By Rick Palsgrove
Groveport Madison Schools officials are monitoring the district’s fiscal health using a five-year financial forecast.
“I would characterize the district as financially stable through 2023 due to our cash balances on hand,” said Groveport Madison Treasurer/CFO Felicia Drummey. “The district revenue sources are much slower growing at 1.24 percent annually while expenditures are projected to grow faster at 4.24 percent annually resulting in projected operating deficits.”
She said operating deficits are not sustainable.
“We work to evaluate spending annually and develop action plans that reduce the growth in projected spending,” said Drummey. “That objective is more challenging during this global pandemic when we must also be prepared for the unexpected.”
Drummey said there are many elements that provide indications about the district’s overall financial condition, which makes it difficult to pinpoint a specific five-year forecast line item that fully expresses the district’s financial health.
However, she noted two financial indicators – the excess of revenue over/(under) expenses and cash balance on June 30.
“The excess of revenue over/(under) expenses represents the net cash flow of revenue minus expenses each year for all operations. I like to call this our checkbook balance as it reflects the operating surplus or deficit,” said Drummey. “The checkbook balances let us know if annually we are able to meet our annual obligations with annual revenues, or do we need to access cash balances on hand to meet some of our annual obligations.”
She said a negative number in this line item means expenditures are starting to outpace revenues.
According to the five-year forecast, the excess of revenue over/(under) expenses line item shows deficits of $2.2 million in 2021, $3.5 million in 2022, $5.7 million in 2023, $8 million in 2024, and $10.4 million in 2025.
“The district would need to cut its fiscal year 2025 projected expenses by 11.7 percent to balance its budget without additional revenue,” said Drummey.
She said the district’s cash balance is positive at fiscal year end 2021, but is projected to worsen by fiscal year 2025.
“A worsening cash balance can erode the district’s financial stability over time,” said Drummey.
The cash balance on June 30 line item shows cash on hand of $18.6 million in 2021, $15.1 million in 2022, $9.3 million in 2023, and $1.2 million in 2024; but a deficit of $9.1 million appears in 2025.
“When expenditures outpace revenues we start to deplete our cash balances on hand to help us meet annual obligations,” said Drummey. “I like to call the cash balance on June 30 line item our savings account. We can’t spend down to zero cash on hand without creating a financial crisis, so we take steps each and every year to reduce the projected operating deficit to improve the overall financial outlook.”
For example, according to Drummey, in May 2020, the Groveport Madison Board of Education and district administration reduced fiscal year 2021 deficit spending by implementing a Budget Response Plan which reduced salary and benefit costs mostly through attrition.
“That budget reduction lowered the projected deficit this year from over $3.9 million to $2.2 million,” said Drummey. “Some budget response plan savings were eroded away due to expanded budgets in the areas of custodial supplies, instructional software, and technology equipment while adjusting and responding to the demands and financial burdens related to maintaining instructional services during this coronavirus pandemic.”