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Latest financial forecast projects need for additional revenue in Fiscal Year 2025

Latest financial forecast projects need for additional revenue in Fiscal Year 2025

Amid uncertainty in state funding, unexpected expenses and legislative changes, Westerville City School District (WCSD) has been able to stretch funds from a 5.9-mill levy voters approved in 2019 and delay deficit spending longer than originally anticipated. 

However, according to Treasurer/CFO Nicole Marshall, deficit spending and shrinking budget balances are on the horizon.

“Through the strategic use of federal pandemic relief dollars, combined with a one-time influx of funds from property tax settlements and better than expected state revenue, the district has been able to exceed its financial targets over the past few years,” Marshall explained. “But with the expiration of federal relief dollars, combined with operational cost increases, the district is projected to begin deficit spending in Fiscal Year 2025.”

The district’s annual general operating budget is approximately $215 million. According to the latest Five Year Financial Forecast, the district is expected to have only six days of unreserved cash balance remaining for Fiscal Year (FY) 2028. Marshall presented the updated financial forecast to Board members at their regular meeting on Nov. 27, 2023. 

“Our unreserved cash balance would only increase to 38 days for FY 2028 if we didn’t have any reserves,” Marshall said. “Given the projected budget deficit, I am recommending the Board consider a ballot issue for November of 2024, and I also plan to convene a finance committee to evaluate numbers and develop a recommendation.”

Voters last approved additional operating funds for the district in November of 2019. At that time, those revenues were projected to fund operations through FY 2023 and Marshall anticipated that the district would need to return to the ballot in November of 2023. Despite the many challenges posed by the COVID Pandemic, the district was able to manage its finances to delay the need for additional operating funds by one more year.   

With Franklin County in the midst of a property reappraisal year, Marshall also reminded Board members about the impact of HB920 on property taxes. According to Franklin and Delaware County officials, residential property values are estimated to increase by approximately 40%. Given pending legislation using averages, Marshall has projected a 22% increase in residential property values across the district. 

Marshall emphasized that increases in property values will not result in additional tax revenue for the school district because of HB920, which freezes a school district’s income on voted mills. As property rates increase, the auditor cuts the school voted tax rates so schools do not receive more money in subsequent years than the first year of a levy. The district does receive a slight increase in revenues due to new construction and unvoted inside millage. However, these increases are very modest. For example, additional revenue received from inside millage would allow the district to operate one additional day.

“I would encourage all of our residents to visit our Treasurer’s Office website to watch the Five Year Financial Forecast presentation, as well as review the available resources on HB920 and property reappraisals,” Marshall said.

Marshall also updated Board members on other variables that continue to impact the district’s general operating budget (e.g., the general fund).  For example, although the state’s Fair School Funding Plan was updated to include FY 2022 data in the funding formula, this data is still two years old as the district is currently operating in FY 2024. 

“Even with the calculated FY 2022 input, the district continues to be underfunded,” Marshall explained. “Despite significant cuts to state funding during the pandemic, we were able to keep our promise to voters by opening and operating two new schools, as well as continue, if not enhance, current programming levels for students.” 

Under House Bill 110, the state’s budget bill for fiscal years 2022 and 2023, the state continues to partially phase-in the Fair School Funding Plan. Full implementation of the plan is subject to the state’s biennium budget process. In FY 2022, the first year of the Fair School Funding Plan, the district was calculated to receive $45.4 million. However, WCSD only received $39.2 million of what it should have received based on the plan’s funding formula. In FY 2025, the formula is projected to provide $48.5 million, but the district will only receive $45.8 million. During the five-year period covering FY 2021 through FY 2025, the district is projected to be underfunded by a total of $28.6 million by the state.

Marshall noted that there is also pending state legislation that could eliminate a portion of Ohio’s share of local property taxes as a cost-saving measure. This would result in an estimated loss of about $14.5 million for WCSD.

There also has been a legislative change that limits school districts’ ability to challenge property values at county boards of revision. For WCSD, the change to property taxation for now will result in an estimated annual loss of $1.2 million in revenue. However, this loss could increase given the way the legislation is written to further erode a school district’s ability to ensure accurate property valuations. 

The third round of Federal Elementary and Secondary School Emergency Relief (ESSER) funding, which at $16.9 million was the largest round, is expiring in 2024. As with the previous two rounds of ESSER funds ($2 million and $6 million, respectively), this means some expenses covered by those dollars will return to the general fund. ESSER funds were provided to public schools to cover expenses normally paid out of the general fund to help offset revenue losses due to the pandemic. 

Earlier forecasts projected that WCSD’s expenditures would begin to exceed revenue in FY 2023. However, the district was able to delay entering deficit spending until FY 2024 thanks to ESSER funds, combined with a one-time influx of revenue from property tax settlements. 

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 website 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.
 

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