Westerville City School District (WCSD) Treasurer/CFO Bart Griffith on Monday presented Board of Education members with a revised financial forecast indicating the district will end Fiscal Year 2018 with a cash balance $10.2 million higher than projected in the October 2013 forecast. Several factors, including belt-tightening measures by district officials and increased state revenue, have contributed to the district’s ability to maintain a cash balance through FY18, which is three years longer than originally projected when voters approved an emergency operating levy in March of 2012.
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. Unknown at the time of the last forecast was how the state would revise its funding formula for schools and the impact this change would have on districts. Griffith said now that the funding formula is finalized, revised financial figures include increased revenues.
“The new funding formula begins in Fiscal Year 2014,” Griffith said. “We were projected to receive $1.9 million this fiscal year but actually received $3.1 million due to the state’s recalculation for Fiscal Year 2013. Also, the state’s new preschool funding is generating $737,051 this fiscal year, which is up from 2013 at $277,635.”
Griffith noted that the state introduced a funding cap with its new formula, which actually is preventing the district from receiving all of the state revenue it is owed according to the new funding formula.
The revised forecast also shows that, when compared to the May 2013 forecast, district expenditures are lower in several categories, which Griffith attributes to changing business practices and continued belt-tightening by district officials. Every employee group made salary and benefit concessions over the past several years, such as freezing salaries and paying more toward health insurance, which has helped contain personnel costs.
“Fiscal Year 2014 reflects the final year of a wage freeze negotiated for the past two school years with our employee groups, and the administrative staff’s salary has been frozen for the past three years,” Griffith said. “Also, we use an average figure when projecting salary and benefit costs, so when employees are hired at salaries below this average cost, it has a positive impact on our projected expenditures. There are salary increments and staffing needs figured into this forecast over the next four years.”
As a result of having an additional year of actual figures showing the impact of employee concessions, Griffith was able to decrease the Personnel Services line of the forecast by $1.5 million. According to Griffith, the state average for employee salary and benefit cost is around 83 percent to 85 percent of a school district’s general fund budget. In Westerville City Schools, employee salary and benefits make up just 78 percent of the district’s general fund expenses.
“When looking at the big picture, the impact of these various factors means we remain on track to stretch emergency levy dollars three years longer than anticipated through Fiscal Year 2018,” Griffith said. “Anytime a publicly-funded institution is able to revise its ending cash balance upwards is good news for taxpayers.”
Due to Ohio’s school funding formula, school districts typically operate on a deficit-spending model. Previous forecasts indicated that district spending would exceed revenue as soon as FY16. However, the district’s continued efforts to reduce expenses, as well as increased state revenues, have yielded positive financial outcomes. WCSD is projected to spend less than it receives in revenues for both FY16 and FY17. It is not until FY18 that the district’s expenditures are projected to exceed revenues.
Griffith shared that the forecast reflects a $13 million reserve fund, which the Board authorized last October.
“The creation of this reserve fund ensures at least 30 days of operating costs to address any unforeseen financial crises,” Griffith explained. “It’s not only good fiscal stewardship, but it’s one more proactive measure that the Board has taken to strengthen its financial position and lengthen the time between levy requests.”
Griffith said that even with the implementation of this cash reserve, the district is projected to have a $41.7 million cash balance at the end of FY18 as compared to a $31.5 million balance initially projected in the October 2013 forecast.
In a recent issue of the district’s community newsletter, Snippets, Superintendent John R. Kellogg, Ed.D., noted that because the March 2012 emergency levy was not a continuing levy, it creates the need for the community to have a crucial conversation in just a few years.
“The emergency levy will expire and be removed from residents’ tax bill at the end of calendar year 2017,” Kellogg stated. “If the levy is allowed to expire, our schools would still be able to operate through FY18 but would need to consider returning to the ballot with a new revenue request shortly thereafter.”
Kellogg further explained that allowing the emergency levy to expire in 2017 likely would have a negative financial impact on taxpayers because the latest state budget also eliminated the homestead exemption and property tax rollback provisions.
“This means the state will no longer pay 12.5 percent of property owners’ tax bills on any new levies or other new tax issues approved by voters,” Kellogg stated. “However, the homestead exemption and property tax rollback would apply to any existing tax issues renewed by taxpayers. This means the state would still pay 12.5 percent of the district’s emergency levy should residents approve its renewal.”
The updated Five-Year Forecast is 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 Department” or by navigating to BoardDocs via the Board of Education page. The May 19, 2014, Board meeting at which the forecast was presented is also available to view at the district’s YouTube page at www.youtube.com/WCSDOhio.