By John Mullen/contributing writer

Deciphering the Alabama Education Trust Fund mechanism — also known as the Foundation — is not for the faint of heart.

And figuring out Baldwin County’s school finances in the wake of the first municipal defection to start an independent system really muddies the water.

“It’s complicated, but it’s a whole lot more complicated in this case because of the value of property in Gulf Shores,” Dennis Heard of the Alabama Department of Education said. Heard is a senior policy analyst for the state.

“If Bay Minette were to break away, the value of property in Bay Minette is tiny compared to Gulf Shores,” he said. “The value of property taxes down in Gulf Shores is so much higher than it is in the average of the rest of the county.”

Property values play an integral role in figuring out who gets what from the Education Trust Fund for Alabama students. Removing those high-dollar properties in Gulf Shores from the county’s calculation should increase the percentage county schools can keep from the fund, but probably means less total funding.

Every school system in the state is allotted a certain amount of money per student from the trust fund. Before the state sends the money, however, it deducts a local match. The amount the state keeps is based on how much 10 mills of property tax is worth in each individual district.

In Baldwin County, the average 1 mill of property tax is worth $3.9 million, or about $40 million in 10 mills, based on the 2017 numbers. Based on the student population, the county’s funding from the state for the year would be more than $171 million, minus the 10 mill match, leaving the county with $131 million in state funding.

“Right now, the local matching part in Baldwin County is 23.3 percent of their total foundation cost,” Heard said.

Taking Gulf Shores property out of the equation should decrease the county’s 10 mill match after the split. But it will also remove 6 percent of the student population — Gulf Shores projects it will have 1,725 students at it’s projected August 2018 opening — from the funding equation.

“Their percentage should go down below 23 percent, but I don’t know how much lower,” Heard said.

Officials with the Baldwin County Board of Education declined to comment on funding for this report. But Lagniappe estimates, based on numbers provided by the state, taking 6 percent of the county’s $171 million — the proportion for Gulf Shores students — would remove $10.2 million from its allotment, dropping it to $160.8 million.

One mill of property, calculated countywide, is $3.9 million, while in Gulf Shores it translates to $540,000. Subtracting the Gulf Shores amount would leave the county millage rate at $3.4 million.

Again, based on numbers provided by the state minus Gulf Shores, the county system’s Education Trust Fund allotment would be $160.8 million. Subtracting the local 10 mill match, or $34 million, would leave the county $126 million in state funding.

After the Gulf Shores split, the remaining public schools in Baldwin County would likely get less total money — $126 million compared to $131 million — but the state would keep just 21.1 percent of the county’s allotment, rather than the 23.3 percent the state kept in 2017 or 26.2 percent in 2016.

According to the Public Affairs Research Council of Alabama (PARCA), the city of Gulf Shores’ 10 mill match would eat up 52.4 percent of a city system’s state allotment, while Gulf Shores estimates it would get 6 percent of the students enrolled in Baldwin County schools.

“Currently the Baldwin County Board of Education has 100 percent of the students, so they get 100 percent of those revenues,” Gulf Shores Economic Coordinator Blake Phelps said. “If a city school system were to form, the amount of students we have would be a piece of that pie as well. We estimated 6 percent of the student population in our county would be here in the Gulf Shores city school system. Baldwin County Board of Education would now get 94 percent of that pie.”

For Gulf Shores, that would mean a state allotment of $10.2 million, but with a 10 mill match of $5.4 million the city would get $4.8 million from the state to help run its school system.

PARCA included this amount and other revenues totaling $15.4 million, with expenses totaling $14.9 million.
“They looked at federal funding, state funding and countywide funding,” Phelps said.

Other sources of revenue would include $4 million from earmarked sales taxes, $1.9 million from county ad valorem taxes, $1.6 million from district ad valorem taxes, $1.6 million in federal funding and $1.3 million through fundraisers.

Phelps said PARCA took a conservative approach in its report by not relying on revenues that are possible but not guaranteed.

“They based that on actual revenues budgeted currently and estimated what those revenues would be for a Gulf Shores city school system,” Phelps said. “There are two exclusions on that.”

One exclusion is the renewal of a countywide 1 mill tax that would be earmarked for schools. It would expire in January if voted down in the Dec. 12 special general election for the U.S. Senate race between Roy Moore and Doug Jones.

“We pulled it out of the projections completely because it is a big question mark,” Phelps said. “We didn’t want to count on it.”

The second variable excluded is a sales tax that caused an issue when Gulf Shores and Orange Beach were considering an island school system in 2007. There are two 1-cent sales taxes in the county earmarked for education and Gulf Shores would receive its per-student allotment from that revenue source.

A third 1-cent tax, first levied in 1983, was made permanent in January by the Baldwin County Commission, sparking new construction for overcrowded county schools. 46.1 percent of the revenue is paid to the Baldwin County Commission and the other 53.9 percent goes to the county board of education. The county received an attorney general’s opinion in 2007 stating any city systems within the county would not be eligible for revenue from this source.

Phelps said city legal counsel believes the Gulf Shores system would be eligible to receive a per-pupil amount of this revenue.

“Again, going with the worst-case scenario, PARCA was really trying to take a responsible approach to this and anything that had a question mark over it was moved off base,” Phelps said. “We looked at what are the circumstances, what are the revenues we know are going to come in. Their projections are based off of that.”

Gulf Shores Councilman Jason Dyken laid out three scenarios for funding: doing the basics at $15.4 million, high-performing schools at $16.4 million or top-performing schools at $17.4 million. Dyken said the city banks a reserve of $2.1 million each year and would tap into those funds for annual support of schools if citizens want higher performing schools.

Baldwin County Public Schools Superintendent Eddie Tyler expressed concerns about the funding model PARCA presented.

“We are reviewing the executive summary provided by Gulf Shores, and while we have many questions and concerns regarding missing information and inaccurate data, we are not going to oppose their split,” Tyler said. “In fact, we wish them well in their future endeavors. We have been anticipating the Gulf Shores split for several months.”

The county has had two reactions during the Gulf Shores discussion of a separate school system. First, it put a planned classroom expansion at Gulf Shores Elementary School on hold until the scenario played out. Second, it announced a new $14.9 million middle school in Orange Beach for all island students. Since Gulf Shores has now decided to leave, that school will be expanded to a grades 7-12 high school in Orange Beach.

“Our decision to move forward with the middle school in Orange Beach was in large part a result of information we had received about the impending decision in Gulf Shores,” Tyler said.

Negotiations are likely to begin between the new Gulf Shores School Board and the Baldwin County Board of Education in late November or early December. Applications for the five spots on the board were made available Oct. 16 and must be turned in by Oct. 30.

“They will be folks that are focused on this community, our kids,” Gulf Shores Mayor Robert Craft said. “Our needs, specifically, and not have to balance that out with everybody else.”

What’s at stake? Just about everything, Alabama Department of Education Chief of Staff Dee Fowler, Ed.D., said.

“Who gets what, what is one’s fair share, who is entitled to this and should not be able to get that,” he said.

Fowler was in the middle of negotiations in 1998 when Madison City Schools left the Madison County system. At the time he was a middle school principal and was appointed as director of administration for the city to be involved in split negotiations. Eventually, he became the superintendent of Madison City Schools.

“It got down to almost to the minutiae,” Fowler said. “When I say minutiae I mean, “what do we get from the bus shop?’ We let that one go.

“When you start doing it you put everything on the table. The books, the desks, everything, we assumed the things that were in our schools. Everything was scary.”

Across the table, Fowler said, were colleagues he’d worked with for many years during his career at Madison County.

“We were like ‘how come we didn’t get a new roof?’” he said. “Well, we didn’t get a new roof because you’re not going to be part of the system anymore. And, honest to gosh, that makes sense. It’s those type of things that have the opportunity to offer discord.

“We were lucky that we all got along, the transition team from the county and our team. It wasn’t like we were dealing with strangers. Everybody had an obligation to do the best that they can for their district.”

One of the many items, a very important one in the Baldwin County situation, is where students living in unincorporated areas of Fort Morgan and north of Gulf Shores city limits will go to school. And where Orange Beach students will be allowed to attend middle school and high school in 2018-19 while the new school there is being built.

“To the remaining students and parents in this area, rest assured we are fully prepared to take care of your children in a brand-new facility,” Tyler said. “We have already heard from teachers and principals who plan on staying with the Baldwin County system; we do not expect any significant disruptions in these transfers.”

Craft said he hopes for an amicable process. His city’s move to separate schools isn’t a jab at the county, he insisted.

“I don’t want anyone to think that we’re down on the Baldwin County Board of Education,” Craft said. “We’re not. I’m a graduate of that. We’ve got others up here who are graduates of the Baldwin County school system.

“We acknowledge we have to agree to disagree with our friends and our neighbors, but we feel like this is vitally important for us to be able to do something better for our students where you’ve got local control.”

Fowler said nearly 20 years ago people in Madison were expressing similar sentiments.

“Everybody would ask back in the day when we broke off, ‘why did you do it?’” he said. “The answer was when the expectations of Madison became greater than the expectations of Madison County, that’s when we left. Obviously Gulf Shores has some expectations that are not being met. Now the primary question is, will their funding allow them to meet those expectations?”

Craft said city systems lead the way academically throughout the state with 18 of the 20 top-performing schools being part of a city system. Those are the expectations he and others in the city have for a new system.

“City schools, as a performer throughout the state, are significantly better in the outcome from our kids,” Craft said. “We’ve done a lot of research on it. There’s a reason why.”

Gulf Shores officials believe funding is available to start a system, even without raising taxes to begin.

“That’s more the exception than the rule,” Fowler said, “but it’s not something that’s unheard of.”