By Dedra Cordle
Officials say the financial outlook of the South-Western City Schools District is stable despite indicators that suggest it could soon enter into deficit spending.
According to Treasurer Hugh Garside, the district’s expenditures will likely begin to surpass its revenue at the end of fiscal year 2023. He told the board of education at its meeting in November that the widening trend is predicted to grow throughout the duration of the five-year forecast.
He said that while there is always cause for concern when a district’s expenditures begin to outpace its revenue, what will help stabilize the district’s finances is the positive cash balance that is also predicated throughout fiscal year 2026.
“An important thing to note is we have a target cash balance of anywhere between three to six months of operating expenses,” Garside said. “That means if we didn’t bring any more revenue in, we could operate our district for three to six months and that would put us in a comfortable place.”
He said the current forecast puts the district on a positive cash balance of five to ten months instead of three to six.
“We are in that sweet spot of where we want to be,” he said. “We feel comfortable with where we are in our cash balances and we want to maintain that.”
The biggest expense of the district comes from personnel services, which consist of salaries and wages for its administrators, educators and support staff. Salaries are projected to grow at an annual rate of 5.43 percent through fiscal year 2026 and benefits are projected to grow at an annual rate of 6.52 percent throughout that time frame. The district has agreements in place with the South-Western Education Association and the South-Western Administrator’s Association through June 2022. They are currently in negotiations with members of the Ohio Association of Public School Employees.
Purchased services expenditures, which represent 15.7 percent of total expenditures are projected to decrease by roughly 3.44 percent annually. This is due to the recent enactment of the Fair School Funding Plan which funds only district educated enrollment. Garside said the passage of this bill will reduce the district’s tuition costs for open enrollment, community schools, STEM, and scholarships by roughly $18 million.
Supplies and materials are projected to increase at an annual rate of 3.66 percent. Garside said the district has to keep up with the latest technology and that Chromebooks constantly need to be replaced. It is estimated the district will spend between $1.8 and $2.7 million annually to implement its technology replacement cycle.
The cost of fuel is also covered under the supplies and materials category. While the district did spend 21 percent less in fuel related expenses during the first year of the COVID-19 pandemic, Garside expects those numbers will tick up again. Fuel makes up roughly one-fifth of the overall supplies and materials budget. Every 30 cent increase in the price per gallon of fuel represents roughly $130,000 in increased cost annually.
According to projections in the forecast, the district’s expenditures will be $273.59 million in 2022, $284.4 million in 2023, $297.6 million in 2024, $311 million in 2025, and $325.5 million in 2026.
The district’s revenue is projected to grow but at a slower pace. Garside said the district maintains a healthy revenue stream from residential and commercial property taxes and they have made wise investments in allowable stocks. He said the district is likely to receive more state funding through the Fair School Funding Plan but those figures were not fully factored into the forecast.
“It (funding through the FSFP) is only in the budget for two years and it’s not fully phased in yet,” said Garside. “It is supposed to be phased in over a six-year period.”
He said the district has to continue to be champions of this plan as he believes it could be a good way to fund the schools. Under the plan, the state has removed South-Western City’s designation as a capped district, meaning they can receive additional funds as they are considered a growing district.
The district received roughly 56 percent of its overall revenue through the state. The district could receive upward of $160 million in state aid should the plan be fully funded.
Garside said those dollars would dramatically change the outlook of the projected revenue but he wanted to err on the side of caution and leave it out of the forecast beyond the current and next fiscal years.
Real estate property tax revenue accounts for 36.2 percent of the district’s total revenue; it is projected to rise at an annual rate of 0.81 percent through fiscal year 2026. Garside said the district is fortunate to have “strong property values” and that new construction will continue to bolster the tax duplicate going forward.
According to the projections in the forecast, the district’s revenue will be $265.6 million in 2022, $275.8 million in 2023, $279.5 million in 2024, $282 million in 2025 and $286.8 million in 2026.
In light of the news that the district’s revenue is projected to be eclipsed by its expenditures soon, board member David Donofrio asked whether that meant the district will be looking to place a levy on the ballot in the future.
Superintendent Dr. Bill Wise said they see no need to do so unless there is a huge decrease in enrollment numbers or something catastrophic happens with the economy.
“At that point anything is up for grabs but I think we’re in good shape for the meantime,” said Wise.