Asheville City Schools on path to budget deficit

Negative numbers are a concept that, per Common Core educational standards, students should encounter by sixth grade. Those middle-school skills could come in handy as members of the Asheville City Schools administration and Board of Education sharpen their pencils to work out their budget for the coming school year.

According to the school system’s most recent comprehensive annual financial report, its available cash reserves totaled just over $5 million at the end of June, with over $1 million in previously available reserves having been spent toward operations for fiscal year 2019-20. Of that fund balance, $3 million was allocated to cover the gap between expected revenues and expenses for the current fiscal year, which ends Wednesday, June 30.

Assuming that money is spent and the same fund balance allocation is needed next fiscal year, ACS would face a roughly $1 million deficit for 2021-22. That scenario drew the attention of the system’s external auditor, Michael Wike, during a Dec. 7 work session of the school board.

“You can’t keep doing that year in and year out. You need to keep an eye on that,” Wike told the board about its spending. “What happens when you don’t have a fund balance is almost like an individual living paycheck to paycheck: You can’t plan for the future whatsoever.”

Wike’s words were an extraordinary rebuke, says Pepi Acebo, president of the parent-teacher organization at Montford North Star Academy. “Usually, whoever the external auditor is praises the assistance they got from the internal staff, thanks the board and basically says everything looks good to us,” he notes, based on his observations over six years of attending school board meetings.

Later in the same work session, Superintendent Gene Freeman also signaled that the system could be in for rough times ahead. “It’s going to take some people thinking differently and understanding that there’s no place to go when this money’s gone,” he said. “We really have got to look at our expenses and how we’re spending money.”

Hey, big spenders

What that budgetary self-examination will involve, however, has been difficult to determine. ACS spokesperson Dillon Huffman declined multiple Xpress requests for an interview with Georgia Harvey, the system’s chief finance officer, and required all questions to be submitted by email. In response to a query about the main drivers of school expenses in excess of revenues, Harvey sent a portion of the external auditor’s report that did not explain that point.

Harvey also said the system had no formal fund balance policy, in contrast with Buncombe County Schools, which adopted such a policy in 2011. The N.C. Local Government Commission, a state agency that oversees city and county finances, issues warnings to governments with an unassigned fund balance below 8% of annual general fund income. Both the city of Asheville and Buncombe County have set and currently meet fund balance targets of at least 15%; for ACS, the current fund balance percentage works out to just under 9%.

ACS is among the most expensive school systems in North Carolina on a per capita basis. According to the N.C. Department of Public Instruction, ACS spent over $13,000 per pupil last fiscal year, placing it eighth among the state’s 115 public school districts and well above the state average of $9,950 per pupil. By comparison, Buncombe County Schools spent just over $10,000 per pupil last fiscal year and ranked 52nd in the state.

Also considered on a per capita basis, ACS has one of the largest central office staffs of any local school system. The NCDPI lists 19 “official administrators and managers” for an average daily student attendance of about 4,100 in the Asheville system, compared with 17 administrators for 22,560 students —  well over five times as many — for Buncombe County. Henderson County Schools has 23 admins for 12,756 students, while Transylvania County Schools has 9 admins for 3,175 students. Asheville’s ratios are most locally comparable with those of the Madison County (11 admins for 2,133 students) and Yancey County (12 admins for 1,958 students) systems.

ACS spent 9.3% of its budget on “central expenses” for fiscal year 2018-19, compared with an average of 5.7% across the state. And 16 of Asheville’s administrators are paid entirely using local tax revenues, the most of any area system.

By some metrics, that spending powers a system that outperforms its peers throughout North Carolina. Per the NCDPI’s School Report Cards for 2018-19, the latest year for which data is available, ACS students had a slightly higher four-year graduation rate than the state average, as well as higher college enrollment and better scores on the ACT and SAT exams.

But ACS has also been plagued by long-standing disparities between its white and Black students. As previously reported by Xpress (see “‘Beat back this monster,’” Jan. 30, 2019), the system’s racial achievement and discipline gaps were the worst in the state for the 2018 school year.

Unkindest cuts

Xpress asked the five members of Asheville’s school board for comment regarding their plans to handle the system’s budget crunch. Of Chair Shaunda Sandford, Joyce Brown, James Carter, Martha Geitner and Patricia Griffin, only Brown, Geitner and Sandford responded; none addressed the issue.

Brown only answered questions regarding her desire to be reappointed to the school board. Geitner referred budget questions to Sandford and Harvey. And Sandford, who also serves a social worker for the Housing Authority of the City of Asheville, said that “the responsibilities of my career, as well as the children and families I serve,” took priority over responding to the inquiry.

The most substantial public discussion so far of next year’s budget, which must be approved by June 30, came from Freeman during the board’s Dec. 7 work session. He indicated a reluctance to fix the deficit by seeking extra funding from the Buncombe County Board of Commissioners — “That would be a bad thing for us to have to do,” he said, without providing further explanation — and instead targeted the local supplement, additional money paid from local tax revenue to teachers and staff on top of their state-mandated salaries. That spending accounts for over $4.3 million of the ACS budget.

“One of the easiest places to look is our supplement,” Freeman said. “I love the supplement, but we spend more than the county gives us by $1 million.”

Freeman’s comments during the board meeting, at which Harvey was present, directly contradict Harvey’s response when asked if the district had discussed cutting the supplement due to budget constraints. “Absolutely no discussions or mentions of this,” she wrote in a Jan. 21 email to Xpress.

Daniel Withrow, president of the Asheville City Association of Educators, says school administrators haven’t yet discussed such a cut with his organization. But he does not believe that reducing the salary of front-line school employees, including approximately 430 teachers, is appropriate, particularly given the area’s high cost of living.

Withrow points out that the average annual ACS teacher supplement of about $4,600 is significantly lower than that for teachers in the Charlotte-Mecklenburg ($8,101), Wake County ($8,720) and Durham County ($7,005) systems. All three regions have lower housing and health care costs than does Asheville.

And according to an analysis of U.S. Bureau of Labor Statistics data conducted by moving website HireAHelper, Asheville ranks 79th out of 88 midsize U.S. metropolitan areas in median annual teacher pay adjusted for cost of living. That figure is roughly $51,200 for the Asheville metro; the national average exceeds $60,000.

“Improving the quality of our public schools is a community priority. We can’t do so if we’re cutting wages for the workers who care for our children every day,” Withrow says. “Instead, the district should work with local government leaders to adequately fund our system.”

Capital ideas

Another controversial ACS budget proposal involves the closure and sale of the Asheville Primary School in West Asheville. During a Dec. 14 special meeting, the school board unanimously accepted Freeman’s recommendation to explore unloading the 4.6-acre campus, which currently houses the Asheville City Preschool and an elementary program based on the Montessori method. A subsequent petition to “Save Asheville Primary School” on Change.org had gathered nearly 2,500 signatures as of press time.

According to an email distributed to ACS parents and staff by spokesperson Ashley-Michelle Thublin on Jan. 5, the sale would prevent the need for roughly $6 million in capital spending over the next two years to “bring the building up to minimum standards.” Listed upgrades include over $2.7 million for a new heating, ventilation and air conditioning system, $940,000 to replace electrical systems and $712,000 for new windows. Since August 2017, the district has spent roughly $500,000 on repairs to the building.

Any proceeds from the sale would go toward the district’s capital fund, which can only be spent on facility improvements. Harvey said ACS was still compiling data to determine what operational savings might result from distributing the preschool and primary students among Hall Fletcher Elementary and other buildings in the system with vacant space. At the end of last fiscal year, the capital fund balance sat at roughly $4.3 million; over $2.5 million from those reserves was allocated for projects in 2020-21, indicating that the district could not pay for the primary school upgrades it claims are necessary without additional revenue.

But Stacy Claude, co-lead of the Asheville Primary School Parent Teacher Collective and parent to two children at the school, says the district hasn’t been transparent about its cost calculations or decision-making process. “In different meetings, I’ve heard anything from $5 million to $7 million to $9 million,” she explains, regarding the varying figures ACS has offered for the school’s required upgrades. “Every single school building except the two brand-new ones could use a fully new HVAC, but that’s not what has to be done to keep kids in that building.”

And according to schools advocate Acebo, ACS leaders haven’t reached out about Asheville Primary’s needs to Buncombe commissioners, who control the primary source of school capital project funding through Article 39 sales tax revenue. “One commissioner said to me, ‘I had to read about [the sale recommendation] in the newspaper,’” he says. “They were shocked, because they know that they’ve been putting money into this building.”

Making change

The ultimate decisions on the primary school sale and other matters regarding the system’s nearly $72.7 million overall budget lie with the school board, whose members are appointed to four-year terms by Asheville City Council. That arrangement is nearly unique in North Carolina; besides ACS, only Thomasville City Schools in Davidson County has an appointed board, with the remaining 113 school boards elected by voters.

Kate Fisher, a longtime ACS volunteer and parent currently seeking appointment to the school board, argues that this setup has failed to hold board members responsible for their budgetary decisions. Because the board doesn’t answer directly to voters, she says, and Council’s only oversight is a relatively brief appointment process heavily influenced by school system staff, there’s little incentive for transparency or fiscal discipline.

“The fact that there is no accountability answers the question as to why nobody knows how the money is spent, because they don’t have to tell anybody,” Fisher says. “We have misspent the money for a really long time.”

All three of the Council members elected last year — Sandra Kilgore, Kim Roney and Sage Turner — said at an Xpress candidate forum in February that they favored converting the school board to an elected body. But at Council’s Jan. 12 meeting, members decided it would be impossible to make that change before the Thursday, April 1, deadline set by state law for appointing three school board seats. The three appointees will therefore vote on next fiscal year’s budget.

Those seats are currently held by Brown, Carter and Griffin. All three are eligible for reappointment; Brown was the only one to directly confirm with Xpress her interest in serving another term. However, Council member Sheneika Smith has said all three are interested in the role.

“I think that there are pros and cons to this but will not go into details at this time,” Brown said, when asked about her position on electing the school board. “In the meantime, I encourage our community to get to know the board members that have been appointed and have real and respectful conversations with them.”