insights (2006-40)

School Construction in a Funding Bind

Finding a way to pay for a $10 million increase in the cost of a new West Knox high school above its original $40 million budget is just the top of an iceberg of school construction funding issues that are ominously impending.

More than $100 million in other school construction projects are included in a capital improvement plan that the school board adopted earlier this year. But in the absence of any other source of funding, the only way the school system has to pay for them is by dipping ever deeper into its operating budget. Already, more than $6 million in the current fiscal year has been diverted from instructional and other operating funds to cover debt service on school buildings in excess of the $17 million provided by a portion of sales tax revenues that’s dedicated to school construction debt.

Allocations of property and sales taxes to schools (both for operations and construction) have been fixed for several years, and there’s little likelihood of their getting a bigger allotment unless County Mayor Mike Ragsdale seeks and gets a tax increase, which he is loathe to do. So revenue growth from the existing local tax rates is all the school system can expect unless and until the state’s inequitable school funding formula is modified to benefit Knox County schools as Ragsdale has been urging.

At last week’s County Commission meeting, Ragsdale warned commissioners and school board members alike that, “You’re digging yourself into a hole that is going to get deeper within the context of our existing tax structure.” The impetus for his warning was a school board appeal to commission to cover $6 million of the new high school’s increased cost from the county’s general funds. Commissioners spurned this appeal but also failed to heed Ragsdale’s recommendation to scale down the size of the new school for the nonce—leaving it to the school board to pony up the extra funds.

These would be in addition to the costs of projects in the school board’s capital improvement plan that include: $16 million each for a new Powell Middle School and new elementary schools in West Knox and South Knox along with $27 million in renovations at six existing schools. Beyond that, elected officials from East Knox are pressing for what they insist is a long overdue new Carter Elementary School that got dropped from the capital improvement plan.

What could become a navigational aid for coping with this iceberg is a needs assessment that’s being conducted at Ragsdale’s behest by an ad hoc panel chaired by the Public Building Authority’s director of property development Blaise Burch and including school administrators and Metropolitan Planning Commission demographers. The panel has established ranking criteria for all prospective school projects, and Burch anticipates presenting its findings to a joint meeting of county commissioners and school board members by the end of October.

Ragsdale has heralded this needs assessment as a way that “tries to take the politics out of it.” He’s known to believe that the school board has spent far too much on too many new schools when renovations and additions to older ones along with rezonings to schools with excess capacity could have met the school system’s needs at far lower costs. These views are largely shared by the school board’s longest standing and most influential member Sam Anderson, but not even he goes along with Ragsdale’s bent to wrest control over school construction projects away from the school board altogether.

Earlier this year, then-board chair Dan Murphy, with Ragsdale’s backing, proposed seeking County Commission approval of a resolution providing that “all debt service for Knox County School’s construction be transferred to and paid by the Knox County General Debt fund.” That would have freed up the $6 million in school operating funds now being diverted to debt, and paradoxically, left it up to Ragsdale to fill the hole. Just how he envisioned doing so, short of a tax increase, is a mystery and is likely to remain so, because the school board wanted no part of a further provision in Murphy’s resolution that “the Public Building Authority assume responsibility for all future construction management services for Knox County Schools.”

So not even a $6 million-and growing pot of budgetary benefits was deemed worth giving up what the school board perceives to be its state-mandated birthright to control how funds for schools get spent. “Dan got a message from the board that we didn’t want to go there,” says new board chair Karen Carson.

In the meantime, however, Ragsdale has proceeded to assume the debt service on and impose PBA control over new school construction on a project-by-project basis, starting with $40 million for the new Hardin Valley High School and extending to $16 million for a new Powell Middle School (though Carson is miffed that the board wasn’t consulted on Powell Middle).

The county is also picking up the tab for $15 million in what are known as physical plant upgrades, which brings the total project costs to $71 million, on which the school budget is being spared about $5.7 million in additional debt service once construction is completed.

Yet these outlays aren’t delineated anywhere in the county’s published budget, let alone attributed to schools. So the school budget is becoming increasingly less indicative of the total spent on schools, which hardly makes for desirable transparency in government. The $5.7 million cost equals about 7.5 cents in property-tax revenues that could be allocated to the school system. But even if Ragsdale is not prepared to make such an allocation, one would think he’d want to highlight everything he’s doing for education in some fashion rather than leave some of it hidden.