By Rick Palsgrove
Groveport Editor
Groveport Madison Schools’ expenses are beginning to outpace the district’s revenues.
At the Feb. 22 Groveport Madison Board of Education meeting, Treasurer Felicia Drummey said, “We’re getting a larger gap between revenue and expenses each and every year. We’ve got to plug that gap either by spending reductions or obtaining additional revenue (such as an operating levy).”
The district’s most recent operating levy was renewed by voters in 2019. That five-year levy was a “no new taxes” levy and it was the renewal of an existing levy.
The earliest the district’s existing five year renewal general operating levy, which will expire in 2024, can be placed on the ballot is November 2023. It is tentatively scheduled for the November 2024 ballot as that is latest date it can be approved for the district to start collecting money in 2025. If it is approved, the district would receive half the funds it generates in 2025 and the remainder in 2026.
“The levy renewal itself is not large enough to plug the gap between revenue and expenses,” said Drummey. “Our costs have increased.”
She said the cash the district now has on hand is “quickly being depleted” and that the longer district officials wait to take corrective action on the spending plan or levy request, the more difficult it will be to correct. She advised considering implementing spending reductions and identifying what to ask for in a levy.
“There would be much more severe spending reductions and a much higher levy request (if action is not taken soon),” said Drummey.
Drummey said levys are collected at a fixed rate or amount so that levy revenue stays flat while costs continue to escalate. Because of this, she said the district has to collect more than what it is going to spend in the year of the levy.
“Our revenue pie is shrinking,” said Drummey. “Our expenses and needs are growing.”
She said a “much larger discussion” is needed among district officials to think in terms of what the consequences are of spending priorities and how to address them.
According to Drummey, based on the district’s current financial picture, if the Ohio Department of Education begins to see consecutive years of operating deficits, the district will “be on the ODE’s radar” in 2025 as a fiscal caution. If the district does not change its financial course, she said the district could be placed under the state’s fiscal watch or in fiscal emergency.
“The ODE would require the district to come up with an action plan, which the ODE would weigh in on and decide if they accept the corrective action plan,” said Drummey. “When a district is under fiscal emergency, the ODE makes all the decisions and the board would no longer have influence over that.”
Drummey said the district needs to “change its trajectory.”
“We can with decisions about future operations costs or a future levy request, most likely a combination of both, because of the amount of these operating deficits,” said Drummey.
The numbers
Drummey said the status of the district’s finances are not unexpected as in 2019 the financial forecast projected there would be an operating deficit beginning in 2023.
“That is a natural occurrence near the end of the levy’s life cycle,” said Drummey. “It is not an indication the district is not managing its resources well, but rather reflects the impact of school funding in Ohio.”
The district is expected to face a revenue shortfall of $3 million by the end of fiscal year 2023.
Drummey said the district’s expenses are expected to exceed the district’s revenues by the following amounts in the coming years: 2024: $5.9 million; 2025: $11.6 million; 2026: $15.3 million; and 2027: $18 million.
“In an environment where the state legislature has discussed various bills that could dramatically impact school funding in Ohio, we do our best to project our financial picture,” said Drummey.
When asked what percentage of cuts would need to be made to balance the district’s budget without additional revenue, Drummey said that, during this time of high inflation, stagnating revenue growth, and a return to normal operations post COVID, it is not feasible to assume that cuts alone would restore financial stability.
As of fiscal year 2022, the district receives 46.5 percent of its revenue from property taxes, 40.7 percent from state funding, and 12.8 percent from other sources.
Salaries make up 52 percent of expenditures, benefits are 23 percent, and services are 17 percent.
According to Drummey, salary expenses increase an average of 7 percent annually.
“Half the increase is a function of growth in the number of employees due to additional students and programming. The other half is attributed to base and step increases that are part of negotiated agreements,” said Drummey.
Benefits’ costs are also rising an average of 8.5 percent.
“This is driven by the number of employees covered and the annual premium cost increases required due to higher plan costs based on use,” said Drummey.
District officials have begun budget talks to dedicate resources for next year’s needs while exploring spending reductions.
“This is a very fluid situation that is pending assessment of the most probable outcome of the state budget in June and identification of any new purchases that may be necessary for instruction and safety,” said Drummey. “I expect these assessments to be completed over the next two to four months to model levy needs and specific reductions.”
Board president’s response
Groveport Madison Board of Education President LaToya Dowdell-Burger said the amount and specifics of potential spending reductions have not yet been identified by Superintendent Jamie Grube and Drummey.
“They plan to continue to monitor expenses and look for additional savings and reductions while making every effort to minimize the impact on programming and services that might affect students,” said Dowdell-Burger. “We will have additional information in the coming months.”
She said that, beyond work that is already being done to constrain expenses, it is expected most of the budget reductions would occur over the next two years. She added that a millage rate for the next levy request has not yet been determined.
“Working with the superintendent and treasurer, the board will work through this process in the coming months,” said Dowdell-Burger.
