NORDONIA HILLS -- An update of the school district's five-year forecast shows deficit spending will begin in 2018, a year later than the previous forecast had estimated.
In last year's October forecast, deficit spending had been expected to start in 2017 -- with the district falling short by nearly $200,000. However, the 2017 forecast update, approved by the Board of Education last month, shows the district will end the fiscal year June 30 with revenue over expenditures of $312,000. By the end of the 2017-18 school year, expenditures will outpace revenue by around $4 million, meaning expenses will begin eating into the district's cash balance of more than $20 million.
If the district stays on the current course, with no new levy, the forecast shows the district will have a negative cash balance in 2021.
Total expenditures in 2017 are projected to be $42.4 million, while the total revenue for the district is at $43.1 million. By 2021 if nothing changes, the expenditures will be $49.6 million while the total revenue is $41.8 million.
Superintendent Dr. Joe Clark said the district has been good stewards of the finances, but a levy may be on the horizon.
"When districts notice spending more than they are taking in, they generally start talking about a levy," Clark said.
District Treasurer Karen Obratil said the May update takes into account various factors specific to this fiscal year, which ends June 30.
"With only two months remaining in the fiscal year, adjustments were made to expenditures to more closely reflect where we think they will end up at June 30," Obratil told the News Leader. "By law, the district is required to submit an update in May; however, districts do not necessarily need to revise their forecast. We choose to carefully review the numbers and revise the forecast to make it as accurate as possible based upon what we know."
While property tax revenue is forecast to increase by $500,000 over the next five years, Obratil said the forecast does not reflect any potential changes the state budget could cause.
Obratil stated in an explanation of the forecast that "No significant changes are projected because of House Bill 920, which adjusts the millage rate to ensure the district receives the same revenue as it originally received."
"This is similar to living on a fixed income," she added.
Much of the estimated $7 million increase in expenses is attributable to employee costs. Personnel costs and benefits account for the $3 million increase from $23 million to $26 million from 2017 to 2021 in salaries as well as a $4 million increase forecast for benefits.
Obratil said the district is in talks with both classified support staff and teachers' unions currently and the five-year forecast reflects an anticipated 1-percent wage increase annually for the next five years. She said she also factored in an 8-percent increase in benefits costs.
School Board President Chad Lahrmer said he had no comment on the forecast, other than to say the negotiations with the employees unions are ongoing and a "very large variable" in what the forecast will mean for the district.
Regarding the decrease in revenue, the district is forecast to lose nearly $900,000 in grants from 2017 to 2021 as the budget reflects a decrease from $6.2 million to $5.4 million. Other operating revenues are also scheduled to drop from $3 million to $2.3 million, all of which account for a nearly $2 million decrease in revenue from around $43 million to around $41 million. Part of the decrease is due to a one-time additional revenue from negotiated settlements in 2017, according to Obratil's forecast report.
The district is recieving about $310,000 per year in tuition from the all-day kindergarten program, and another $250,000 from other districts whose students are educated in Nordonia Hills Schools, according to Obratil. The district is also receiving money each year from a development agreement with the Rocksino. That payment totaled $944,000 in 2016.
Obratil said the forecast also doesn't reflect potential insurance premium "holidays" which saved the district $1.3 million by not having to pay premiums for three months in the past. Obratil said there is no guarantee the district will receive premium holidays each year so she cannot factor them into the forecast.
The district's last school levy was approved by voters in 2011 for a continuous period and was expected to only last the district one year, according to Clark. The district has now gone six years without a levy, but did go to the voters for a 1.49 permanent improvement levy in 2015. Voters rejected the levy by a nearly two-thirds margin with 6,694 votes against and 3,817 votes for the measure. The Board discussed returning to the ballot in November 2016 but scrubbed the plan hoping to get by another year or two without having to go to the voters.
"The community should be proud to have the second lowest tax rate in Summit County and that the district was able to stretch a one year levy into six years," Clark said.
Briana Barker: 330-541-9432