By Dedra Cordle
Officials say the financial outlook of the South-Western City Schools District is stable despite a recent indicator that suggests 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 2021. He told the board of education at its meeting on Oct. 26 that the widening trend is predicted to grow throughout the duration of the five-year forecast.
He said that while the gap between the district’s expenditures and revenue is a cause for concern, the panic button does not need to be hit now or in the immediate future.
“I do not see us putting an operating levy on the ballot anytime soon,” said Garside.
He explained that when he crunches the numbers to put together the five-year 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.
He added that if the actual numbers come in around 2 percent of the estimated numbers, it could mean a bottom-line difference between $10-11 million. That, he said, could cause the delay of any potential deficits within the immediate forecast.
“Just because the forecast is showing the possibility of deficit spending in the next fiscal year, does not mean it will automatically come to fruition,” he said. “There have been times where the forecast predicted we would enter into deficit spending and we did not when the actual numbers came in.”
Garside also said that what is helping the financial outlook of the district is that it will maintain a positive cash balance throughout the duration of the forecast, which runs through June 30, 2025.
“We’re in good shape with our cash balance, which is always a good indicator of financial health.”
He said that the greatest expense of the district comes from personnel services, which consist of salaries and wages for its administrators, educators and support staff. He said the district is not ashamed that 80 percent of its expenditures go toward the staff as he considers it to be money well spent.
The forecast has also accounted for negotiated base salary increases of 2.5 percent for its union groups, and the forecast also predicts health insurance funding levels will increase by 1.5 percent beginning in January 2021.
Garside said the health insurance increase was not a surprise, but added that it could have been worse.
“Our 1.5 percent is much less than national trends,” he said, referring to reports that state some districts will see an increase of 10 to 15 percent in their health insurance benefits and costs.
The district will also be spending more to purchase additional computers and textbooks for students, along with any other technological upgrades that are needed.
According to the forecast projections, the district’s expenditures will be $271.9 million in 2021, $288.7 million in 2022, $302.5 million in 2023 and $318 million in 2024.
The district’s revenue is projected to grow but at a slower pace. Garside said much of the revenue is dependent on state funding, which accounts for roughly 60 percent of its revenue stream. With the pandemic hitting in the spring, the state had cut funding for South-Western by $3.4 million. Garside said the district will likely see the same amount cut for the upcoming fiscal year, but said the economy seems to have stabilized so future funding cuts are “not as grim” as initially believed.
The district could see a growth in state funding should the Cupp-Patterson bill be passed in the future. Garside said he believes the district would “benefit greatly” as it has the size and demographics to fit the parameters of the new school funding bill.
The district could also see a growth in property tax revenue after recent valuations and an influx of homes being built or purchased in Franklin County.
According to the forecast projections, the district’s revenues will be $274.4 million in 2021, $278.6 million in 2022, $278.9 million in 2023 and $279 million in 2024.
As for the cash balance, the forecast projections show the district will have $221.8 million in 2021, $211 million in 2022, $187 million in 2023 and $147.8 million in 2024.