Coronavirus fallout puts school funding at risk in Knox County

Larry Van GuilderAs I see it

As Knox County is preparing budgets for the fiscal year 2021, the impact of COVID-19 has added an extra element of uncertainty to what is a complex process in the best of times. County officials are responding in a variety of ways to prepare for and minimize the financial consequences of the virus’ spread.

In Mayor Glenn Jacobs’ office, Communications Director Rob Link is assisting the Knox County Health Department and the Emergency Operations Center during their response to the crisis. In his absence, Link said, “Abbey Harris and Mike Donila are running point” for Jacobs.

Although Finance Director Chris Caldwell acknowledged the absence of a written financial contingency plan, the want of a formal document has not halted action on several fronts.

“… (W)e have put actions in place last week to prepare for the loss of revenue. Both Knox County and Knox County Schools enacted, at the request of Mayor Jacobs and Superintendent (Bob) Thomas, hiring and spending freezes. Under these actions, only essential positions will be posted and filled. Likewise, departments should only purchase mission-critical expenses,” Caldwell wrote in response to an inquiry from Knox TN Today on March 24.

Continuing, Caldwell said, “We have been working closely with (schools),” Knoxville city officials and Blount County in forecasting sales tax revenue for the remainder of the fiscal year. The conversations have also included state officials and the University of Tennessee with the aim of achieving “consistent” revenue forecasts for the balance of fiscal year 2020 and in preparing the fiscal year 2021 budgets.

Caldwell’s breakdown of how local option sales taxes are allocated makes plain the jeopardy to schools. Collections are split among the general fund; the solid waste fund; the engineering and public works fund; and the general purpose school fund.

“The General Purpose School Fund receives the vast majority of the revenue, over 91 percent. Thus, the most significant impact will be felt by Knox County Schools,” he said.

Compounding the fiscal uncertainty, gasoline taxes, business taxes and “court-related” revenues are also expected to decline.

Based on his discussions with school officials, Caldwell said he expected school employees to be paid through the closure related to COVID-19.

Russ Oaks is the chief operating officer for Knox County Schools. Oaks said they will continue to pay employees as well as honor contracts with school bus contractors. To do otherwise risks losing employees to other jobs when the crisis passes.

To be clear, Knox County is not in danger of bankruptcy. Sitting on $200 million-plus in cash, the well will not run dry anytime soon.

But funding schools promises to become more problematic as the recessionary impact of COVID-19 deepens, as it most certainly will. Like gauging the size of an iceberg from a vast distance, we’re not sure how much of the coronavirus remains out of sight waiting to create greater suffering and financial turmoil.

Larry Van Guilder is the business/government editor of Knox TN Today.

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