By Dedra Cordle
The South-Western City School board of education was presented with an update of the five-year financial forecast at its regular meeting on May 8. It was summarized by Treasurer Hugh Garside as showing little to modest change from the financial projections that were made at the end of last year.
“I would say that we are on target to where we thought we would be,” he said. “Maybe a bit better financially than was previously predicted.”
He explained that when putting together the forecast, which is a hypothetical representation of a district’s financial future based on historical trends and known facts, he does so in a conservative manner as a way to mitigate unwanted surprises.
“We always try to be within a two percent margin of our revenues projected and within a two percent margin of our expenditures projected.”
He said that if the actual numbers come in around that projected goal of the two percent range, it could mean a bottom-line difference between $10 and $11 million. He added that they are “right on the mark” within this updated forecast.
“Our overall revenues and expenditures are within the two percent margin and I do expect that our cash balance is going to come in a little better than anticipated from the October forecast,” Garside said.
The forecast predicts that the district’s overall cash balance will be roughly 4.5 percent better than the previous forecast, which is an increase of $11 million.
“That’s a good place for where we want to be,” he said.
Garside attributed some of the projected increase of funds to a “better than expected” return on investment earnings. He said since the overall interest rate has increased roughly 3 percent over the last year, that has allowed the district to collect an additional $5.5 million in interest earned.
“The market has gone up and having those funds in reserve has really helped us at this point,” he said.
He added that the district will continue to see those positive cash balances throughout the five-year forecast.
The updated projections show the district will see a modest increase in revenue in fiscal year 2023, which could begin to taper off in the following fiscal years. What could help increase those dollars, said Garside, is the passage of a new state budget and the Fair School Funding Plan (FSPS).
According to Garside, the district receives roughly 60 percent of its revenue from the state of Ohio. He said the FSFP has provided the district with more funding – they received approximately $142 million this fiscal year – and he anticipates the district could see a $12.7 million increase in funding and a $16.6 million increase in funding in the next two fiscal years, respectively, should the plan be fully funded.
“That would really help us bridge that gap,” he said. “We are very hopeful that the state budget goes through with the 2022 cost sets and we will be making a lot of calls so we can really push toward making sure this formula gets put into place.”
The updated forecast, which was approved by the board, predicts the district’s revenue will be $292.7 million, $293 million, $293.7 million, $295 million, and $296.8 million in fiscal years 2023 through 2027.
On the expenditure side, Garside said the forecast predicts it will continue to rise throughout the forecast.
“Our operating expenditures will be up about 4 percent, or $11.7 million annually throughout the forecast.”
He said the contributing factors include a rise in salary expenses – salaries and benefits represent roughly 80 percent of total expenditures – which has been accounted for in the forecast as the district came to an agreement with its non-union and union groups last year. He added that what they need to “keep an eye on” is the rising cost of health insurance premiums which could negatively impact the district’s operating expenses.
“We are working with our health insurance committee to keep those costs down but we are possibly looking at a pretty significant increase in health insurance premiums,” he said.
According to the forecast’s projections, the district’s expenditures will be $298.8 million, $301.5 million, $315 million, $328.8 million, and $342.7 million in fiscal years 2023 through 2027.
Despite the forecast projections that show the expenditures will soon begin to surpass the revenues in the next fiscal year, Garside said the district remains in “strong financial standing” as they will continue to have that positive cash balance throughout the five-year forecast.
“Having that positive cash balance is a very good thing for us,” he said, noting that the forecast predicts the district will have a positive cash balance of $256 million, $247 million, $224 million, $190 million, and $144 million in fiscal years 2023 through 2027.
He added that he does not foresee the district requesting a new operating levy throughout the duration of the forecast.