Increased Revenues, Decreased Expenditures Yield Positive Results in Latest Forecast

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Westerville City School District (WCSD) Interim Treasurer Laura Hendricks, on May 21, presented Board of Education members with an updated five-year financial forecast showing a projected ending cash balance for Fiscal Year 2018 that is $7.7 million higher than initially projected in the October 2017 forecast.  Hendricks attributes the increase to higher-than-expected revenue, combined with lower-than-projected expenditures.

Hendricks noted that while growth from new construction helped increase district revenues, the majority of the increase is likely due to federal tax law changes to the limit of deductibility of property, state and local income taxes.  

“There is anecdotal evidence that some taxpayers pre-paid their entire 2018 tax bill prior to January 1, 2018, to take credit on their 2017 federal tax returns,” Hendricks explained.  “The true impact of this will become clearer once we receive the second half settlement in the fall.”

Hendricks said this latest forecast takes a conservative approach by projecting decreased revenue projections for FY19, followed by returned revenue growth thereafter.

The forecast also reflects an approximate $1.9 million decrease in anticipated expenditures for FY18 as compared to last October’s forecast.  At that time, general fund expenditures were expected to be $168.95 million.  The updated forecast indicates expenditures instead will come in around $167 million.

Hendricks said a significant factor causing the decrease is the containment of salary growth in FY18, which is the first full year of savings from the retirement of approximately 160 certified staff over the last two fiscal years.  Benefit costs also decreased approximately $650,000 due to lower personnel costs and a partial year of premium increases.

“Premiums are forecasted to increase 12 percent in FY19 and 10 percent thereafter,” Hendricks said.  “This is a change from the October forecast of 8 percent in all years, so we will continue to review actual results with projected amounts and make adjustments as needed.”  

Due to Ohio’s school funding formula, school districts typically operate on a deficit-spending model.  Much earlier financial forecasts indicated that district spending could exceed revenue as soon as FY16.  However, even while rebuilding its programs and services from significant budget reductions several years ago, WCSD continued to stretch its resources.

Last October, the financial forecast indicated that district officials had been able to delay entering deficit spending until FY20.  Though the updated forecast still projects deficit spending in FY20, district officials have effectively slowed the projected rate by approximately $4.75 million.  Rather than $4.87 million in deficit spending for FY20, the latest forecast projects the district will spend only $117,631 more than it receives in revenue.

“We continue to manage our resources wisely on behalf of the taxpayers in our community,” Hendricks said.  “While our cash reserves are strong, we will need to continue to investigate levy scenarios that could provide additional operating revenue in the future.”

The district continues to maintain a $19 million reserve fund, which is sound fiscal stewardship and provides approximately 45 days of operating costs to address any unforeseen financial crises.

Hendricks noted that a new funding formula enacted by the State of Ohio in FY14 introduced a funding cap that prevents WCSD and other districts from receiving more state revenue it otherwise is owed.  Hendricks said without the state funding cap, WCSD would have received an additional $11.8 million in revenue for FY18.

District officials do not expect the state to remove the funding cap anytime soon.  Couple this with the uncertainty of what Ohio’s school funding model will entail following the election of a new governor this fall, and district officials continue to take a conservative approach to financial estimates beyond FY19.  If funding is better than anticipated, the district’s financial picture improves.  Should projected state revenue end up lower than anticipated, district officials are better able to manage the impact.

The updated forecast projects the district will end FY22 with a fund balance of $92.87 million. Subtract from that the $19 million reserve fund and $1.5 million in estimated encumbrances, and the FY22 fund balance for certification purposes is projected at $72.4 million.  This is approximately $22.1 million higher than projected last October, which reflects continued efforts to stretch existing resources.

As a result of district officials’ efforts to stabilize finances, Moody’s Investors Service recently upgraded WCSD’s general obligation unlimited tax bond rating from Aa2 to Aa1, the second highest possible ranking.  Should the district ever borrow money, such as for upcoming facilities projects, this improved rating will result in lower interest payments.  At the time of the upgrade, Westerville joined an elite group of only 20 Ohio school districts with the distinction of earning the highest or second highest standing.

School districts must file their five-year financial forecasts with the State of Ohio by October 31 and May 31 of each fiscal year.  These forecasts rely heavily upon past fiscal trends and future assumptions.  This most recent forecast includes actual revenue from the state’s biennial budget for fiscal years 2018 and 2019.

The updated Five-Year Forecast and all other Board action items are available online through the district’s web site at  Visitors can obtain the information by visiting the Treasurer/Fiscal Services page under “Our Departments” or by navigating to BoardDocs via the Board of Education page.  Board meetings and presentations also are available to view at the district’s YouTube page at