“We are starting to have meetings with various people regarding this situation, but at this point, we don’t have anything to report,” said Kelli Gauthier, communications director for the Tennessee Department of Education.
Oak Ridge education officials have said the school system failed to meet a state maintenance of effort test that requires local funding to remain at least the same from year to year. If the city fails to cover a $250,000 shortfall in local revenues by Oct. 1, the schools would lose the state money—known as Basic Education Program funding—and the district would have no choice but to temporarily close, local education officials said.
But city officials are skeptical that the Tennessee Department of Education would withhold all the BEP money, which is about one-third of the school system’s funding, if it withholds any. Oak Ridge City Manager Mark Watson said the city is not delinquent yet.
Covering the $250,000 shortfall could require the equivalent of a 2.5-cent property tax rate increase. Watson said it’s too late for a tax increase this year.
The state maintenance of effort, or MOE, test adds up county taxes—property, sales, and mineral severance taxes—and local revenues that include investment income, leases and rentals, certain maintenance and operations funds, and the general fund transfer from the city.
The two-tier MOE test first checks whether local revenues have remained at least the same from year to year. If they don’t and there has been a drop in enrollment, then the revenue-per-pupil has to stay the same. Oak Ridge, which has had a drop in enrollment, failed both tests, said Karen Gagliano, director of business and support services for Oak Ridge Schools.
School officials pin the blame for the shortfall on an Oak Ridge City Council decision to withhold about $766,000 from the school system in May 2012 as part of a dispute over how to spend new tax revenues generated in Anderson County under a 2006 sales tax referendum. That dispute centers on about $250,000 in new revenues collected in Anderson County outside Oak Ridge, although the exact amount generated varies from year to year. School officials said they forwarded the money to the city for five years under a “gentleman’s agreement” for debt repayments on the $66 million renovation of the Oak Ridge High School, but that agreement is no longer in effect.
School officials said the original shortfall in the state’s MOE test was even higher—$393,000. But through budget adjustments, they were able to cut it to $250,000.
“We’re trying to do everything that we can to lower the city’s burden,” Oak Ridge Schools Superintendent Bruce Borchers said.
Watson said the city has been providing the same level of funding to the schools, or about $13.9 million per year, but it is expected to make up shortfalls elsewhere, including when federal funds are cut or when sales tax revenues drop, such as when a Kmart store in Clinton closes.
“The last recourse is us,” Watson said. “It gets to us to make up that differential if we’re the last man standing.”