"Preparing All Students to Succeed"

Board of Education Chairman Richard Yercheck responds to appeal of jury verdict

The Union County Board of Commissioners has filed an appeal of the recent court verdict. After nearly 9 weeks of carefully reviewing the evidence, the jury found that the school system needs an additional $91,157,139 to be adequately funded. In the county’s October 17, 2013 News Release, Commission Chairman Jerry Simpson stated, “We are not going to sit by and have 12 jurors determine the future of the county.” Why are the commissioners, who refused any settlement offers and forced this case to the jury, now denying the verdict of 12 citizens of Union County who sacrificed 9 weeks of their lives and careers to resolve this issue?

Unfortunately, the spin doctoring has already begun, with carefully orchestrated media appearances and statements by various county commissioners claiming that the jury verdict would be catastrophic for the county.

The county is now stating that it has only $26.7 million to pay the jury verdict and that any additional amount would have to come from a 44% tax increase or cuts to county jobs and services. These are clearly scare tactics. As the jury saw, and as Commission Chairman Simpson, County Manager Coto, and County Attorney Ligon Bundy all stated during the trial: “The money is there.” The evidence in the trial clearly showed that the funds are available to fully pay the jury verdict WITHOUT a tax increase.

The County’s 2013 audit (just released, only a few days after the trial ended), confirms that fund balances through fiscal year 2013 increased, and that they increased at a far greater rate than projected by the county manager when she was on the witness stand. In fact, the 2013 fund balance increase was nearly four times the amount she estimated in her May, 2013 proposed budget. The May 2013 estimated increase of $5,284,571 turned out to actually be $19,074,915 according to the audit.

Once again, the County is trying to claim that “the money is not there.” The truth is that the money is there; it is just not being used, or is not planned for use, to support the public schools or to pay the judgment against the commissioners.

The County Commissioners are continuing to stockpile funds, and their latest audit proves it. The county’s fiscal year 2013 Comprehensive Annual Financial Report (CAFR) that was just posted on the County’s website confirms the county’s ability to pay for the judgment.

In the last year, the county’s total fund balance in its General Fund increased by $13.7 million. (2013 CAFR, p. 36). The audited fund balance in the General Fund as of June 30, 2012 was $65,995,517 (2012 CAFR, page 34). As of June 30, 2013, it had increased to $79,669,000.

During fiscal year 2013, the unrestricted portion of the county’s General Fund fund balance increased by $13.3 million. As of June 30, 2012, the unrestricted fund balance in the county’s General Fund was $52,747,393. (2012 CAFR, page 34). By June 30, 2013, the unrestricted portion of the county’s General Fund fund balance had increased to $66,046,229. (2013 CAFR, page 36). During the trial, the county’s own financial expert testified that “unrestricted funds may be spent for any purpose.”

The county’s unassigned fund balance as of June 30, 2013 stood at $62,284,839. (2013 CAFR, page 36). This is an $11.2 million dollar increase during the 2012-13 fiscal year. The unassigned fund balance in the county’s General Fund as of June 30, 2012 was $51,249,617. (2012 CAFR, page 34). The unassigned fund balance in the county’s General Fund was 28.2% of General Fund expenditures, which is $26,917,845 more than the county’s own policy of keeping a 16% unassigned fund balance. (2013 CAFR, pages 26, 36). The State requires counties to maintain an 8% unassigned fund balance. The county’s unassigned fund balance is $44.6 million greater than the 8% required by the State.

As of June 30, 2013, the county’s General Capital Project Fund had a separate fund balance of $42,412,467, of which $39,712,735 was unrestricted. (2013 CAFR, p. 36).

Testimony at trial indicated that the county’s enterprise funds (sewer and water fund, solid waste fund, and storm water fund) had an unrestricted fund balance of approximately $91 million as reflected in the 2013 CAFR, page 39. The county’s own financial expert testified that these funds were “unrestricted” and “available for any purpose.”

The 2013 CAFR indicates that unrestricted funds in the enterprise funds totaled $89,452,705 as of June 30, 2013. (2013 CAFR, page 41).

During 2012, the county transferred $20,023.787 from the General Capital Project Fund to the General Fund to provide funding for the cost of terminating interest rate swaps. (2013 CAFR, page 93). Trial testimony indicated that the county chose to incur this $20 million loss in order to buy its way out of bad interest rate swap agreements the county had entered into years ago.

Regrettably, the county’s most recent audit for the fiscal year 2013 confirms that the county has continued to substantially underestimate its revenues and available resources, then relied upon these underestimates as justification for not providing more funding to the Union County Public Schools.

The audit proves what the county has long denied – that the county had more than enough resources to fully fund the Board of Education’s entire 2013-14 budget request.

During 2012-13, the county’s unassigned fund balance, over and above the county’s 16% reserve policy, increased by $10,935,819.00. (2013 CAFR, page 27). This increase in unassigned fund balance, over and above the county’s 16% reserve policy, was more than sufficient to pay 100% of the unfunded portion of the Board of Education’s 2013-14 budget request submitted to the county in April 2013. Why did the county cut the school board’s request so drastically and leave the Board of Education no alternative but to go to court?

The 2013 CAFR continues the county’s unfortunate recent trend of misleadingly blaming UCPS for purportedly breaking the county’s budget. For example, page 32 of the 2013 CAFR blames the budgeted increase for 2013-14 General Fund expenditures in part on a $756,253 increase in current expense funding for UCPS. No mention is made of the county’s adding 22 new employees (not counting school resource officers) nor of the county’s 3% increase for county employees, each of which adds expenses exceeding the $756,253 for UCPS.

The county’s 2012-13 budget ordinance projected that the county would spend $1,312,349 of fund balance from its General Fund to balance the budget. Instead, the county added $13,675,539 to its General Fund fund balance. (2013 CAFR, pg. 42). Similarly, in 2012, the county added $11,499,233 to its General Fund fund balance. (2012 CAFR, page 36). There is every reason to expect that fiscal year 2013-14 will also result in an increase in the General Fund’s fund balance, notwithstanding the county’s current estimate.

Union County Board of Commissioners Chairman said: “While at the end of FY 2012 these funds existed, it is important to note that a significant portion of these monies have been expended and the remaining earmarked for critical county capital projects and programs for law enforcement, human services, and other core county functions,”

Union County Manager Cindy Coto said that “the county’s available funds from the general fund balance are $26.7 million, which is less than one-third of the judgment. Fully expending these funds would leave the county less than two months of operating capital in reserve for emergencies or economic crisis.”

These statements simply are not true according to the County’s own 2013 Comprehensive Annual Financial Report. The county has an unassigned General Fund fund balance of $62,284,839. The County’s unassigned fund balance in excess of the Local Government Commission’s recommended 8% reserve is $44,601,342, which means almost HALF of the judgment could be paid from the unassigned fund balance in the General Fund alone.

Furthermore, the County has “assigned” $39,712,735 from the General Capital Project Fund for the 2014 Fiscal year, according to 2013 CAFR, for the following:

$35,000,000-for a NEW Human Services Campus
$1,130,000 – IT infrastructure and Efficiency Enhancement (while the BOCC chose not to fund similar projects for the BOE)
$1,094,880- Human Services Automation and Record Management
$250,000 for Law Enforcement facilities Expansion & Renewal
$0.00 for Union County Public Schools

However, in the Union County 6 year Capital Improvement Plan, page ES-11- the County stated that it would expend $0 in the Capital Reserve Fund for FY 2014 and $0 for the next 6 years.

Now that the citizens of Union County have spoken, the County has suddenly decided to use the General Capital Project Fund on these projects rather than comply with the jury’s verdict and provide for the school system’s needs.

The County has an additional $89 Million Unassigned Fund Balance in its enterprise funds according to the County’s 2013 CAFR. In the County’s 6 year CIP it budgeted only $600,000 of that $89 Million Unassigned Fund Balance for the next 6 years. The County’s own finance expert at trial said that the UNRESTRICTED FUND BALANCE of these Enterprise Funds can be used for whatever the Board of Commissioners chooses, including schools.

The county clearly has the money:

Unrestricted General Fund and General Capital Fund Balances (above the 8% reserve)=$88,075,467

Unrestricted Enterprise Fund Balance = $ 89,452,705

These funds are available. As a Union County citizen, as a father, and as a taxpayer, I call upon the County Commissioners to drop their appeal and fully fund the recent verdict so that the school system may begin the work that has gone undone while claims were made that money was unavailable in recent years. Our children and our teachers deserve to work in classrooms where the roof does not leak and in schools with handicapped accessible bathrooms. As our Superintendent has said, “This is about the children.”

Richard Yercheck
Chairman
Union County Board of Education

Posted October 21, 2013 by Rob Jackson