By Callie Hietala
The Henry County Board of Supervisors on Tuesday received a proposed budget for fiscal year (FY) 2022-2023 which included pay raises for teachers and county employees, full funding of operational requests from the school system, and a 2 percent increase in the meals tax.
This year’s budget was “especially difficult,” Henry County Administrator Tim Hall said. “We’re taking some chances here.” He presented the proposal on behalf of the budget team which included Deputy County Administrator Dale Wagoner, Director of Finance Darrell Jones, Deputy Director of Finance Richard Stanfield, and Director of Human Resources Michelle Via. The team, Hall said, also consulted with department heads and constitutional officers when crafting the budget.
When the budget process began at the beginning of the year, Hall said the county was $13 million out of balance, a situation he called “ulcer-inducing.” However, a $3 million increase in local revenues, due mainly to increases in sales and meal tax revenues as well as an additional $3 million which will come from the Compensation Board, helped to close the gap. Ultimately, Hall said, he was presenting the board with a balanced budget.
The recommended advertised budget for FY22-23 is $18,921,961, a 13.1 percent (or $22,084,555) increase over the current year budget of $167,837,406.
Hall said the “vast majority” of the increase was due to a hike in funding requests from the school division and from the sheriff’s office.
“Our biggest cost center is education,” Hall told the board. The school board’s budget request, Hall said, seeks total local contribution of $20,321,619, an increase of $947,842 over the current fiscal year. Rather than increasing the local funding, however, the county is recommending decreasing funding for the division in the coming year.
The proposed budget recommends a total local contribution of $18,712,619, down from the $19,373,777 it allocated to the schools in the current year. The budget narrative states that “we (the county) are required to provide $15,951,224 in local funding, and this budget exceeds that requirement.”
Despite the decrease in local funding, Hall said staff was recommending full funding of the division’s key operational requests that include a 7 percent pay raise for teachers (with a 3-step adjustment), increasing pay for full-time bus drivers and aides by 10 percent, increasing pay for administrators by 7 percent, increasing supplements for coaches and sponsors, and adding three coordinator positions, 13 regular positions, three special education and related service positions, and five special education paraprofessionals.
The reduction in local contribution, Hall said, comes in the area of facilities.
“Within their budget, the school board asked for a significant increase in local funding for facilities. They’re also going to get a substantial increase from the Commonwealth for facilities,” Hall said.
The schools budgeted $5,976,526 for facilities in the upcoming fiscal year, more than double this year’s $2,144,000.
“We think, if we remove money from the local contribution to facilities, it will be easily back-filled by the sales tax revenue, the ARPA (American Rescue Plan Act) money, and additional money from the Commonwealth,” Hall said.
Hall said the county anticipates the 1 percent sales tax increase will generate $5 million in FY21-22 and another $4.7 million in FY22-23, for a total of $9.7 million in facility revenue for the school division. Additionally, he said, $30 million in ARPA funding has been allocated to the county schools, and $3 million or more for facilities is anticipated to come from the state.
The county’s proposed budget includes only $535,000 allocated to the schools for facilities. Of that, $500,000 is for general needs not met in other facilities funding, and $35,000 is allocated to purchasing new scoreboards for the elementary schools, which are used by the county’s Parks and Recreation teams.
Garrett Dillard, of the Iriswood District, made the request for scoreboards at the board’s budget work session.
“Inevitably,” Hall said, “we’re going to get an outcry from some folks that we are not fully funding the school board … but it requires explanation.”
“The Commonwealth’s Local Composite Index (LCI), which is the Commonwealth’s unbiased analysis of a locality to pay for its education, our LCI has gone down, which means the Commonwealth believes we have a reduced ability to pay for schools. In fact, the City of Martinsville’s LCI is now higher than Henry County’s LCI,” meaning that the city was better able to pay for its education than the county, Hall said.
“This should bring into question the city’s reversion point that it can no longer afford to educate its students,” he said.
“It’s often cited by critics that we’re 131 of 132 in how we fund schools. That is one metric,” Hall said. “But what that metric does not show, localities get no credit for any debt service that they are paying on behalf of the school system, so that means all $23 million of local money that went into Meadow View Elementary School, we don’t get credit for that.”
Hall said, should the board want to explore fully funding the facilities request before finalizing the budget, it would equate to a 5.5-cents increase on the real estate tax.
Hall said the county hired an outside expert to assist with ARPA spending, reporting and tracking.
The budget narrative states that the county was allocated approximately $9.8 million in ARPA funds and treasury regulations allow localities to designate up to $10 million in revenue loss with relatively simple reporting and documenting required.
He said that “ARPA allows you this year to take the total amount you have been given and shift it into your regular budget and tell the fed we’re using all that money for salaries and benefits. In fact, they encourage you to do it that way. If you choose not to do it that way, the reporting requirements, the paperwork and the paper chase is much more difficult than putting it in your regular budget.”
Therefore, Hall said, staff was recommending putting the ARPA funding into its regular budget to cover salaries and shifting a comparable amount of money out of the budget to cover ARPA-related projects.
The narrative indicates that the county recommends using the revenue-loss model with approximately $8.1 million for FY22-23 and $1.7 million in the current year budget.
“This strategy allows Henry County to use the ARPA money on general government services for salaries and benefits. The local money freed up by this action would then be set aside in a new account for future ARPA-related projects,” the narrative stated.
The proposed budget includes a 6 percent pay raise for county employees. Last year, Hall said, the board approved a 5 percent increase. He said the board emphasized improved employee treatment at its planning sessions over the last few years.
“We are losing people at a phenomenal rate,” Hall said, adding that in 2021, the county lost 19 people to retirement or to other opportunities.
He said the county has done an excellent job of bringing in new companies that pay good wages. “What we have failed to do is match those increased wages from the private sector.”
He noted the proposed raises fail to match the rate of inflation.
In addition, Hall said staff recommend two new staff positions, an additional maintenance worker for Parks and Recreation and a full-time staffer, whose time would be divided between Human Resources and the Finance Department.
Adult Detention Center
The budget narrative states that the county anticipates a first-year operational budget of $11,572,015 for the new jail, which should be mitigated somewhat by the elimination of the need to outsource inmates and by selling some beds to other localities.
Overall, the budget for the law enforcement is increasing from $15,937,910 to $19,704,922, largely due to the need for additional personnel and operational costs of the new facility. Thus far, the narrative stated an additional 79 employees have been hired, and 12 more are recommended in the coming fiscal year.
In January, the board adjusted the salaries for law enforcement and Public Safety staff, using $1.2 million in funds from fund balance. That amount, the narrative noted, now becomes an ongoing budgetary obligation.
“I know that I have had conversations with several of you leading up to January and February trying to warn you of the number, if any, of suggested tax increases we were going to bring to you,” Hall told the board. “I’m really proud to say that we have that down to one.”
The proposed budget includes a recommended 2 percent increase in the county meals tax, from the current 4 percent to 6 percent. “In easy math, if you spend $1 to eat, you’re going to spend two more cents in taxes,” Hall said.
“You make a conscious decision to go out to eat,” he said. “By making that decision, you are essentially saying I’m willing to pay the cost of that tax burden. This is a user tax. People that come through town will pay it, we don’t have to worry about educating their kids or incarcerating them, they eat and they move on. This is really a user tax. You can choose to participate or not, based on whether or not you want to go out to eat.”
He said the hike “is the best alternative we have to spread the tax burden not just among our citizens, but the residents who come from other localities to eat at our restaurants.”
Hall said another reason staff focused on that particular tax ii because the General Assembly gave localities the authority to institute an increase on the tax by up to 6 percent. “I would anticipate that authorization will go away pretty soon. I think that will probably be pulled back by Richmond and that revenue stream will probably be taken from localities. So, I think we need to move this number, to get it on the record and to move forward.”
Hall said staff estimated the increase would generate $1.2 to $1.3 million over the year. It is the only tax hike staff was recommending.
Hall said the county did not budget for any reversion costs in the next fiscal year. The county has consistently stated that the estimated costs of reversion would equate to an 8-cents increase on its real estate tax.
He explained that the primary reasoning behind the decision was the recently-passed legislation requiring a referendum within Martinsville on the issue of reversion.
“That ballot initiative, there’s a deadline I think of June 15 for the courts to act to add that to their ballot. If it does not get added by that deadline, then in cannot be on the Nov. ’22 ballot, it has to be on the Nov. ’23 ballot. So we are rolling the dice. We’re anticipating no real action that costs us money with regard to reversion in the next 12 months. If that changes, then this will need to change as well.”
The budget narrative states that staff recommends an increase in the board’s professional legal category based on the continuation of the reversion process. The narrative stated the county has spent $264,789.64 in legal fees and associated costs related to reversion.
A roll of the dice
“We are not recommending any new capital in the next fiscal year,” Hall said. “That is a recipe for disaster. You might get away with it once, but maybe not.”
He said that the county was hopeful that “once the dust settles and we can grasp our ARPA money and really decipher where we can spend that money, then we can use that for some capital, but from a budgetary standpoint we have no capital items in the budget.”
Hall reiterated that the decision not to allocate any money for reversion was a risky choice as well. “I don’t know where this will end. I’m just taking an educated guess and an educated prayer that there will not be a demand on us in the next 12 months to provide revenue to absorb offices to do all these expansions. They’re inevitable, they are coming, I don’t think, unless the city changes its mind or the voters go against it, that reversion is off the table. At some point that will be revenue you have to generate, unless the city residents vote against it.”
The Board of Supervisors has the authority to make any changes deemed necessary to the proposed budget. A public hearing on the school and total county budgets is scheduled for May 9 at 7 p.m. The board is slated to adopt the budgets on May 24, and appropriate them on June 28.
A copy of the full document is available at www.henrycountyva.gov and can be viewed in the County Administrator’s office, 3300 Kings Mountain Road, Collinsville.
Henry County Administrator Tim Hall told the board that this year’s proposed budget included no new capital, which he noted could be a “recipe for disaster.” It also does not include any costs associated with reversion, outside of a proposed increase in the board’s professional legal category.
The Henry County Board of Supervisors were presented with a proposed budget on Tuesday which included a 2 percent meals tax hike, pay raises for county and school division staff, and a decrease in local funding for the school division.