Budget Talks Turn to MCS Funding Issue

By Bill Dries

If the city of Memphis has one more fiscal year of funding Memphis City Schools, it could be one-time-only funding instead of raising the city property tax rate.



After several years of Memphis City Council members debating the use of one-time-only funding to cover continuing expenses in the city’s operating budget, the coming schools consolidation that begins in August 2013 has prompted some new scenarios.

So far, the scenario about one-time-only funding hasn’t surfaced in that precise way on any kind of consistent basis.

But last week during budget committee hearings, several council members came at it from another direction.

They began with Memphis Mayor A C Wharton’s April 17 budget speech to the council in which he unveiled the proposed tax hike.

“Once this year’s over, the schools will be out of the way. That will free up capital,” Wharton said after the speech in which he said the property tax hike he proposed was solely to fund Memphis City Schools with none of the revenue going to city of Memphis operations or programs.

So when City Finance Director Roland McElrath talked in budget committee hearings last week of needing a “recurring stream of revenue for city schools and other issues” the 10 council members around the same table noticed immediately.

“No additional expenses related to schools in (fiscal year) 2014,” McElrath said in response to the questions. “I don’t believe we can narrowly focus on 2013 and assume there will not be additional costs in 2014. There are huge obligations that will be arriving in 2014.”

Among the obligations in the fiscal year after the one that begins this July 1 is a $25 million gap in funding the city’s debt service, the debt on bonds issued to finance one-time-only city expenses – chiefly construction and renovation projects.

“You’re saying that even if the council were to vote for the 47 cents, your hope is that the council will see coming forward that there is a $25 million gap to fund debt service, correct?” Council member Harold Collins asked as he went through the numbers and the fiscal process. “We balance our budget year to year. So if we vote the 47 cents and then we pay the school system, then we don’t have to pay the system back. There will be nearly $64 million available to the city to do whatever it needs to do.”

The $64 million figure is the $47 million to go to MCS from the proposed property tax hike plus the additional amount in funding the city council did not cut in 2008 when it cut the majority of the city’s MCS funding.

“What I think I’m hearing you say is that that tax increase for the next year (fiscal year 2014) may be used on city government,” budget committee chairman Jim Strickland said to McElrath.

When Wharton began talking about required city funding ending with the schools merger in 2013, there were some questions about whether that would be the case.

“What I’m saying is that there are challenges on the horizon in 2014 that we would like to have you be aware of,” McElrath answered. Beyond the debt service there are rising health care insurance costs as well. “It would address the obligation we have in 2013 to fund the schools. If there were a need for additional money for operations in 2014, there would have to be some action by the council.”