The Tuscaloosa City Board of Education is weighing a budget that would spend more than $6 million over the revenue they expect to bring in, pulling from reserves to maintain the status quo as voters mull a proposed property tax increase to fund them for the future.

TCS Chief Financial Officer Jay Duke presented his proposed budget for Fiscal Year 2025, which begins on October 1st, during a school board meeting Tuesday night.

In it, he said the system, which boasts 11,000 students across 21 campuses, would bring in more than $144 million next year. To maintain the services offered this year, though, they need to spend almost $151 million, creating a $6.1 million budget shortfall that would be addressed by drawing from TCS' $35.6 million reserve fund.

The proposal comes as voters in Tuscaloosa are set to decide in less than three weeks whether to increase property taxes in the city limits by 22 percent to better fund the school system.

So how did we get here? What's on the ballot, and what would it mean if it passes - or if it fails? The Thread will report extensively on the referendum this week, starting with a factual breakdown from Duke.

The CFO explained the budget and the proposed tax hike in a Wednesday interview, but a 2022 Alabama law limits him and other public employees and officials to giving "an objective analysis or factual information on a ballot measure which does not advocate a specific position."

Additional perspectives from voices outside TCS - both for and against the referendum - will follow.

A PLANNED DEFICIT

Duke said the $6.1 million deficit he included in his Tuesday budget proposal does not come as a surprise. The system's over $35 million reserves were built up to address it as now-dried-up federal pandemic funding covered other costs across the system.

"This is a planned deficit in that during the last four years, since COVID hit, we've been able to build up a reserve and have a landing strip that will allow us for the next two years or so to operate at a deficit," Duke said. "But that runs out in 2026 and the game starts to change then. At that point, we will have eaten into that reserve and we'll have to address that."

Things have been trending this way for some time. Duke said TCS operated at a deficit in all but one of seven fiscal years before COVID arrived in 2020. Pandemic relief funds are the only reason the system's urgent need for more property tax revenue was temporarily deferred.

Now, with the third and final wave of the federal government's Elementary and Secondary School Emergency Relief funding ending later this month, that need is front and center again.

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A SMALLER RESERVE THAN IT SEEMS

So with more than $35 million in reserves, why the push for new revenue? Duke explained that thanks to state law and TCS board policy, the pile is a lot smaller than it may seem.

"In the state of Alabama, public school systems have to keep on hand, at all times, a one-month reserve. So if you take our proposed budget of $151 million and divide that by 12, we have to wake up every day and make sure we've got 12 and a half million dollars in the bank that we cannot legally spend," Duke said. "In your personal checking accounts sometimes you may just be trying to stay above zero, but as a school system in the state of Alabama, that "zero" number is 12.5 million for Tuscaloosa City Schools."

And the school board wants even more prudence than that - their policy is to keep enough reserves to cover all budget costs for 1.75 months and they ask Duke to aim for a 2-month reserve of $25 million if possible.

That makes less than half of the current $35 million reserve actually spendable money - the rest is meant to remain banked, making even a couple of years running at a $6 million+ deficit unsustainable. Duke and TCS will have to either find a way to bring in dramatically more revenue or make dramatic cuts.

NO AVENUE EXCEPT PROPERTY TAX REFERENDUM

They hope to avoid those cuts with this month's tax referendum - voters will decide on September 24th whether to increase property taxes in Tuscaloosa by 22 percent to fund the school system.

This is separate but similar to the 2023 referendum which would have increased property taxes outside city limits and benefitted the county school system.

"In the state of Alabama, in Tuscaloosa County, the only avenue for us to raise revenue is through a property tax vote," Duke said. "We can't charge fees or raise any other type of money."

Property tax rates in Tuscaloosa haven't increased since 1986, but the TCS budget has more than tripled, growing 272 percent since 1987.

Duke said TCS is careful not to come back to the well and ask for tax increases often, even though there is no legal restriction on how many times a district can request a referendum. But that means the ask - a 22 percent increase over current rates - has to be big enough to last without increasing again anytime soon .

"This is probably going to be a 30-or-so-year ask, so we've got to plan for rectifying and balancing that $6 million deficit - which probably be $7 million next year and only grow with inflation, but also to enhance services," Duke said. "That's how we landed on 11 and a half mills, which we think would set this system up for the future for another few decades."

The ad valorem tax revenue that would come from the 22 percent increase, if adopted, would be allocated across three areas - educator excellence, student services and school safety.

Duke said these priorities were identified by a large-scale survey of TCS staff and parents last year, and the school board will require a yearly presentation demonstrating that the new funds are being spent as appropriated.

If adopted, the higher rate will not go into effect until October 2025.

NO CUTS WITHOUT CONSEQUENCE

They have also done a great deal of trimming, said TCS Director of Public Relations Lydia Avant, who also cannot directly advocate a yes vote in her official capacity.

"The school system has done everything it can do make cuts to the budget in the last few years without impacting the classroom. Selling Northington Elementary, trying to make buildings more energy efficient, renegotiating contracts," she said. "The state suggests five percent as the upper threshold for your administrative costs - well we're already down to 3.9 percent, so our central office has shrunk. We're doing everything we can to prevent cuts to programs and services that affect children but unfortunately, we're at the point where that's really the only area left to cut."

Duke said if the referendum fails and cuts become necessary, the first impacts will be larger class sizes and a reduction in the number of professional interventionists available to help teachers with students who need individual attention. Even programs which are partially funded by the already-implemented Elevate Tuscaloosa sales tax such as TCS's Pre-K and summer learning programs would likely be impacted.

"Those things take multiple funding sources. Local funds - property tax - helps pay for a lot of programs but Pre-K and Summer Learning in particular and the face of those will change [if the vote fails,]" Duke said. "Elevate has been a big help to us but as for as those programs go, it gives us a percentage but not full, 100 percent funding."

"IT ALL DEPENDS ON FINANCES"

Other points made in the Wednesday interview may resurface in later reporting, but in conclusion, Duke and Avant said they and other TCS employees are committed to transparency and open conversations about the hard facts of the budget as it is today.

"Our job is to educate people let them know what this means and hope that you know that they know enough about it to make it a decision," Avant said.

"These aren't our schools, they belong to the citizens of Tuscaloosa and they get to decide how they're going to look," Duke said.

But that decision is going to have consequences, positive or negative, she said.

"This is really going to have an impact. It's an opportunity to shape our community and become the premier school district that the city wants and deserves," Avant said. "We've made huge progress and we want to continue that progress, but again, it all depends on finances."

For more in-depth coverage of the upcoming referendum and perspectives from leaders on both sides of the issue, stay connected to the Tuscaloosa Thread.