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School cut confirms funding fears for administrators

MONTGOMERY – Halloween is today, but Alabama school administrators got their frights earlier in the week when state superintendent Joe Morton said their monthly allotments from the state would be slashed by 25 percent.

That sent school systems dipping into reserve accounts and taking out loans in order to give employees their once-a-month paychecks on Friday.

Assistant superintendent Craig Pouncey, who oversees the department’s administrative and financial services division, said all of the state’s 49,364 teachers and other school employees should be getting their checks.

“I have not been notified of anyone who has not made arrangements or is incapable of making payroll,” he said Thursday.

Still, the 25 percent cut left many administrators spooked by yet another sign that across-the-board spending cuts — called proration — are looming.

“The nervousness comes from … knowing that probably proration is going to occur,” said Susan Taylor, chief financial officer for Dallas County Schools. She said the system used $401,331 from their reserve funds to make Friday’s payroll.

“We have money to meet our October obligations and as far as proration, we’re just going to wait and see to determine exactly how we’re going to deal with it,” she said.

State Finance Director Jim Main said a decision about declaring proation won’t come for another couple months but that a constitutional amendment to expand usage of a rainy day fund would help the situation. That amendment is on Tuesday’s ballot.

“Voting yes on Amendment One will probably make it a lot easier to tread these waters because then we’d have the ability to smooth out the bumps in the road,” he said.

Morton sent letters to the states’ 131 school systems on Tuesday saying the state only had enough money to pay the schools 75 percent of their October allotment and he hopes to have the balance to them by Nov. 7.

Pouncey said most systems had enough in their reserves to cover the shortfall but a few were “very limited” and had to get loans.

However, none have reached the point where they need the state department to step in and secure funding to pay employees, he said.

Sumter County Custodian of School Funds Patrick Harris said the system took out a $300,000 loan to complete their monthly payroll, which is just under $1.5 million. The 2,300-student system is in one of the state’s poorest counties and doesn’t have the tax base to generate a meaningful reserve.

Having to take out loans to supplement expected state allotments doesn’t help the situation for Sumter and other small systems, Harris said.

“If the state sent us the 25 percent, we still have to pay interest on the funds we borrow, which eats away at the little funds we do have,” he said.

The state pays out $340 million monthly but was short an estimated $85 million in October — the first month of the 2009 fiscal year.

Pouncey said October is traditionally a slow month but there’s usually money left over from the previous fiscal year to carry over into October.

But all that money — plus that in a $440 million proration prevention account — was spent before Oct. 1 rolled around.

“I think that there are a lot of administrators that recognize that with the slow collection of tax receipts and with the absence of any (carry-over) balance, there’s not much of a safety net out there,” he said.