budget hearings









This post is written by Jimmie Covington, veteran Memphis reporter with lengthy experience covering governmental, school, and demographic issues. He is a contributing writer with The Best Times, a monthly news magazine for active people 50 and older, where this article was published this month.  

By Jimmie Covington

Do you remember all that noise about this time last year and for several months afterward about whether Shelby County government had an operating surplus of $6 million or $22 million in the fiscal year that ended on June 30, 2015?

Some county commissioners were all in a tizzy about how they had been “misled” by county Mayor Mark Luttrell’s administration into believing there would be only $6 million left over at the end of the fiscal year when County Trustee David Lenoir said his office had collected $22 million more in current and delinquent property taxes than had been anticipated.

There also may have been an undercurrent of that type feeling a time or two during this year’s county budget discussions and actions.

Be that as it may, did you ever get an answer to the question of whether the county administration had severely underestimated the general fund surplus?

Let’s take a look at the official numbers. They are in the county’s 2015 Comprehensive Annual Financial Report, which has been circulated to various entities, including state officials and bond rating agencies, and has been posted on county government’s website since late last year or early this year for everyone to read if they wish.

The figures show a $5.3 million general fund operating surplus for the year, which boosted the government’s unassigned fund balance to $107.8 million at year’s end. Other figures in the report show that overall general fund revenues came in $9.4 million above budget estimates, including $7.3 million more in property taxes than budgeted.

Spending came in $769,574 under the finally approved budget. When scheduled transfers and other financing sources are considered, the surplus was the $5.3 million.

The county’s outside auditing firm doesn’t check every figure in the report but the auditors do testing to state that “generally accepted accounting principles” were followed.

Traditionally, the County Trustee’s Office has used a different accounting approach in public reporting of the tax collections by the office than the county Finance Department uses in budgeting and overall county financial operations. Remember, the trustee is a separately elected official and does not come under the authority of the county mayor.

Auditors have never reported any problem resulting from the different accounting approaches. In the end all of the accounting in county government and all other governments across the country come under the principles that are generally accepted in the United States by the Governmental Accounting Standards Board.

If you will notice closely, Lenoir did not say that the $22 million was surplus for the year. He just reported that the approach his office follows showed that $22 million more than expected had been collected.

If any blame is to be placed for the confusion on the issue, it should be on county commissioners for not having a better understanding of county financial operations and on news reporters for not exploring the matter thoroughly rather than just accepting what elected officials said.

And the news media do deserve major demerits for not going to the official financial report months ago and reporting what the government’s outcome was for the year.

Note from Jimmie Covington:

A couple of County Commission members called me about the above piece. One of them, Heidi Shafer, said that I had not thoroughly explored the issue, which she said involved not just the general fund but the education fund and debt fund as well. She said the administration had used surplus funds from the wheel tax for school bond debt rather than school operations and had failed to provide transparency. She said she and other commissioners had become aware of the situation and through budget actions this year.’ commissioners moved to make sure that money designated for school operations is going to school operations. She said commissioners have found it increasingly difficult to get information from the administration.

Whatever the situation is currently, I believe the course the administration has been following is in line with an approach worked out in A C Wharton’s first county administration between administration officials and county commissioners in office at that time. This “capped” school operations funding by limiting schools to the amounts budgeted in the school fund each year rather than than allowing them to receive the usual annual growth from the various revenue sources allocated to schools. At the time, probably around 2005 or 2006 none of the changes in school funding procedures was well reported in the media.

All of this strays a bit from the amount of surplus at the end of 2015 fiscal year.

During the budget discussions in 2015, the city’s major news media reported that the administration said the county’s surplus for the year that was ending on June 30 was about $6 million. About that same time County Trustee David Lenoir was quoted as saying his office had collected $22 million more than had been expected. As of this time, there has been no reporting in any of the city’s major news media on how the year actually came out.

The Comprehensive Annual Financial Report for the year shows a $5.3 million surplus in the general fund. and a $4.1 million surplus in the debt service fund. The financial report only covers the “primary government” and does not include the schools which are classified as a component unit.Schools are in a separate report. If the education fund were listed in the general report the same way it is in the budget it would show no surplus since only budgeted amounts for schools are listed rather than revenue amounts.

If County Commission members are concerned about surplus or growth money from revenue sources allocated to schools being shifted by county administration officials to paying debt costs on school bond, they have a clear path to prevent that. All they have to do is adopt a policy that all of the funds from revenue sources allocated to schools must go to the county school system  and the municipal school districts. That was the approach that was in effect for decades until  administration officials and some Republican members during A C Wharton’s first county administration during 2003-2008 developed and implemented the change that capped the operations revenue provided to the then city and county school systems and started using the “surplus” revenue to pay the debt costs on school bonds. All county mayor’s administrations and a goodly number of county commissioners through the years have considered county money to pay school school bond debt as school funding. However, state law does not recognize it as school funding but as a general government obligation. School funds, in the view of the state, consist only of the monies provided by county government for the operations of the state.

Another approach, the commission could take could be to increase the county property tax rate to a level that would provide all the county funding for schools. The general government and debt service portions of the tax rate could be reduced could be replaced by the wheel tax, the county’s share of the unincorporated local taxes.

Why don’t commissioners take one of these courses and forget all this talk about surplus funds and schools?