The $3 Million Question: Why Didn’t Wake Divert a Property Tax Surplus to Its School System? | News

The $3 Million Question: Why Didn’t Wake Divert a Property Tax Surplus to Its School System?

by

2 comments
Three million dollars equals only about 0.0023 percent of the annual allotment that Wake County schools receive from the Board of Commissioners. But when county coffers took in that much more in property taxes this spring than expected, it started a row about county governance that appears far from over.

At the heart of the disagreement is the action by Wake financial staffers to incorporate into the overall budget more than $3 million in revenues without first consulting the elected commissioners. County staffers describe the folding in of the money as a routine part of the budgeting process, which was completed last month. But first-term commissioner Greg Ford, a former high school principal, wants to know who calls the shots when public coffers run over by millions.

After all, during this time period, county commissioners were considering a budget request from the Board of Education that would have put $44 million in new local funding into the schools.

“They can say that it was not a purposeful diversion from the schools,” Ford says. “The point is, staff used discretion to allocate this funds in a way that I think that, because of the amount, should have been brought before the Board of Commissioners for action. What is an appropriate threshold of when elected officials should be notified?”

Commission chairman Sig Hutchison says the system of letting the county’s financial staff make interim adjustments is working just fine, despite Ford’s concern.

“I would say this is his first time, and this is the way it’s always been done and the way it always will be done,” Hutchison says.

Commissioner Jessica Holmes responds: “That is true as long as there are a majority of votes to support that position, but the chair does not speak for me. We are both duly elected.”

Commissioners Ford, Holmes, and Matt Calabria, the board’s vice chairman, thought after a June meeting that as much as $5 million in additional funds might be directed to the schools.

“Several commissioners, including me and including Commissioner Holmes, wanted to know from staff, did our budget projections for the year match the actual revenues and expenditures?” says Calabria, who eventually forged an agreement that brought the schools $5 million more than Wake County manger Jim Hartmann’s first proposal. “We wanted to know what, if any, additional monies would be available to the school system.”

Financial staffers told the commissioners that the property tax revenue went into a pot of current-year funding with all other revenues, to serve many needs, including the schools. However, they said, $1.5 million in sales taxes—again, more than projected—could go into the eventual increase of new funding to the schools for the fiscal year that began July 1, from $16 million to $21 million.

Calabria accepted that explanation, but Holmes and Ford maintain that commissioners should have been able to weigh in on the allocation of the other $3 million.

Hutchison disagrees: “It wasn’t that a decision was made; it was part of the normal budget process that we go through.”

Holmes first learned of the “extra” $3 million while attending a June 9 planning session for the June 19 meeting at which commissioners would decide on the school board budget. The amount, listed at $3.7 million, appeared on a handout along with news of the $1.5 million in unanticipated sales tax revenue.
In addition, the document showed that the Wake County Register of Deeds office, which is under an SBI investigation for mishandling of funds, was operating at a deficit of $4.8 million.

Holmes recalls deputy county manager Johnna Rogers linking the $3 million with the hole in the Register of Deeds budget.

“It's my understanding that those excess revenues went to address lower-than-projected revenues at the Register of Deeds,” Holmes says. “I made a specific request that those funds be given to the schools.”

Rogers declined to reply specifically to Holmes’s statement about money going to make up for the Register of Deeds shortfall. Via email, Rogers said: “In putting these amounts together, no one particular amount was tied to any particular adjustment. In the end, revenues would have to equal expenditures. One dollar of additional revenue generated is not specifically tied to another dollar of revenue or expense.”

Holmes persisted in her quest through an email to Scott Warren, the county attorney.

“During the agenda meeting I learned that we have additional revenue from property and sales taxes that exceeded projections,” Holmes wrote in a June 9 email. “The total amount was a little over five million. Are there restrictions on how we can use these funds? For example, could we add it to the school budget?”

Warren responded: “I'm not aware of any restrictions so yes, I think it could be added to the school appropriation.”

Hutchison says that any billion-dollar-plus plan will contain functions that spend more or less than expected, and revenue sources that may go up or down.

“This happens every year, because every line item doesn’t spend exactly what you think it’s going to spend,” Hutchison says. “You’re never going to be perfect.”

Ford expresses concern that $3 million was too large an amount for staff to allocate without getting sign-off from the board.

"My takeaway from this is, first of all, I'd like to have greater lead time on, when additional funds are found, that they come before us as an elected body and we make decisions on that, with staff input,” Ford says. “Staff saying, 'We've already done that internally' didn't set well with me.”

To follow up, Ford says he intends to consult Hutchison and county manager Jim Hartmann about the issue. He will further suggest that it be addressed in a work session, he says.

No one has implied any wrongdoing or impropriety in the preparation of the budget. Instead, the discussion centers on establishing the difference between big stuff and small stuff, or the level at which financial staff members should turn over decisions on allocations to elected officials.

County officials sometimes express frustration over the school board’s annual requests for more funding, noting that county departments such as public safety and human services also need more money.

Board of Education member Keith Sutton, a former head of the panel, says Hartmann isn’t obligated to let the schools know if additional money shows up. But such a relationship might work better.

“In the ideal situation, Jim Hartmann picks up the phone calls [schools superintendent] Jim Merrill and says, ‘We got an additional three million’,” Sutton says. “’Maybe there are a couple of things on your list that we might be able to address with some of this money.’ In my mind, that would be the ideal situation.”

Comments (2)

Showing 1-2 of 2

Add a comment
 

Add a comment