Howard County Executive Calvin Ball sent the following letter to the Howard County Public School System Superintendent Dr. Martirano and Members of the Howard County Board of Education on November 20th:
Dear Dr. Martirano and Members of the Board of Education (BOE):
On November 7, the BOE approved a “budget augmentation” that would increase the total FY2020 appropriation to the BOE by transferring its entire unassigned fund balance of $15,168,948, as reflected in its FY2019 CAFR, to the Howard County Public School System (HCPSS) Health and Dental Fund (“Health Fund”) to pay down its pre-existing deficit. Subsequently, HCPSS has contacted my office seeking emergency legislation to effectuate the budget augmentation.
As defined in Article II, § 209(d) of the Howard County Charter, an emergency bill may be passed only to “meet an immediate emergency affected the public health, safety or welfare” of the County. The Health Fund deficit has been in existence for the last five years. While it is commendable that HCPSS is taking actions towards reducing its Health Fund deficit, more information is needed to process this request. Please provide a response to the items listed below by December 4, 2019:
• Emergency Legislation Justification
Please provide a justification explaining why the budget augmentation referenced above meets the County Charter threshold for an emergency bill. In your response, please indicate how the emergency bill will change the outcome of the FY2019 and FY2020 CAFR opinions regarding the Health Fund.
• Use/Transfer of 100% Unassigned Fund Balance
Please provide a justification explaining why the entirety of the $15.2 million unassigned fund balance in the HCPSS General Fund should be transferred to pay down the Health Fund deficit. If the purpose is to eliminate adverse opinions in HCPSS CAFR in FY 2020, please describe your plan to come up with other savings needed to eliminate the interfund loan ($20.7 million in FY 2019 CAFR) in FY 2020. This fact was quoted by the HCPSS auditor as one of the primary reasons (together with a lack of a school management multi-year plan to close its Health Fund deficit) for issuing adverse opinions for HCPSS FY 2019 CAFR.
• Impact on HCPSS General Fund Budget in FY 2020 and FY 2021
If the proposed budget augmentation were approved, bringing down the unassigned fund balance in the HCPSS General Fund to $0, please indicate how other potential unforeseen emergency expenditures in the HCPSS General Fund in FY 2020 will be managed.
Additionally, the proposed budget augmentation would result in a $12 million reduction in school source revenues in the FY2021 HCPSS General Fund budget. The HCPSS-approved FY 2020 revised budget included $12 million use of fund balance to support on-going expenditures, which based on the proposed augmentation, would leave $0 of fund balance to support the FY2021 budget. Please describe which programs and positions will be impacted by this $12 million structural imbalance in the HCPSS FY2021 budget on top of other budget challenges and what strategies are being considered to mitigate the impact.
Your timely response will be highly appreciated. Thank you.
Read the letter HERE.
It looks like a lot of justifications will be coming from the HCPSS and HoCoBOE in order for this to move forward.
The scary part of all of this was “the proposed budget augmentation would result in a $12 million reduction in school source revenues in the FY2021 HCPSS General Fund budget”. Where is the HCPSS going to make that up from if this goes forward?
Keep an eye on this folks…it could be significant.
Read more on this topic from The Baltimore Sun “Howard school board, administrator looking to reduce $39.2 million health deficit with emergency action”