THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, January 5, 1996 TAG: 9601040141
SECTION: VIRGINIA BEACH BEACON PAGE: 06 EDITION: FINAL
TYPE: GUEST COLUMN
SOURCE: BY MEYERA E. OBERNDORF
LENGTH: Medium: 97 lines
An ``editorial'' (What did city know about school deficit?) by John T. Early appearing in the Beacon last Friday (Dec. 29, 1995), confuses the issues and in no manner advances appropriate solutions to the serious problems that we are confronting. Incorrect assumptions were made, and therefore improper conclusions were drawn by Mr. Early and published in this column. It is regrettable that his concern about this issue may result in confusion and mistrust among our citizens. It is unfortunate that Mr. Early did not avail himself of the opportunity to meet with members of City Council or city staff to gain a clearer understanding of this complex issue.
In the column, Mr. Early confuses the projections of a five-year forecast with the function of an operating budget. A forecast is NOT a budget. A forecast is based on assumptions that may or may not come to pass in the coming years. It provides city policy makers with several ``pictures'' of the future in financial terms in order to make sound policy decisions. Can we afford to provide new services? Can we afford to provide raises? Should we consider a tax increase? It is not uncommon for these forecasts to include projections for less than ideal economic conditions. Further, the forecast acts as a document to stimulate discussion. Forecasts are not approved or rejected by Council and in no way do they indicate any problems with a specific budget.
At the time these forecasts are presented to Council, they are distributed to the media and made available to citizens in our public libraries. They are not required to be included in the ``official statement'' to the bond market. Again, the numbers are only assumptions that allow planners to look at potential policy decisions. They provide ``what if' scenarios. No Security and Exchange Commission rules were violated by omitting this material from the bond prospectus.
A budget, on the other hand, is a plan that ties anticipated expenses during a particular fiscal year to the income (revenues) for the period. After the schools submit the operating budget and funds are appropriated by City Council, it is the legal responsibility of the schools to spend within their budget, the same way that city departments are required to do.
Mr. Early's column refers to ``a disparity'' in the school and city forecasts, suggesting that the schools' forecast was revised to hide a potential deficit. In fact, the schools' forecast was revised when it was determined that it was based on incorrect assumptions about enrollment figures, contributions from local taxes and projections for salary increases.
Furthermore, the forecast in question, presented in November 1994, was looking forward to fiscal years 1995-1996 through 1999-2000 and obviously had no bearing at all on the 1994-95 budget year. The budget for 1994-95 had been approved in early 1994. It was based on revenues and expenses being equal, as must all budgets. A deficit occurs when the amount of revenue actually received is less than what is actually spent. The fiscal year 1994-95 did end in a deficit because the actual revenues received were $5.7 million less than the estimated revenues and the actual expenditures were $6.4 million more than budgeted expenditures.
Although some school officials spoke publicly of the potential for a budget deficit during the fall of 1994, the School Board and the City Council were repeatedly reassured by school administrators that they would find a way to manage costs and ensure that the budget was balanced at the end of the fiscal year, a requirement of the Code of Virginia.
It became apparent that this balance had not been achieved and that there would be a school budget deficit for fiscal year 1994-95 when the financial books were closed in August 1995. The full extent of the deficit became known when additional audit procedures were performed and reported in November 1995.
We now know that there were many factors that contributed to the deficit, including overestimates of federal revenues and underestimates of expenses, including salaries. Also, during the year, the schools implemented new initiatives and changes in program priorities without adjusting the budget to reflect those changes.
The City Council of the City of Virginia Beach takes the stewardship of public funds very seriously. Of course, our bond rating is important as it determines how much it will cost to borrow money to finance city projects. What will be most important to the bond markets is that we take the necessary steps to solve this problem and to ensure that this does not happen again. The City Council's capacity to oversee the school budget is severely limited by state law, however, we are currently working on several initiatives, both administrative and legislative, to improve the situation. We will also be looking for insight and guidance from the Special Grand Jury which was recently convened.
The 1994-95 school budget deficit is a difficult and complex issue that the City of Virginia Beach must confront in a candid and forthright manner to assure that our children get the best education possible with the money that is available. Decisions must be made and plans implemented to ensure that this never happens again. In order to do this, our citizens must be provided with accurate information about the cause and effects of the deficit. They must understand that City Council could not have had prior knowledge of the deficit for fiscal year 1994-95 and was repeatedly assured that the school budget would be balanced. MEMO: Meyera E. Oberndorf is mayor of Virginia Beach.
by CNB