Isle of Wight County, despite school deficit, ends prior fiscal year with surplus
Published 6:12 pm Tuesday, February 6, 2024
Isle of Wight County, despite its school system’s deficit, ended its 2022-23 fiscal year with a surplus.
That’s according to the annual financial report Chief Financial Officer Stephanie Wells presented to the Board of Supervisors on Jan. 16.
From July 1, 2022 through June 30, 2023, the county’s general fund, which accounts for the majority of last year’s revenues and spending, saw $83.4 million in revenue and $81.6 million in expenses, leaving a balance of $1.8 million. The $27.5 million county supervisors allotted to Isle of Wight County Schools for 2022-23 accounted for just under 32% of the cumulative $86 million cost of government services.
A recent audit of the county’s finances by the accounting firm Robertson Farmer Cox showed IWCS having overspent its budgeted expenses by more than $700,000, which despite efforts by IWCS staff to move money around left the school system just over $345,000 in the red.
IWCS Superintendent Theo Cramer, at the School Board’s Jan. 11 meeting, said he would release a written report in coming weeks detailing his staff’s efforts to date to resolve the shortfall. According to auditor Aaron Hawkins, the county will, as a result of the findings against its school system, be considered “high risk” and will need to undergo a more extensive audit for 2023-24.
“If you haven’t had any findings or material weaknesses in the past two years, I can consider you a low-risk entity and only have to test 20% of your federal revenue … now I would have to test 40% going forward at least for the next two years,” Hawkins told supervisors.
Separate from the county’s budget is its fund balance, which refers to the amount of cash Isle of Wight has on hand at any given time for unplanned expenses.
According to Wells, the county’s fund balance took a $4 million hit, dropping from $34.8 million in 2022 to $30.8 million as of June, largely due to a court-ordered repayment of $8.3 million in machinery and tools taxes to International Paper.
The payment stems from the interest accrued during two years of appeals by the county after a judge ordered Isle of Wight to repay IP $5.4 million in 2021, ruling that its efforts in 2017 to recoup a previously court-ordered refund were unconstitutional.
Of the $30.8 million that remains, $26.8 million remains “unassigned,” or not included in the county’s budget. More than three-quarters of last year’s revenue came from real estate and car taxes.
A county policy requires Isle of Wight to maintain an unassigned fund balance of at least 15% of what’s been budgeted for the current fiscal year. The $30.8 million amounts to 28% of the $95.5 million budgeted last May for 2023-24, or nearly double the policy minimum.
Supervisor Renee Rountree, at the Jan. 16 meeting, asked whether there was any downside to maintaining so much in excess of the policy minimum. Wells responded that it could cause taxpayers to ask why the county’s tax rates weren’t being reduced.
“That is obviously a consideration and something that you would want to consider,” Wells said.
The county did reduce its real estate tax in 2023 for the first time in 16 years to the current rate of 71 cents per $100 in assessed value to partially offset an average 34% rise in the valuation of single-family homes during the 2023 reassessment, but restored its car tax last year to the $4.50 per $100 rate in effect during 2021, after lowering the rate by 13% in 2022 to provide temporary relief to taxpayers amid a surge in used-car prices. Despite the lowered car tax rate, Isle of Wight saw roughly $2 million in additional car tax revenue in 2022 over 2021.
According to County Administrator Randy Keaton, the larger-than-required fund balance acts as a slush fund for when tax revenue isn’t coming in.
“We have about 3½ months of spending there,” Keaton said. “Taxes generally come in in two lump sums … in June and December, so basically once the fiscal year starts in July, you know, you’re not getting a lot of your revenue in until December, so you’ve got to have enough for cash-flow purposes.”
Keaton said the fund balance could also fund expenses associated with disaster cleanup in the event of a bad storm or hurricane, where the county would need to spend money upfront and apply for reimbursement from the Federal Emergency Management Agency, or FEMA, which may not be approved until a year or two later.