Behind the Headlines – July 22, 2016

Behind the Headlines – July 22, 2016


(female announcer)
Production funding
for Behind the Headlines is made possible in part by.. (male announcer)
The Bartlett Area
Chamber of Commerce and its member A2H – engineers,
architects and planners creating an enhanced quality of life
for our clients and community. To learn more about
A2H’s services and markets, visit A2H.com. – County officials
on budgets, schools, and more tonight on
Behind the Headlines. [theme music] I’m Eric Barnes, publisher
of the Memphis Daily News. Thanks for joining us. I’m joined tonight by
County Mayor Mark Luttrell. Thanks for being here again. – Thank you, Eric. (Eric)
David Lenoir,
Shelby County Trustee, thanks for being here. – Thank you. (Eric)
Van Turner from
Shelby County Commission, thanks for being here again. – Thank you. (Eric)
Along with Bill Dries, senior reporter with
The Memphis Daily News. We are here to talk about
budgets and the impact of schools and so on. Given the really kind of
historic events of what will be two weeks ago as this show airs,
just want to give a quick chance for each of you to kind
of comment and reactions. And I want to say that we’re
pre-taping this because of scheduling issues. So, just a quick touch given the
historic nature of what is going on and your
thoughts, Mayor Luttrell. – I think we’re
seeing this movement across the United States
at various capacities. And I think the way it’s
been handled here in Memphis initially with very little
disruption other then obviously the expressway but few
arrests, few injuries. I give a great deal of credit to
the way it’s been managed here in Memphis and certainly I
hope that’s a tribute to our community and what lies ahead. – David Lenoir, your thoughts? – Yeah, I mean, my
comments would echo the Mayor’s. I mean, certainly our thoughts
and prayers go out to the victims across the country. But as the Mayor said, in terms
of how it was handled locally, it was very challenging and a
very difficult time for our nation and also our city. I thought Interim Director
Rallings did a good job in terms of addressing the issue
and working through it. There’s still a whole
lot of work to be done, no doubt about it, a lot of
dialogue and conversation. But beyond that, I think folks
are looking for real action to take place. – Van Turner,
again, your thoughts. – Yeah, I was with a group of
youth yesterday in Hickory Hill. And I think what came out of
that was community policing. It’s much more difficult for
some citizen to do something as a police officer if that
police officer has been in that community and they
know that officer. And likewise it’s much more
difficult for that officer to do something to the citizen if he
knows the family and knows the citizen has walked up and
down those streets for years. So, I think that hopefully this
will be an outcome of what we’re dealing with now, a
focus on community policing. As my colleagues have stated,
I think Director Rallings did a wonderful job. And I have my eye
on Reverend Fisher. He seems to be one of the ones
that’s come out of this whole movement that has good thoughts
about moving the issue forward and doing it in a
very logical way. And so, I’m looking at him and I
think that he’s doing great work and really synergizing what’s
going on and making sure that there is progress and there’s
no violence to come about. And I think that
he’s doing a great job. – Alright. Well, I wanted to give everyone
a chance just to do that. Again, we’re
pre-taping this show. So, it’ll be, you know,
a week has passed by the time this has aired. Let’s move to the budget. And I’ll start with
you, Mayor Luttrell. You essentially have
come to the conclusion. I guess it’s not final pass,
technically not finally passed or the tax rate hasn’t been set. But talk about
this budget season. Talk about the challenges. Talk about what you’re proud
of and talk about some of the compromises you feel
like you had to make. – Well, when I think
of the budget season, it’s really a 12-month
season because we’re already in preparation for the fiscal
’18 budget as we move forward. So, budgeting is
a very complex process and it is a year-round process. It’s one where we work very
closely with the Trustee’s office as we try to
project revenues. And we always hope
that it’ll go smoothly. But it always becomes
very chaotic toward the end. And I think that’s for
a number of reasons. There are a lot of
competing priorities. Each of the 13 commissioners
have their priorities of things that they would like
to see in the budget. And we try to work
with them in that regard. Also, we have with
every commission, every commission term, with term
limits here in Shelby County, we can count on at least
about half of our commissioners turning over each election. And that provides a learning
curve for us to try to teach up the commissioners on the
subtleties and nuances of public finance. Public finance is a
very complicated process. Money comes from a lot of
different directions and has restrictions on
how it can be used. And that’s a process that we all
have to go through to make sure that we live within
those guidelines. But we did get our
budget approved finally. I’m a little bit uncomfortable
with the fact that we had to dip into fund balance. – How much? – About eight million dollars
we dipped into fund balance, which means that we’re living
beyond our means to some extent. – And much of that driven
by needs of the schools. – Schools but there are also
needs by the District Attorney and by the sheriff and
various other elected officials. So, we did have to dip
in the fund balance, which means that we are
spending a little bit more than we’re taking in. That troubles me. – We’ll come back to some of
those things and we’ll get everybody’s comments. Van Turner, your sense. Are you pleased with
the budget process, with the compromises
that had to be made, you know, the increased
funding for the schools? Your thoughts. – I think the Mayor stated
when this process was going on, the people saw the
sauce that was being made. And, you know, sometimes it
can get a little uncomfortable. And so, pushing everyone
past their comfort level is probably good. I mean, that’s the process. The tension is good because what
comes out of it is something that hopefully will come
the community forward. Pulling the eight million out of
the fund balance I think should be focused upon as a
one-time scenario. As the budget
chairman for this process, I do not think that it is good
to dip into the fund balance year in and year out. – And fund balance, a lot of
people think of that as the reserve fund or
the rainy day fund, right? I mean, savings account. Same thing. – But given the pressing needs
that are within this community, the school needs, the needs of
Amy Weirich with the DA’s office and all that’s going on
right now in the community, I think the commission
felt that it was necessary to do it this one time. I don’t think that
this should be a pattern. Hopefully it will not be
a pattern going forward. – And David Lenoir, the trustee
is sometimes called the banker, the county’s banker. Does that concern you,
dipping into the fund balance? And do you feel like.. Are we going down a bad road? Not just this year but does this
set a precedent that can take us in a bad direction? – Eric, I think we’ve
taken a step down a bad road, no doubt about it. How far we are down it I
guess is yet to be determined. But as the banker and really one
trying to protect the balance sheet for Shelby County, as
both Van and the Mayor said, anytime you dip into the savings
account and use tomorrow’s money for today’s
expenses, it’s concerning. You know, we’ve worked hard to
increase fund balance during a very difficult economy. We’ve worked hard with
the Mayor’s administration to reduce debt. We’ve been able to accomplish a
$600 million reduction in debt. But yet, the county is still
a billion dollars in debt. And so, as we look to use
those monies in other places, obviously there’s a trade-off. I mean, that’s economics 101. So, where we have aggressively
paid down debt in the past, we might not be able to do that. So, yeah, it is concerning. You know, I feel like beyond
just the revenue side of the income statement, I want
to protect the balance sheet for the county. And when we use tomorrow’s money
to pay for today’s expenses, it’s a concern. – Bill? – So, is there eight million
dollars of one time spending in this current budget that
can come out of it next year? – Much of it is not
one time spending. It could be recurring costs that
even complicates the issue more. Because as the Trustee said,
if you dip into fund balance, it should be for
one -ime expenses. There are some items in there. The Sheriff’s budget, the
District Attorney’s budget, the education budget,
which are recurring expenses. This is also the year we
established our maintenance of effort for education, which
means that the money that we gave to education this year will
be the baseline for education next year and going forward. So, those are some
issues that are complicated. – So, do you wait for the state
education department or the folks in Nashville to tell you
this is what we’re saying the maintenance of effort is
at for education funding? Or is it set with the budget? – It’s set with the budget. It’s set with our budget. – As you all know,
Superintendent Dorsey Hopson has said he expects that there will
be some continued reduction in the head count of students for
the school system at least for the next school year. He’s trying to stabilize that. But could that change
maintenance of effort next fiscal year? – Well, the one way that you can
reduce the education budget is when you have a
decrease in enrollment. But keep in mind
within Shelby County, if they’re leaving the Shelby
County school system they maybe going to Bartlett,
or Collierville, or Germantown school system. So, it just moves the money from
Shelby County school system to one of the
municipal school systems. And keep in mind that Shelby
County government funds all public education
across Shelby County. So, unless those students that
are leaving the Shelby County school system are
leaving Shelby County, then the chances are that the
budget would remain the same. – Because we have seen some
growth in the attendance in the suburban school
systems without a doubt. Van, what was your impression
of the push for more education funding this year? Sometimes this is a really
rough conversation to have about education funding. Historically, it’s been
a tense conversation. What do you think happened this
year that was different from those past discussions? – Well, I think this was really
one of the first years where you really didn’t have any
measurable amount of money coming from any other source. The Memphis city government of
course is not funding education any longer. There is some money still coming
in pursuing to a lawsuit but that’s not really money
coming in in a great amount. And so, I really think that what
we experienced this go around was a great need from the school
district to have more funding. Furthermore, we really saw the
impact of the ASD school system and what that has done. Because as students
move out of the district, there are still
liabilities there. There’s still debt. And there’s still other things
which remain at the school system, which does not
follow those students. So, I think that put a
strain on the budget as well. And just in referencing
what the mayor has said, the maintenance of effort
law is sort of a state law. And so, really we’re bound
to not decrease our funding for the school system. And although there may be some
recurring costs in some of the other departments, I don’t know
if state law would suggest or demand that we continue that
same recurring money going to those departments
year in and year out. I’m hopeful that we can create
or that those departments can create more efficiencies going
forward and there wouldn’t be a need for recurring costs
to go to the sheriff’s office or got to the DA’s office. And I don’t think that there
will be any state law in place to force us to still continue
to give to those departments. – David, you look
at the numbers. You look at the estimates. Is there going to be eight
million dollars of growth between now and next
year at this time? – Bill, there’s no
doubt there’s a lot of private sector investment. Y’all have covered them
on this show in the past. The University
District, the Medical District, the Chisca Hotel, the
guest house at Graceland, the Overton Square investment. So, there’s no doubt there’s
been a tremendous amount of investment. I mean, will it equate to
eight million is yet to see. We still deal with the
challenges of blight and poverty within our community. So, I guess it’s hopeful. But my background
and experience, it’s hard to make decisions
today on sort of potential promises of the future. – And next year is
a reappraisal year. So, you know, that’s
the assessor’s job but, you know, you’re
involved in all that. Do you have any sense
of a crystal ball that, you know, that property.. The last reappraisal and
property values happened and basically caught
the incredible hit to value from the Great Recession. Do you have any
sense of whether, you know, the reappraisal next
year will reflect an increase in the tax base? Just separate from
the investments, just a better housing
market and a better economy. – Yeah. I mean, no doubts. I think things are improving,
residential and commercial. But when we work with the
mayor’s administration in building our forecasts, I mean,
we forecast in property value increases in our
annual forecasts. So, it’s not like we wait for
the four year reappraisal and then catch it all up at once. So, these last several years, we
have forecasted increases in the tax roles that the
assessor puts together. – I mean, last year there
was what should have been great news. There was a 22 – 25 million
dollar surplus and it seemed to make everyone angry. You know, they didn’t know how
to split and they hadn’t planned for it and they
made cuts and so on. I mean, it is a forecast. It’s not an absolute promise. What’s your sense this
year of where it is? – I don’t know that it
made everyone angry. – I say that facetiously. – I want to clarify. We saw the surplus as a positive
indication that the economy was improving. The main driver of the
surplus was the taxpayers. We forecasted that the
taxpayers would pay the taxes at about 94%. They actually paid at 96. – In terms of just collections,
non-delinquent taxes. – And so, two percent
doesn’t sound like a whole lot. But on an $800 million,
it’s 16 million bucks. So, for us, it was a good
indication that the economy was improving. Now, one day that was a
good thing because the mayor’s administration took that
surplus and paid down debt. And that was a good thing. But one day it was a bad
thing because some of the commissioners thought that
they were misled in terms of.. So, I’m not going to
say everybody was upset. But I think it depends on what
day it is and what the context and the scenario is. – Let’s go back. We all mentioned
the recurring costs, almost eight million. Specifically for Amy
Weirich and the DA’s office, that’s related to
body cameras, right? Which is ongoing. The people they have to have. We’ve talked about
body cameras quite a bit. To go through all the
data, to go through the video, video analysts. From the sheriff’s department,
the recurring costs that we’re talking about, what
were those specifically? – I think a lot of
personnel needs were there. They had cars and
vehicles as well. And based on the body, you
know, when you look at the body cameras, there’s
several ways to approach it. The Memphis Police Department
approaches it a different way than the sheriff’s
office approaches it. And it seems to me that the
sheriff’s office approach didn’t call for as many bodies to sort
of review the footage and to process the paperwork. So, you know, again, I think
if the sheriff’s office and the Memphis Police
Department got together, there’s probably a way to create
more efficiencies and to have a one set type of
rulebook for how you do this. And I think that could
cut some of the costs. – Are there costs, new
costs associated with, you know, after the terrible
incident Downtown where the police officer
was hit and killed. And there have been a
couple of other instances. Just the general spike in crime. The sheriff is now providing
more deputies Downtown. Does that hit the budget too? I mean, is that an ongoing
expense or does that make it hopefully a one-time deal? – We count on the sheriff to
kind of budget his funds out. And the sheriff sits down
with the police director in situations like that. And I’m sure that his budget
restrictions or limitations come into play. But the sheriff’s budget is
really crafted based upon the mission as he has defined it. So, if there’s going
to be redefinition, let’s say a commitment of more
resources within the city of Memphis, I’m sure the sheriff
is going to have to make some adjustments in his
future budget presentations. But obviously anytime that
you change the mission or the organization, it’s going
to have a financial impact. And we’ll count on the sheriff
to keep us advised on what the needs are in that area. – But back to reappraisal
and reappraisal year, do you have a crystal ball? I mean, do you have any sense or
do you rely on David’s forecast? It’s a big reappraisal. – We rely very heavily upon
the work of the assessor and the trustee to really
kind of predict for us. And one of the things
I’m pleased with in our communication is that we do
have our Mayor’s finance and administration office working
very closely with the trustee. Because in past year’s, we’ve
had situations where there was conflict between the Mayor’s
administration and the Trustee’s office about projections. And that just is confusing. And Mr. Lenoir and Mike
Swift from our staff, I just appreciate so much
the harmony that they have in working through this. – One more question and
then I’ll go back to Bill. In terms of school, school is
this huge part of the budget. And, you know,
originally Dorsey Hopson, the superintendent, you know, in
the spring was talking about an $86 million deficit. He got that down
to some, you know, 20 – 25 million or so. But they have been
cutting, and cutting, and cutting year after year. Some of that is
the transition from, you know, the merge then demerge
and all the changes that have been going on with the schools. We talked to him about the ASDs. We talked about
competition with municipalities. But at some point
they can’t cut anymore, right? I mean, at some point, I mean,
everyone who comes and sits at this table says,
“Education, that’s the future, the kids, that’s
what we need to fund”. Does that concern you
when you look forward? There’s a point at which
you just can’t close any more schools or cut any more staff. – That’s a dilemma that
I think we’re all facing. We’ve had lengthy discussions
with the Superintendent and he’s projecting that we’ll see the
enrollment decline while we continue to see the cost
increase in the school system. And I find that a
little bit troubling. I think we’re getting very close
and far be it from me to tell a superintendent how
to run a system. But it’s obvious that the
changing dynamics of the Shelby County school system are
going to require some really re-engineering of the whole
budget process to determine a strong baseline of
sustainability going forward. – I said we would go
to Bill but I’m not. Sorry. Van, the same question to you. At what point can the
school system not cut anymore? They’ve cut.. Some people say they
haven’t cut enough. I’m not saying that
they’ve done it great. But there’s also this
argument that at some point, they still have to have a
certain number of schools, a certain number of staff. What is the future of
the school system and funding the school system? – You know, that’s an ever
evolving scenario because the charter schools
continue to grow. The achievement school district,
which are the state run schools, they continue to come in and
take over some of the schools. So, I think we just have to
realize you can’t turn the ship, you know, in a day or two. And I think Superintendent
Hopson is slowly trying to adjust the school district,
adjust the budget to fit this new system, which
we’ve never seen before. And it’s going to take some
time but I think Superintendent Hopson is committed to doing it. I think we’re
going to, you know, have to work with him and
allow that process to work its way through. – Go ahead. – One thing that we’ve
learned when we watch other municipalities that have gone
through the transitions we have, it takes years to
really fully transition. And if you talk to
Chattanooga or you talk to Charlotte-Mecklenburg,
they’ll tell you the same thing. I think Memphis and Shelby
County is moving through that transition process but it’s
going to be a few years before we really are settled
into this new system. – One thing. I think both of you have said
they’re always increased costs with schools. What are those costs
that always increase? I guess it’s salaries and it’s
healthcare and it’s whatever the cost of goods. – Post Employment
Benefits is a huge issue. – And with the new
testing from the state. I mean, that’s
all ever-changing. So, they have to
adjust to that testing. – You want to get on this? – Yes, I think my colleagues,
Mayor and Commissioner Turner, would agree. I mean, we’re all for teachers
and we’re all for students. I’m in the early stages
of a study just looking at the schools’ data. I think one-third of the high
schools in Shelby County high schools are at 50%
capacity or less. Now let’s not talk students. Let’s not talk teachers. Let’s just talk you’re running
an operation as a manufacturing facility and you look and see
that a third of your facilities are operating at
half a capacity. I think it’s disturbing to me. I think it’s maybe
disturbing to your audience. I’m not talking about cutting
funding to the teachers or the students. But when you have a school
that’s built in 1926 that’s at 32% capacity.. – And I’ve heard
other people say this. It just sounds like a
depressing place to be. It doesn’t sound like a
great place to learn when you’re walking through what
would feel like a ghost town. And that’s an interesting
thing to play out, too. – And the Mayor mentioned OPEB. I mean, you know,
the future liability. We had the budget
summit last fall. There was very
little discussion, at least publically,
in the commission about the OPEB funding. That’s concerning. The one who, again,
understands balance sheets and future liabilities. – OPEB being Other
Post Employment Benefits. Example being? – Well, it’s like at the end of
the show if I say I’m going to give you a hundred bucks
and you say okay, great. But if you found out I only
had three dollars in my pocket, it would be a
little disconcerting. So, it is a future
promise to pay retirees. And I think the school
funding of it is only at about three percent. – Do they fall under the
state law that hits the city of Memphis so hard and made them? They’re having to up their ante. The school system
is under that same? – The Actuarially
Required Contribution is, you know, $30 million. (Eric)
And they’re doing what? – Very little. – I think it concerns all of us,
the post-employment benefits. We’re talking about insurance
and healthcare insurance and life insurance. We can talk about
other post employments. But we’ve got ot get a handle
on that or we’re going to get, I’m afraid, a letter. – So, is a handle on it to
increase the ARC possibly in combination with a
reduction in benefits? – Well, that’s
going to be their call. That’s going to be the
school system’s call. They have their own governing
board and we’ll have to rely on the board of education to
make that determination. – Let me shift gears a bit and
go back to the progress that we’ve made on the
county’s overall debt. You’ve been able to do
somethings that you haven’t been able to do while the debt
was at a certain level. Talk about how much
that’s opened up the range of possibilities of what
county government can do. – Certainly when we look at
the needs of county government, I like to say
the needs are infinite and the resources are finite. And we’re in a situation now
where anything that we can save on debt is money that we can
reinvest in other services across the county. And I would point out two
areas in particular that have benefitted from us
paying down debt. Number one is the blight
reduction initiative that we’ve undertaken. We’ve put more money and thanks
to the county commission it was approved this year to move
money into blight reduction. Also, maintenance
of our county roads. We have about 800 miles of road
and the revenue that we receive from the gas tax
is not sufficient to really meet the needs. We’re paving about 20 miles
a year out of the 800 mile inventory that we have. But we were able to move a
little bit more money into that function over and above
what we get on the gas tax. So, those are two very
significant infrastructure requirements that we’re able to
meet without raising taxes and without it costing the
taxpayers any more money. – Alright, we’re going
to leave it on that note. Thank you all for being here. Thank you for joining us. Join us again next week. [theme music] (male announcer)
Production funding
for Behind the Headlines is made possible in part by.. The Bartlett Area Chamber of
Commerce and its member A2H – engineers, architects and
planners creating an enhanced quality of life for our
clients and community. To learn more about
A2H’s services and markets, visit A2H.com.

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