Tennessee school finances sometimes throw Sullivan schools for a loop

Rick Wagner • Nov 13, 2016 at 6:30 PM

BLOUNTVILLE — A school system with less than half of a superintendent might sound like the start of a bad joke, but it is reality when it comes to state education finance in some local systems.

Evelyn Rafalowski is a full-time director of schools for the Sullivan County system, but the state of Tennessee funds only 47 percent of her salary because two other public school systems operate in the county. That means the Kingsport and Bristol systems also get a proportional share of superintendent funding, which is based not on what the systems actually pay their leaders, but on a state formula.

Welcome to the weird world of Volunteer State school finances, where unknowns and retroactive funding changes seem to be around every corner, especially for Sullivan County schools, according to its director and budget chief.

Since the Sullivan County Board of Education didn’t have time to hear all the scheduled presentations at its Oct. 28 retreat, the board at its work session Thursday evening heard two reports and will hear two more at its December work session. One was by Ingrid DeLoach, the system’s business manager.

DeLoach explained to the board, which includes recently elected members Matthew Spivey of Kingsport and Mark Ireson of Colonial Heights, that education funding from the County Commission is split among the three school systems with 48.22 percent going to the county, 31.95 to Kingsport and 19.83 to Bristol. That is based on a countywide “pie” of funding, which BOE member Randall Jones, a retired Bristol school system central office administrator, said means that if a student transfers from the county to one of the city systems, it is “almost like losing them twice” since it simultaneously increases the city’s share of students and decreases the county’s share.

The numbers are weighted full-time equivalency average daily attendance, the kind of stuff by which school finance gurus live and die. Such concepts, however, are not well known or understood by the public. Board members and other school officials fear that public officials outside the education system don’t understand them, either.

The same logic applies to property tax revenues. With each penny of the tax rate generating $354,985, based on a collection rate slightly less than 100 percent, the county gets $171,174, Kingsport $113,417 and Bristol $70,394.

“Anytime we ask for something, we have to ask for twice what we need because of the city-county split,” Rafalowski told the board. “We have no idea how the city-county split is going to shake out until April.” Then, she said, it is applied retroactively for the whole fiscal year that started July 1, something member Randall Jones suggested lawmakers change by using numbers from the past year so systems go into a budget year with more certainty.

Locally, the impact of the current retroactive funding is that Kingsport in recent years receives more money from the city-county split that it budgeted because its share of students across Sullivan County county has risen in proportion to the county system.

Local option sales tax works a bit differently. Of the local option collected countywide in any jurisdiction, half goes to the local government where the tax is collected. The other half is earmarked for education and split among the three systems, with an extremely small amount going to Johnson City because it has annexed into the county near Piney Flats.

As for Tennessee funding through the Basic Education Program, that money is based on average daily members or ADM. However, the BEP has been changed from stability and mandatory increase provisions to something called minimum funding. For the county system, that meant an increase that would have been about $862,000 instead would be $62,000, based on preliminary funding projections.

Another caveat is that the state’s instructional salaries reimbursements, paid for teachers, are based on the minimum number of teachers mandated by the state, which DeLoach said would be fine if the county had only one elementary, one middle and one high school. However, in the real world the system falls short of the teachers needed as a practical matter.

In addition, the state reimbursement of $44,430 per teacher sounds pretty good since it is near the average pay for Sullivan County teachers; however, the state actually pays Sullivan’s school system only $27,894.858, yes the formula even splits pennies, for each of the 627.84 professional positions, which are split fractionally like the funding, covered by BEP minimum number of teachers, which she said even the poorest systems exceed. 

For health insurance, the state pays $5,849.22 compared to the average cost of more than $7,400. In both cases, the local government are expected to make up the difference.

One of the big changes that came this year was that funding for at-risk students was increased, but it covers only students whose families get food stamps and other government assistance, whereas the old system paid for students who had applied for free or reduced meals. The number of eligible students on which funding is based fell to 3,339, that loss far offsetting the increased funding per at-risk student.

“That was a bit of a bomb on us,” Rafalowski said.

BOE Chairman Michael Hughes asked how much notice about the change the system received, and DeLoach said she and Rafaowski learned of it during a spring finance meeting. 

One good change for Sullivan County that went into effect this year, Rafalowski said, is that thanks to a law change systems across the state no longer will be penalized in BEP funding for students who graduate early, which normally occurs at the half-school year mark in December and obviously reduces ADM.

“We will not be penalized for early graduates anymore,” Rafalowski said.

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