Shortchanged? Misled? Departing School Official Challenges Past County Spending

Gabi Juba, former school district finance director, says the county withheld sales tax revenue mandated for school upgrades. The county manager says the county has more than complied with the law.

Gabi Juba, who has left her position as Transylvania County School’s’ full-time finance director after 2 1/2 years on the job, pictured after her interview last week

BREVARD — Now that Gabi Juba is moving on from her job as Transylvania County Schools finance director, there’s an issue she wants to revisit.

In fiscal years 2020, 2021 and 2022, she said, Transylvania County withheld $3.3 million worth of sales tax revenues mandated by state law to go to capital improvements of schools.

And after she and the School Board’s attorney brought this up at a School Board meeting last year, Juba said, the county responded with a misleading presentation that seemingly included spending from other sources to show it had met requirements for sales tax distribution.

“We’re talking about millions of dollars for our schools that are being taken away from them without a good explanation,” Juba said last week, three days after her last day as full-time finance director.

County Manager Jaime Laughter, both in last year’s presentation and in emails to NewsBeat this spring, said the county’s total capital spending for schools in recent years has been significantly higher than the Schools’ share of sales tax proceeds. She also said unspent proceeds from this revenue have been placed in restricted accounts for Schools’ future use.

And even Juba, who has taken a job in the private sector but will continue to work part time for Schools during the search for her replacement, acknowledged that the amounts now being committed for school fixes far exceed the sums she questioned.

Laughter told the Commission at its meeting two weeks ago that about $6 million is available for immediate school upgrades. The county is also on track to sell bonds this fall to pay for $59 million worth of projects — including the badly needed replacements of roofs and HVAC systems — on a list previously approved by the Commission and Board.

“We’re on schedule,” she told commissioners.

So why are the past shortfalls significant?

Because, Juba said, they involved money that the law says must be spent on school fixes, because in some years the district was left with only tiny sums to address its vast backlog of repairs — and because the county has not provided accurate information about this issue to taxpayers.

Sales tax spending “is not being represented transparently and truthfully like the county is claiming,” she added. “I think it is being misrepresented what funding is available for our children.”

“Restricted” Funds

One thing Laughter and Juba agree on, as Juba said Monday, is that spending on school capital improvements is “complicated.”

Because school districts in North Carolina have no taxing power, Juba said, they depend on a variety of county, state and federal sources. During her interview last week, she focused on two of them:

The county’s Education Capital Project Fund, which was created to pay off future debt from the bond sale approved by voters in 2018. It has been fed mostly by a property tax increase that has raised about $6.2 million annually since fiscal year 2020.

Secondly, there’s the total of one cent of sales taxes the county levies under Article 40 and Article 42 of state law. Percentages of the proceeds collected under both these articles, as Article 40 puts it, “may be used by the county only for school capital outlay . . . or to retire indebtedness incurred by the county for these purposes.”

The restricted sales tax “money must be spent for those purposes,” School Board attorney Chris Campbell said at its meeting on March 20, 2023, though any money not spent within the year it is collected “can be carried forward into a reserve fund.”

Unless a district and county have reached an agreement to do otherwise, that means all of the schools’ share of sales tax proceeds must either be devoted to or reserved for school capital, said Pam Satterfield, executive director of the North Carolina Association of School Business Officials and a former school finance director.

That’s true even if counties contribute equal amounts of money from other sources, she also wrote: “If the county dedicates money to the schools from another fund, that does not satisfy the statutory requirement.”

At the School Board meeting in March of last year, Juba displayed a spreadsheet showing Schools’ share of sales tax proceeds and the county’s expenditures from this source for more than a decade. It focused on fiscal years 2020, 2021 and 2022 and the $3.3 million gap between the amount the county had received in restricted sales tax revenue during that time and the amount it had handed over to the schools. 

Yes, she said then, in several years prior to 2020, the county spent more than the Schools’ share of sales taxes on capital funding. And on Monday, she acknowledged that the shortfalls during the years she highlighted were partly due to a trend frequently bemoaned by commissioners. The county, they say, has committed money for a long list of jobs that were never completed.

For example, several projects that the Commission approved for funding in fiscal year 2022 — including the replacement of flooring and air handlers — remained unfinished more than eight months after the year had ended, according to a presentation in a Commission meeting in March of last year.

But even the amount the county pledged to invest in school capital improvements in the years Juba highlighted fell far short of the district’s share of sales tax revenue, she said.

In fiscal year 2022, for example, the county collected $2.6 million that should have been distributed to Schools while approving only 1.6 million of that money for capital spending for the district, her documents showed.

And how much did Schools actually get?

The county’s audit for that fiscal year lists $1.1 million under “schools — capital outlay,” which is the same amount Laughter listed in her presentation last year.

In a May email to NewsBeat, she wrote that the “true” figure is about $1.3 million, and Juba, in her presentation last year, put the number at $1.2 million.

But that amount, she said, included $110,000 to cover debts from past projects and, more significantly, the $873,000 cost of recurring capital expenses such as the replacement of furniture, computers and vehicles.

What was left to address the millions of dollars worth of needed upgrades across the district, she was asked last week.

“Not a lot,” she said.

County Spending

At that meeting in March of 2023, Campbell said “I’m not going to give you a legal opinion that the county is violating the law,” but he did say the matter was one the district and county needed to resolve, and that he planned to discuss it with County Attorney Bill Bulfer.

Campbell did not return calls seeking an update and Juba said on Monday that she was unaware if the two lawyers had resolved the matter.

But Bulfer and Laughter did respond with their own presentation at the Commission meeting on March 27, 2023.

It highlighted a list of projects the county had funded but had not been completed, and Bulfer noted that the state, which reviews all county audits, had never flagged Transylvania’s use of sales tax money. 

At that meeting, the Commission voted to place unspent sales tax money into the Education Capital fund, an action intended to clarify the county’s use of that revenue, Laughter said.

And Bulfer offered an interpretation of the law that, unlike Satterfield’s, didn’t mention the importance of the sources of funding.

“In simplified terms, what the statute actually says is this,” he told the Commission. “The money you spend on school capital has to meet or exceed the amount you obtain through those restricted funds.” 

The spreadsheet he and Laughter displayed showed the county had received a total of $9.9 million in sales tax earmarked for schools since the start of fiscal year 2020 and spent a total of $11.1 million on school projects.

A more recent spreadsheet, which Laughter emailed to NewsBeat this spring, showed that in the past seven years the county had taken in $16.2 million in sales taxes earmarked for schools and, she wrote, and the amount “spent in direct payments, payments to vendors and allocation totals $22.9 million and exceeds the collected sales tax.”

She provided an email from the then-Deputy State Treasurer, who wrote that she was “100 percent fine” with tracking unfinished projects and sales tax proceeds in the Education Capital fund.

Before the county adopted that practice, Laughter wrote in an email this spring, this money went into a pot of money labeled “restricted” in the county audit:

 “You’ll find the fund balance on the balance sheet for governmental funds, Exhibit C.”

Where’s the Money?

The problem, Juba said, is that no available information from the county specifically addresses the gap between the amount of money the county collected in sales tax revenue for schools and the amounts either committed to or spent on its required purpose.

The spreadsheet the county displayed at last year’s meeting, she said, was especially misleading because of its heading, “Sales Tax Expenditures.”

But it also showed a total of $3.3 million in “other costs” that do not appear to have been covered by sales tax revenue.

Laughter did not respond to a question about the source or use of this money, but it matches the amount that has been withdrawn from the Education Capital fund to pay the fees of the contractor and architect in the now-abandoned plan for major renovations at Brevard High and Rosman High and Middle schools.

“Sales tax funding and bond funding are two pots of revenue, and an expense can only come out of one pot and not both,” Juba said. 

That fund-balance exhibit in the fiscal year 2022 audit that Laughter pointed to does show restricted funds but not the amount specifically dedicated to Schools.

“It’s never been made clear to Schools or the public what the true account balance is,” Juba said.

Laughter did not respond to recent emails or text messages seeking a response to Juba’s comments and clarification about the amounts of sales tax revenue in the restricted accounts in previous years. And the sum from this source held in the Education Capital fund in fiscal year 2023 is not available from that year’s audit because it has not yet been completed.

The North Carolina Department of State Treasurer’s initial deadline for submitting these documents is April 1 of each year, according to its website, and local governments failing to do so by July 1 may be subject to the withholding of sales tax proceeds at the discretion of the state Local Government Commission.

The county has been in contact with the Commission to make sure this does not happen, Laughter said in a presentation at the most recent Commission meeting.

The audit should be complete next month, she said, and cited several factors that contributed to its delay, including the departure of the county’s previous finance director in June of last year and the five-month gap in hiring a replacement.

Also, the state has imposed several new auditing requirements, she said, and “because of that you are seeing counties late on audits across the state,” she said.

(A check of the Treasurer’s website last week showed that 95 of the state’s 100 counties had submitted fiscal year 2023 audits.)

“It’s not a secret,” Laughter said at the meeting. “We are late on our audit.”

Future Advocacy

Juba said she hopes the county will be similarly open about its sales tax expenditures to schools.

She left her old position partly because she recently received a state license to work as a certified public accountant and secured a job with an accounting firm.

But also, she said, the role of finance director is difficult in every county in North Carolina because of the array of funding sources and spending requirements.

It’s been especially tough in Transylvania because of conflicts between the Board and the Commission over school funding. It didn’t help that Laughter singled Juba out by name in presentations about lack of documentation provided by Schools and potential “double dipping” — seeking funds from both the county from other sources.

“A lot of what we face on the local level has sparked me to look for employment elsewhere,” Juba said.

But her recent transition will also allow her to openly work for more accountability from the county. She’s already started, she said, by sending a public records request for documents delineating sales tax proceeds and expenditures.

“I’m hoping that now that I’ve stepped back,” she said, “I will be able to say a lot of things and do a lot to advocate for our kids from the outside.”

Email: brevardnewsbeat@gmail.com