By Ernest W. Carter & Jim Mitchell
On June 18, a report was published which questioned the financial ability of the City of Millington to establish and maintain a municipal school district.
The author of that document, James Knipple, admitted in the report that his “…knowledge of school finance is very limited.” Further, Knipple encouraged “…anyone to check my numbers.”
At the request of several Millington citizens and elected leaders of the City of Millington, the Knipple financial projections have been carefully reviewed for errors in facts or assumptions.
Two individuals, Ernest W. Carter and Dr. Jim Mitchell were asked to conduct the review.
These individuals are very experienced educators and have extensive knowledge of Tennessee school district finance. Their conclusion is yes, the city of Millington can afford to operate its own municipal school district.
Ernest W. Carter is a lifelong Millington resident and a Millington Central High School graduate. He also holds both Bachelor’s and Master’s degrees.
Carter served Shelby County Schools (SCS) for more than 33 years, including 12 years of service as the Chief Financial Officer and Assistant Superintendent for Business and Finance.
He successfully developed and administered the entire school district’s annual operating budgets. In addition, he expertly managed the school district’s day-to-day business operations with average annual operating budgets of more than $250 million.
Mitchell served Shelby County Schools for almost 34 years, including two years as principal at Millington Central High School, 9 years as Assistant Superintendent for Operations and 5 years as Superintendent of Schools. During the years of Carter’s and Mitchell’s service, the Shelby County School District operated with annual balanced budgets and annual operating surpluses. Unfortunately, neither Carter nor Mitchell was consulted by Knipple prior to the release of his report.
The Knipple report contained the following errors in facts or assumptions:
Assumption-Revenues will increase at 1 percent per year. Incorrect. The Tennessee Basic Education Program (BEP) provides the single largest source of school district revenue. By state law, the BEP revenue amount sent to each local school district is adjusted up annually for inflation.
Other school district revenue sources also are expected to increase. An “assumption” of 1 percent revenue growth is not appropriate.
Assumption-Salaries and fringe benefits will increase at 1.5 percent per year. Incorrect. This assumption would mean that both the Millington Board of Education and the Millington Board of Mayor and Aldermen would have to approve spending 50 percent more than the amount of revenue they had available. Tennessee law requires the local school board to submit a balanced budget each year.
The BMA has final approval of the school budget and sets the local property tax rate.
The local school board will not have the authority to levy any taxes or set the local property tax rate. Only the BMA has that authority.
Assumption-Millington would have to pay extra to establish a teacher retirement system. Incorrect. All teachers currently pay their share into the Tennessee Consolidated Retirement System, and no additional premium must be paid to create a new school district.
Assumption-Health insurance premium costs will increase at a rate that is 100 percent more than the assumed rate of revenue increases. Incorrect. The Millington Board of Education will determine the type and scope of all health insurance plans offered to employees.
The MBOE will be able to monitor costs and to determine the amount that employees will pay and the amount that the Board of Education will pay for health insurance.
Assumption-School transportation and bus costs were not included in the SES Feasibility Study. Incorrect. The 2012 Southern Educational Strategies, LLC feasibility study projected that 27 bus routes would be used, and the projected costs to provide this service were based on actual SCS costs or the costs to sub-contract transportation services to a vendor who will own the school buses.
Assumption-Millington has old school facilities and will have to build new school buildings. Incorrect.
The city of Millington has some of the newest school buildings and will need to operate only two elementary schools, one middle school, and one high school.
Other than E. A. Harrold Elementary, each of the existing Millington school facilities was either built or renovated in recent years.
Using the incorrect assumptions and facts listed above, Knipple concluded that the city of Millington school district could have a $1.1 million dollar annual deficit after 10 years. He also assumed that the only revenue source to close such an assumed deficit would be the local property tax. The report ignored the fact that the major source of school district revenue, the Tennessee Basic Education Program (BEP), is adjusted up annually for inflation.
In addition, the recently approved half cent Millington sales tax increase will produce at least $1.2 million for schools in 2013, and that amount is expected to increase each year.
In summary, the city of Millington can afford to operate a city school system. In fact, because the citizens recently approved a half cent sales tax increase, Millington actually will receive more local revenue per student than the unified Shelby County Schools.
Currently, 27 other Tennessee cities successfully operate their own school districts, including cities in West Tennessee which are smaller than Millington such as Alamo, Bells, and Humboldt. The Millington Board of Education is required to operate within its annual revenues and must submit an annual balanced budget.
Each year, the Millington Board of Mayor and Aldermen must review and approve the school budget, and the BMA will have full control of the property tax rate.
It is not logical to assume that over a ten year period, both the Millington Board of Education and the Millington Board of Mayor and Aldermen would approve annual school district expenditures that exceeded their annual revenues by 50 percent.
However, that was the logic that was used in the Knipple report. The assumptions in the report are not reasonable, and the facts about revenue growth and retirement expenditures are wrong.
Therefore, the conclusions stated in Knipple’s report are incorrect. Yes, Millington can afford municipal schools.