffing for their administrative fees, which amount to about 33 percent of what it will dole out for substitutes’ pay.
Other expenditures are slightly up from the last fiscal year, but well within their $71.3 million budget for expenditures, and Manuel expects that the general fund will have more money by the end of the upcoming fiscal year.
The system has a surplus in the Child Nutrition Program fund, which will be moved to the general fund at the beginning of the 2020 fiscal year.
“They’re only allowed to have a two-month operating budget,” Manuel said. “The federal government allows you to withhold some of that pass-through. This year, they will withhold most of that – about a $1.8 million dollar surplus, which will go back to the general fund.”
Now, the program has four months of operating budget.
“They have a huge participation, which helps them to be profitable,” Manuel noted, adding that administration does a good job of getting the best prices through bid processes for food costs and kitchen supplies. The federal government also reimburses the system for 67 percent of DCS students, who are on free or reduced lunches.
Additionally, the office makes sure they do not have excess staff and that personnel do not work too many more hours than are reimbursable by the state.
Next year’s closure of four schools, as well as three buildings on Dusy Street that used to be central office’s headquarters, is expected to boost cash flow. The system is expected to save at least $2 million a year in operating and administrative expenses.
Edwards plans to use some of those savings to reinvest in instructional costs like professional development. She is already using some of those projected savings to hire more foreign language and art and music teachers.
The state will also grant the system formula funding, the main state revenue source for K-12 schools nationally. Because 2019’s average daily membership decreased to 9,011 students from 9,162 students, the system will receive funding for about six less teachers for the 2020 fiscal year.
Manuel also hopes the district will start to see some of the money from online sales tax collections from the state.
Recently, new legislation required that 25 percent of what the county government receives from the state for online sales tax collections be divided appropriately among all schools in the county.
While the general fund has peaked over the years, Dothan City Schools’ debt will increase. The system just borrowed $15 million for capital improvement projects, including restructuring efforts and deferred maintenance.
The system currently has $22.56 million in long-term liabilities.
Dothan city’s school board also recently agreed to take out an additional $10.6 million performance bond with Trane in the upcoming fall for energy-saving services.
“That’s going to let us do some much-needed maintenance and upgrades in the system,” Manuel said. “It’s hard to do some of those things the two bond issues are doing when you only have 10 mils of local effort, which is the absolute minimum that you can have.”
Each county, and its districts, is required to give at least 10 mils of property tax collected to fund the school district. The mill rate is the amount of tax payable per dollar of a property's value.
The recent bonds issued or approved will be repaid mostly with capital outlay funds and savings in energy costs, guaranteed by Trane, the energy services contractor.
As of May, DCS has $14.94 million in its capital project fund and a positive balance of $1.56 million in its debt service fund.