By Dedra Cordle
The annual spring update of the five-year financial forecast was presented at the South-Western City Schools board of education meeting on May 9. It was summarized by Treasurer Hugh Garside as showing little to modest change from the financial projections made at the end of last year.
“I would say we are on target to where we thought we would be,” he said.
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 two percent of our revenues projected and within two percent of our expenditures projected.”
He said 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.”
“I would even say we’re a little bit better in both areas, and even in our projected cash balance.”
The updated projections show the district will see a modest increase in revenue in fiscal year 2022.
“We do expect this fiscal year to end the year with our revenue surpassing our expenditures,” Garside said. “But in the next fiscal year and the ones throughout the forecast, we could possibly be spending a bit more than we bring in.”
He said the revenue is expected to rise primarily due to reimbursements from Medicaid and funding received through the state.
The district, he added, receives roughly 60 percent of its revenue from the state of Ohio. He said the recently approved Fair School Funding Plan (FSFP) has provided the district with more funding – they received roughly $120 million this fiscal year and are projected to receive roughly the same next year – but there has been no commitment to additional funding at that level beyond their current biennium budget.
“They haven’t funded the whole thing yet but that is not uncommon for the state because they only have so many dollars themselves,” he said. “They need to figure out where they’re going to fund this funding formula and how they’re going to fund this funding formula.”
He said the state has been fortunate to have financial stability but added that could change with the state of the domestic economy and other global factors.
Garside said he is hopeful the state will find the funds to be able to fully fund the FSFP because he believes it provides an excellent opportunity for continued financial stability within the district.
“I’m hopeful that the state will come through and we will keep pushing for that.”
He did say, however, the state recently made it harder for districts throughout the state to collect assessed values from commercial properties by passing House Bill 126.
“It limits our ability to work with commercial and industrial property owners when they have a market value sale,” said Garside.
He said the district will have to be diligent to make sure commercial and industrial properties are paying their “fair share” in taxes.
The updated forecast, which was approved by the board, predicts the district’s revenue will be $270 million, $270.2 million, $279.2 million, $280 million and $286.6 million in fiscal years 2022 through 2026.
On the expenditure side, Garside said the forecast predicts it will continue to rise throughout the forecast.
“Our expenditures are expected to increase by $10 million, or 3.6 percent, annually throughout the forecast.”
He said the contributing factors include a rise in salary expenses – salaries represent roughly 54.6 percent of total expenditures – a 6 percent increase in health insurance costs and an increase in purchased services expenses and supplies and materials.
Garside noted the district will soon begin the collective bargaining process with the South-Western Education Association and the South-Western Administrative Association. The district recently came to a new, three-year collective bargaining agreement with its classified staff. Members of the Ohio Association of Public School Employees will receive a 2.75 cost of living increase in the contract years of 2022-23 and 2023-24 and a 3.23 percent cost of living increase in 2024-25.
According to the forecast’s projections, the district’s expenditures will be $275.3 million, $285.2 million, $297.3 million, $310 million and $323.4 million in fiscal years 2022 through 2026.
Despite the forecast projections that the expenditures will surpass the revenues in the next fiscal year, Garside said the district maintains “strong financial footing” as they will continue to have a positive cash balance throughout the five-year forecast.
“Having a positive cash balance is a very good thing,” he said.
He added he does not foresee the district requesting a new operating levy throughout this forecast but noted that a disclaimer may need to be included.
“We get 60 percent of our funding from the state and if something major or weird would happen, then that would be really problematic for us,” he said. “But, as of right now, I feel confident that this is a great forecast and we are marching in the right direction financially.”