Montgomery council questions school system surplus -- Gazette.Net


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Members of the Montgomery County Council will question the county school system this week on its plans for spending $33.3 million projected to be left over from its budget this year.

Montgomery County Public Schools is expected to end fiscal 2012 on June 30 without spending $21.4 million of its estimated $2.09 billion total budget, as well as $11.9 million it carried over from previous years, according to the school system’s May 8 monthly financial report.

The Education Committee of the Montgomery County Council is scheduled to meet Wednesday morning with representatives from the school system and the Board of Education to discuss the surplus, said Valerie Ervin (D-Dist. 5) of Silver Spring, chairwoman of the council's Education Committee.

Council members said they want to know why there is a surplus when the county, which provides nearly half of the school system’s budget, has not maintained its level of funding per pupil for the last three fiscal years.

The state Maintenance of Effort Law dictates a county fund its school system at the same amount per pupil as the previous year. For fiscal years 2010, 2011 and 2012, the county did not meet maintenance of effort.

In 2010, the school system ended with $12.8 million in its fund balance, said Jennifer Hughes, director of the county Office of Management and Budget. It ended fiscal 2011 with $22.8 million, said Blaise DeFazio of the county Office of Management and Budget in an email. It is projected to end this year with $33.3 million.

Larry Bowers, the school system’s chief operating offer, said the fact that the county did not meet Maintenance of Effort should not at all be associated with surpluses. Building much of the surplus was intentional, he said.

“The council and the county executive asked us to come up with savings and help fund future year budgets,” Bowers said.

Normally, between $5 million and $7 million would be the most that is requested to save, he said.

“For those years that they asked us to save, we made very difficult decisions — it is not easy to save that much money,” he said.

The school system spent $17 million from the fund balance this fiscal year and will use $17 million of the $33 million currently in the balance next fiscal year. Without those funds, the school system would have had to cut the budget, or ask the council to provide the funds on top of its current request, Bowers said.

The school system currently is requesting the minimum to meet maintenance of effort, and those extra needed funds would expand the request, he said.

Montgomery County Executive Isiah Leggett (D) has proposed funding the school system at Maintenance of Effort in fiscal 2013, an increase of $50.7 million from this year to $2.001 billion.

Under recently adopted state law, maintenance of effort can be enforced by the state if the county neglects to do so. The law gives the state the authority to raid county income taxes and funnel it to education should the county budget less than maintenance of effort for the school system.

Bowers said that the only reason why council members should be surprised about the surplus is because of how it has grown unexpectedly this year. In November, the school system was projecting the 2012 fund balance to grow to $7 million, $14.4 million less than what currently is projected.

The surplus increased this year for three main reasons, Bowers said. The school system saw greater than expected turnover and more retirees, accounting for about $10 million.

Utility rates were low this year, in part due to a mild winter, he said. The surplus in that account is $5.3 million.

Due to a reduction in the amount of local funds that need to be contributed to the employee benefit plan, there is a $1.5 million surplus in that account, he said.

In and of itself, carrying a surplus is not questionable, said Councilman George Leventhal (D-At Large) of Takoma Park.

"In fact, a surplus is a sign of good fiscal management," he said.

But not spending its full allocation in years when the school system was given less, per pupil, than the prior year, proves that the county was not "underfunding" the system, as argued by proponents of the latest changes to the Maintenance of Effort law, Leventhal said.

Some surplus is normal for the school system, said Ervin, who has led the Education Committee for the past four years.

"I think that they know that they are going to have costs moving forward and they are being good fiscal stewards and that they are managing their money well," she said.

Had the county actually funded the system at the required amount under state law, it would have given the school system an additional $640 million from fiscal 2010 through 2013, Hughes said.

Montgomery County has no control over how the school system spends its allocation.

When other county agencies do not spend all the money allocated in the budget, the money reverts to the general fund for future use, said Councilman Marc Elrich (D-At Large) of Takoma Park.

The school system is different, he said. Any unspent funds remain with the school system.

kalexander@gazette.net

jbondeson@gazette.net