The Forsyth County school system’s financial woes appear to have deepened.
Based on the county’s final tax digest released last week, the system will be receiving about $3 million less than preliminary projections from earlier this spring.
"I thought it might be down a little bit, but I didn’t think it would be down that much," said Dan Jones, the school district’s chief financial officer.
The digest, or county property values on which tax collections are based, was expected to drop, given that the majority of local properties have decreased in value.
But it wasn’t until late last week, when the final numbers were tallied, that the school system knew just how far it had fallen.
The school board is scheduled to approve the 2011-12 budget on Thursday. They will also likely discuss the millage rate, used to calculate property tax collections.
The system’s balanced budget proposal was based on the $121.8 million projected to come in through property taxes. That number has since been reduced to about $119 million.
To balance the proposed budget, the board was prepared to pull about $2 million from the system’s reserve funds.
More can be drawn from reserves, which currently total about $40 million, but "that’s just one of the options the board will have," Jones said.
"Some other options are furlough days and adjusting benefits," he said.
Three furlough days are planned for system employees in the coming year. Each furlough day equates to about $1 million in savings, Jones said.
The drop in the tax digest is also impacting how much the school system will collect toward paying off its bond debts.
April projections showed the system would collect about $11.3 million. That number will now be closer to $11.05 million.
The projected $6.2 million shortfall in paying off bond debt has grown to about $6.8 million based on the tax digest.
"Bond payments are different than our operating budget, in that I can’t adjust the expenditures," Jones said.
"The expenditures are set in the amortization schedule, so our only options are to look at our revenue stream. There are only two sources of revenue for bond payments. It’s property tax and sales tax."
Sales tax revenue continues to lag. Because the system can’t ask for more sales tax money to cover bond debt, its options are few and include pulling from reserves and raising property taxes.
Jones said he will present the information to the board Thursday.
"I don’t make a recommendation on this," Jones said. "What I do is say here are the numbers, here’s what they all calculate out to be and they decide. I just give them the information."
The timing of a possible tax increase has caught some residents by surprise, especially coming on the heels of a successful March referendum to extend the system’s 1-cent sales tax for education.
The five-year extension, which will take effect in July 2012, will go toward retiring bond debts from 2005 and 2007.
Officials and a group that backed the extension had said the district would have been forced to raise property taxes if the referendum failed. Though it passed with more than 80 percent of the vote, a tax increase is a distinct possibility.
While they addressed the two recent bond debts, campaign materials did not mention that there were still voter-approved bond programs from 1992, ’95 and ’98, on which the school system owes more than $86 million.
Those three bonds cannot be paid off using revenue from the recent sales tax extension, leaving only reserves and a property tax hike with which to pay down the debt.
The school system currently has two separate property tax millage rates.
The bond millage rate of 1.418 mills, which can go only toward bond debt, is being used to pay off the older bond issues.
That rate is separate from the system’s maintenance and operations millage rate of 15.395 mills, is used for the budget.
A mill is equal to $1 for each $1,000 in assessed property value. Assessed value is 40 percent of actual market value. Each mill brings in nearly $8 million in revenue.
For the owner of a $200,000 home, a .5 mill increase would result in about a $78 more in taxes for the year, Jones said.
However, because about 66,000 of the county’s some 77,500 properties fell in value, the total tax bill still could go down even with a millage rate increase.
For example, if that $200,000 home’s value was lowered to $160,000, and there was a .5 mill increase, the tax bill could drop about $207, Jones said.
The board has Thursday’s meeting and a July 21 session to approve millage rates before the final rates must be submitted to the county on Aug. 1.