Updated Financial Forecast Shows Negative Impact of State’s Latest Biennial Budget

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Last July, as the Westerville City School District (WCSD) Board of Education discussed operating levy millage to place on the November 5, 2019 ballot, Treasurer/CFO Nicole Marshall cautioned that uncertainty surrounding the state’s pending budget would play a significant role in how the district’s financial forecast would look moving forward.

Given that legislators failed to approve a state budget prior to key filing deadlines for the election, Marshall recommended that Board members should seek the higher of the two millage amounts being considered for the November ballot.  This advice proved prophetic as actual increases in state funding are significantly less than prior years, according to the district’s updated five-year financial forecast.

Marshall presented an updated forecast during the Board’s regular meeting on November 18, 2019.  According to the latest report, WCSD received $3.2 million more in unrestricted state funding from Fiscal Year 2017 (FY17) to FY19.  However, according to projections based upon the state’s current biennial budget, the district’s funding increase was cut to less than $500,000 in unrestricted state aid through FY21.

“We anticipated receiving less of an increase from the state, but this is very significant and shows how important it was for us to secure additional local revenue to maintain current operations while planning for additional students in future years,” Marshall said.  “Though we are receiving other revenue from the state as part of its Student Wellness and Success Funding, school districts are required to account for this revenue outside of their general fund, which means this forecast does not reflect an impact to our general operating revenue.”   

Marshall acknowledged that Student Wellness and Success Funding will help the district’s efforts to provide student mental health and well-being programming, but there is no guarantee that these funds will be provided in future state budgets.  Therefore, the district will use these resources to help cover costs for existing programming, rather than launch new initiatives that could cause future burdens to the general fund should the state reduce or eliminate this funding.

Marshall noted that Ohio legislators continue to debate a new funding model for schools, so the district’s updated forecast takes a very conservative approach to projecting future revenues. Deficit spending is not anticipated to begin for another two fiscal years at an amount that is $13.1 million less than prior projections.  The district is projected to have an approximate $57.68 million unreserved fund balance through FY24 while maintaining a $19 million budget reserve for unanticipated financial emergencies.

In addition to funding current programs and services, district expenditure projections take into account the opening and operating of two new schools to help accommodate projected enrollment growth of 1,300 additional students over the next decade.  The district’s new elementary school will open in the fall of 2022 and a new middle school will open in the fall of 2023.

Marshall reminded Board members that for several years, WCSD has been a “capped” school district.  This means that the state has withheld millions of dollars annually that the district otherwise would receive if the funding cap was not in place.  WCSD would have received approximately $12 million more from the state last year without the funding cap.

At least one school funding model being considered by legislators removes the funding cap system, which according to legislators can act as a “de facto tax increase” on residents by causing their local school districts to have to seek more frequent levies.  The current state budget funds WCSD based upon its already-underfunded FY19 amounts.  This means that while the cap does not technically exist, the district will continue to be underfunded by that amount for at least the next two years.  House Bill 166 (the state biennium budget for FY20 and FY21) effectively eliminated the school funding formula and provided for flat funding for public school districts across Ohio.

“We were able to stay off the ballot for any new revenue requests for seven years, which, considering the negative impact that the funding cap had on districts, is an amazing accomplishment,” Marshall said.  “Needless to say, we are keeping a close eye on what’s happening at the state house and will lobby accordingly.  We would welcome a new state funding model that provides Ohio school districts with all of the revenue they should be receiving, provides additional support for enrollment growth, and takes into consideration students’ specific instructional needs.”

School districts must file their five-year financial forecasts with the State of Ohio by November 30 and May 31 of each fiscal year.  These forecasts rely heavily upon past fiscal trends and future assumptions.  The updated Five-Year Forecast and all other Board action items are available online through the district’s web site at www.wcsoh.org.  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 www.youtube.com/WCSDOhio.