The choice facing Wake County school leaders is whether to lay off hundreds of teachers and other employees this year or to nearly bleed dry their rainy-day fund.

Superintendent Tony Tata wants to avoid making any layoffs that could be caused by the loss of $28 million in federal stimulus dollars that paid for more than 500 teachers and other school-based employees this fiscal year. So Tata is recommending taking $29 million out of the district’s $34.6 million rainy-day fund to balance the budget for the upcoming school year.

But the recommendation, which will be reviewed by the school board today, might only delay the layoffs for a year. Unless the economy improves or the district gets a major infusion of funds next year, the employees might not be around for the 2013-14 school year.

“We’re just trying to get through this year’s budget,” said David Neter, the school system’s chief business officer.

The specter of mass teacher layoffs is something that has dogged the school system the last several years as the worsening economy constrained what the state and county – the district’s main two bankers – can provide. Wake hasn’t laid off teachers officially, but teachers on year-to-year contracts haven’t automatically been rehired.

Knowing that federal stimulus dollars would eventually dry up, school leaders cut costs over the past three years to build up the undesignated fund balance, colloquially called the rainy-day fund.

Tata is recommending using 80 percent of the beefed up $34.6 million rainy-day fund. It’s part of a $1.25 billion proposed operating budget for the coming fiscal year. Tata also wants to ask county commissioners to give $8.8 million more after several years of relatively flat funding.

“If we can keep our people and keep our class sizes where they are, we’ll be maintaining things while we wait until the economy recovers,” he said.

‘It’s not sustainable’

To implement the recommendation, the school board would have to waive a policy that says only half the savings fund can be used annually to balance the budget. The policy was passed in 2007 because prior school boards had drained the rainy-day fund to balance budgets and cover emergencies.

School board Vice Chairman Keith Sutton said he’s uncomfortable with using up so much of the rainy-day fund in one shot. But he said he’s also leery of laying off employees when they’ve got so much money available to save the jobs this year.

“It’s as if you’ve got money in savings,” Sutton said. “You could say that you don’t want to touch the savings, even if it means not paying the bill to keep the lights on. You could do that, but how many people would?”

County Commissioner Joe Bryan warned “it’s not sustainable” to use the savings to pay for recurring expenses such as salaries. But he said it would have been hard for Tata to request an increase from the commissioners while sitting on a large “piggy bank” in its rainy-day fund. But Bryan said it will be hard to give the extra $8.8 million because “the economy is still weak.”

Tata said he’s hoping that the economy will improve enough next year that money will be found to avoid the layoffs for the 2013-14 school year. But if the economy doesn’t improve, the school board could find it difficult to ask commissioners for a big funding increase in 2013 in the same year when it may ask for a construction bond issue to be put on the ballot.

Bryan said he’d have to weigh the impact of asking for a tax increase to pay for a bond issue against whatever is requested for the school operating budget.

“You can’t make the decision in a vacuum,” he said. “You have to look at it with a holistic approach.”

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