The City Council slashed $57 million from its annual contribution to Memphis City Schools two years ago but put no money aside in case of unfavorable court rulings in its dispute with the school district.
Instead, the council delivered a property-tax-rate reduction to citizens and increased city spending by more than $40 million. City employees also got a 5 percent raise.
Now, after the Tennessee Supreme Court’s decision Wednesday not to hear the city’s appeal in the school-funding dispute, council members and Mayor A C Wharton are scrambling to raise as much as $57 million — 9.1 percent of the city’s operating budget — for a one-time payment to the school district.
Wharton said Thursday that a variety of options — including spending cuts, layoffs and a tax increase — will be under consideration.
“Nothing is sacred,” the mayor said during a news conference at City Hall. “We’ve got to look at cutting services. We’ve got to look at reducing spending. We’ve got to look at a tax raise. Everything has to be placed on the table.”
Wharton met Thursday morning with council chairman Harold Collins, Chief Administrative Officer George Little, City Atty. Herman Morris and council attorney Allan Wade.
Wharton said city and MCS finance officials would meet over the next 30 days to determine exactly how much the city owes and how it will pay the tab.
“We want to get this done,” said Collins. “We have a city to run. We don’t want to have this lingering over us.”
A recent resolution sponsored by Councilman Shea Flinn launched an audit of the school system’s attendance numbers, which could help determine exactly how much the city owes. School funding is based in large part on student enrollment numbers.
At the school board offices Thursday, the mood was light. Still, board members and administrators acknowledged the tax implications for Memphians.
“Our board is very, very concerned,” said Dorsey Hopson, city school board attorney. “We share the same tax base, the some constituency. It’s very important to come up with ways to pay this thing without having a big property-tax increase.”
Wharton, who moved into the mayor’s office Oct. 26, inherited the school-funding issue from the council and former mayor Willie Herenton. In December, he proposed a nearly 10 percent tax hike to help fund the school system before meeting resistance from the council and eventually settling on spending cuts.
Wharton emphasized that he would first look to cut expenses before calling for a tax hike.
“We met this morning and not one time did somebody pick up a pencil and say ‘What kind of tax increase do we have?’” the mayor said.
Several council members predicted the fiscal nightmare, including Flinn and Jim Strickland.
“We’ve lost months of savings because we didn’t act in the budget season,” said Flinn, who proposed more cuts to city government and a plan to fund the school judgment over a period of years. “We could have dealt with this issue any time over the last two years.”
For weeks, Strickland and Flinn called for additional cuts to Wharton’s fiscal year 2011 budget and a possible rollback of the pay raises given to city workers over the last two years, which equals roughly $30 million.
But a solid block of council members wanted to wait on a ruling from the Supreme Court before figuring out how to pay the bill.
“At the end of the day seven votes rules the day,” said Collins.
Staff reporter Jane Roberts contributed to this story.
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