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Rick Smith is the superintendent of Hamilton County Schools.
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Superintendent Rick Smith says the equation is simple: New schools + new kids = new costs.

While Volkswagen's arrival and growth in other industries were an economic boon for the region, they also drove up the cost of doing business for Hamilton County Schools: Enrollment has increased nearly 5 percent over the past five years.

That has meant new buildings in certain areas, along with teachers and staff to fill them.

Smith says he won't ask for a budget increase this year, but he wants county leaders to be aware of future needs. And the superintendent isn't talking about a one-shot bump in funding, but a recurring boost in money for local education.

"We need additional operating capital," Smith said. "I think we are going to have to start having some serious conversations."

But it doesn't look like the school system will find much relief at the state or local level. One has deemed the district too rich, while the other is holding to its pattern of conservative budgeting.

In the past five years, student enrollment grew by about 2,000 kids, to 42,705, according to the 20th-day enrollment report. The system has had to hire about 100 new teachers, and the coming year's budget calls for hiring 20 more to meet anticipated growth.

The general purpose budget will grow by about 2 percent next year, reaching about $337 million. That figure was close to $300 million five years ago.

But Hamilton County commissioners, who control the school system's funding, are urging school officials to tighten their belts.

Relations between the commission and the department of education are fraught with power struggles and money grabs, as board members seek to offer programs and services and the commission looks to keep costs -- and tax rates -- down.

While state law doesn't allow the commission to set school policy, commissioners often seek to assert influence over the direction of the school system. Some people cited County Commission meddling as the reason for the 2011 ouster of former Superintendent Jim Scales.

Smith has worked in the school system for years. He knows many commissioners and was a favorite of the group, which helped propel him into the superintendent's office.

But it seems that not even their favored son has won enough support to sway the commission to pry open its wallet any further.

Commissioner Fred Skillern served on the county school board for two decades before being elected to the commission. He said the school system should look to its own budget and its share of tax revenue growth to fund its needs before it asks commissioners for more cash.

"It could come from their budget. I don't even know where they spent the money they got from Volkswagen," Skillern said.

The school system was projected to receive nearly $3.6 million in 2012 from agreements known as payments in lieu of tax. PILOTs are deals to lure businesses such as Volkswagen by allowing them to pay only the schools portion of their property taxes for a certain number of years.

School officials say they tucked PILOT money in their reserve funds, some of which will be tapped to cover this year's budget shortfall. The system's reserve fund now is about $24 million, compared to about $100 million the county has in reserves. The schools will again dip into reserves for the 2014 budget year.

The state won't prove much help, either.

Tennessee's complicated education funding formula predicts an area's ability to fund its own schools.

Because of a relatively high population and tax base, Hamilton County's state allotment is the 134th lowest of 136 school systems. Our $3,100 per-head figure compares to $6,220 per student in much-poorer Grundy County, according to a Chattanooga Times Free Press analysis.

"That's where having a AAA bond rating and wealthy areas like Lookout Mountain hurts us. ... What I call it is, the person who does the wrong thing gets the break," Skillern said.

Budget grows, cuts add up

The county's schools budget is, in fact, growing. Increased state funding based on enrollment and growth in sales and property tax revenues will help lift this year's general fund of about $331 million to about $337 million next year.

But school leaders say cost are rising even faster.

In the past five years, the school board has cut some $44 million to balance budgets as health care, salary and utilities costs rose, records show. This budget cycle, the board is looking to cut about $5 million.

The system has closed schools, reduced central office staff, slashed capital maintenance funding and made employees pay more for health insurance.

"You can't just keep cutting things and keep the quality of education," said board member Joe Galloway. "As you cut and cut and cut, it affects the classroom."

And school officials say recent cuts don't count many worthy needs the system has sacrificed. Few elementary schools have art teachers. The list of needed maintenance projects now tops $200 million. And some schools struggle to purchase basic items like copy paper and supplies.

"I keep going back to one thing: What kind of school system do you want?" said school board Chairman Mike Evatt. "What kind of school system does the public want?"

New school openings also have hit the schools' balance sheet. Officials estimate opening the East Hamilton and Signal Mountain middle/high schools added about $8 million in recurring personnel costs and nearly $2 million more in utility, custodial and maintenance expenses.

A massive Ooltewah Elementary and a new Red Bank Middle will open in August, though three older buildings will be shuttered.

But Commissioner Warren Mackey, who is chairman of the commission's education subcommittee, has his own ideas about the schools' growth and operational woes.

"They say they have schools in need of repairs, and in addition they have excess classroom capacity," Mackey said. "Instead of spending money to build new schools, they should use it to raise test scores."

Contact staff writer Kevin Hardy at khardy@timesfree or 423-757-6249.

Contact staff writer Louie Brogdon at or 423-757-6481.