Recent budget decisions by county government have enraged some folks and left others pondering our sanity. Over the next two weeks I'd like to explain how and why we made the choices we did. I'll begin with our decision not to fund area school districts (and cities) as we have in the past.
The funding in question concerns what we call "surplus" dollars: revenue we consider in "excess" of the county road department's estimated financial needs for a given year. For the past six years the (so-called) county payments plan - which ended this year - has been the road department's primary source of revenue and also the source of the surplus dollars in question.
A brief look at the 2006-2007 budget year will help illustrate what I'm saying. To simplify matters I'll use approximate figures (and also forgo discussion of the department's cash carryover, which enables it to operate until other projected revenues are actually received). Please note the accompanying graphic that depicts the flow of money in question.
This year $9,500,000 came to the county as a result of the county payments plan. Of that, $620,000 went to the Title III program, leaving $8,800,000 to be split between area schools and the county road department.
ORS 294.060 states this revenue is to be split 75/25: 75 percent to the public road fund and 25 percent to the public school fund. This split sent about $6,500,000 to the county road department and $2,200,000 to the public school fund (which the state administers).
In addition to the $6,500,000 in federal revenue, the road department took in about $900,000 from other sources like the state gas tax, the sale of gravel, a transportation grant, etc. As a result we projected a revenue base of approximately $7,400,000 for road department operations in 2006-2007. We estimated the road department's operating costs at approximately $3,000,000 for the year.
This amount, subtracted from our projected revenue of $7,400,000, left a "surplus" of $4,400,000 above the road department's estimated operating costs for the 2006-2007 fiscal year.
Of the $4,400,000 considered "surplus to our annual needs," we transferred $2,000,000 to the road reserve fund (currently at $35,000,000), $1,200,000 to area school districts (including the ESD), and $1,100,000 to the cities. Each district's allocation is based on student enrollment and is used as it sees fit; each city's allocation is based on a combination of population and road miles and is used for city road maintenance or construction.
Worth emphasizing here is that the road reserve fund is not the same as, or the source of, the surplus dollars the schools (and cities) have been getting. Surplus dollars are dollars left over after the road department has estimated what it will need to operate for a year. Reserve dollars are surplus dollars that have been set-aside by the road department over the years for the time -unfortunately now - when timber (related) dollars are no longer forthcoming as a significant source of revenue for our road operations.
Hopefully it will now be clear why the county can no longer responsibly fund the schools (and cities) as we have in the past: The road department will be going from well over $7,000,000 in annual revenue the last few years to an estimated $2,700,000 this year. The future looks no more promising. We can no longer afford to be so generous.
By contrast the schools will not see a net loss in revenue as a result of the ending of the county payments plan. The state has said it will make up the $2,200,000 shortfall in federal revenues to provide what it estimates area schools need to educate our children. As of March, that amounts to about $8,700 per student for District 3, while it amounts to almost $31,000 per student for District 17. The other three districts will receive amounts that fall between these figures.
A number of people have suggested that we should dip into the $35,000,000 road reserve in order to continue funding the schools. We are unlikely to do this for several reasons. One is that the county is obligated by law to maintain our county road system, not our county schools. That is the state's responsibility. Moreover, to dip into the road reserve to continue funding the schools at past levels will seriously undermine our ability to maintain our county road system.
We intend, with only a few other minor revenue sources, to fund the road department with the interest generated by the principle in the reserve fund, which is expected to be about $1,800,000 this year. We'll quickly lose this source of revenue if we spend the reserve's principal. That is something we can't afford to do, given our obligations.
Finally, I'd like to point out that our county government has sent area school districts an average of almost $1,000,000 per year over the last 27 years. That's a lot of money! Moreover, it's money that should have been "over and above" what the state estimated area districts needed to operate.
Based on this, and speaking only for myself, I wonder why the districts haven't built a reserve fund. That they haven't can be explained in several ways: The state has seriously under-funded our children's education, such that county surplus dollars really have been needed to cover this shortfall. Our districts have not been as wise as they might have been with the dollars the state sent them, such that they have needed surplus dollars to continue operating. Or, county surplus dollars have funded school-related opportunities which are valuable, but unaffordable when sufficient funds are no longer available.
Whatever the explanation, my intent here is not to criticize or lay blame. Rather it is, first, to highlight the fact that the county's past generosity has enabled everyone to ignore issues that we can no longer afford to ignore. And second, it is to encourage this community to take ownership of an issue that properly deserves the community's attention and involvement.