SWCS treasurer lays out 5-year forecast

By Dedra Cordle
Staff Writer

South-Western City School officials say the financial outlook of the district will continue to be stable despite a recent analysis 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 by the end of fiscal year 2025. He told the board of education at its regular meeting on Nov. 27 that it will be a trend that continues to grow throughout the duration of the five-year forecast.

While the gap between the district’s expenditures and its revenue is a cause for concern, he said the panic button does not need to be hit now or in the immediate future.

“We do not anticipate having an operating levy on the ballot through the 2028 school year,” 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 said that if the actual numbers come in around 2 percent of the estimated numbers, it could be a bottom-line difference between $10-12 million. That, he added, could cause the delay of any potential deficits within the immediate forecast.

“Just because the five-year forecast is showing the possibility of deficit spending in an upcoming fiscal year does not mean it will be so,” he said, referring to previous five-year forecasts that indicated the district would go into deficit spending in 2020, 2021, and 2022. None of those predictions, he added, came to fruition.

Garside said what is helping the financial stability of the district is the positive cash balance it will maintain throughout the duration of the forecast, which runs through June 30, 2028.

Generally speaking, Garside said he wants the district to have a positive cash balance target of three to six months of what their operating expenditures would be, thus enabling the district to “weather storms” should there be a shortfall in state funding or property tax collections.

He said currently the district is well beyond that three to six month positive cash balance target.

“From fiscal year 2024 to fiscal year 2028, we are about five to 10 months on at any point in time in our forecast,” he said. “So we are in a pretty good spot right now.”

Also making the financial outlook a bit healthier, said Garside, has been an increase in state funding and the development of additional homes and businesses within the district’s boundaries. Much of the revenue in the general fund is dependent on state funding and property tax allocations – roughly 84.6 percent of the district’s $300 million general fund revenues comes from these two sources – and Garside said he expects that trend will continue throughout the forecast.

“Our revenue is projected to increase but at a much slower rate than our expenditures,” he said.

Garside added that the revenue could skew “even more positive” should the state fully phase in its Fair School Funding Plan. The district currently receives around $140 million annually from the state but Garside said he did not include additional state dollars in fiscal years 2027 and 2028 as that biennial budget has not yet been approved by the legislature.

“I think the FSFP is a good plan to fund schools and I do believe it will help our financial situation should it be approved,” he said.

According to the five-year forecast projections, the district’s general fund revenue will be $317.8 million in FY 2024; $320.2 million in FY 2025; $325.5 million in FY 2026; $323.4 million in FY 2027; and $332.1 million in FY 2028.

The biggest expense of the district, said Garside, 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 roughly 73 percent of its general fund expenditures go toward staff and student instruction 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 collective bargaining groups through fiscal year 2025, and the forecast also predicts that health insurance benefits costs will increase at a rate of 10 to 12.6 percent.

“Hopefully that will not be true – it is a conservative estimate,” said Garside. “But we are working hard with our health insurance committee to see what we can do to get those costs down.”

He mentioned that the district’s health insurance fund was healthy and that the district also has a four month cash balance carry over.

The district has also been hit hard by inflation regarding purchased services and materials and supplies. Garside said purchased services represent 13.48 percent of the total expenditures and will grow at an annual rate of 1.32 percent through FY 2028. Materials and supplies represent 4.27 percent of the total expenditures and will grow at an annual average rate of 1.66 percent through FY 2028.

“There has been some heavy inflation – I think we have all experienced that – and we are monitoring inflation and making sure we are staying on target with that,” said Garside.

According to the five-year forecast projections, the district’s general fund expenditures will be $311.9 million in FY 2024; $345.2 million in FY 2025; $339.7 million in FY 2026; $354.4 million in FY 2027; and $369.9 million in FY 2028.

As for the cash balance, the five-year forecast projects that the district will have $254.1 million in FY 2024; $248.5 million in FY 2025; $233.6 million in FY 2026; $202.5 million in FY 2027; and $164.6 million in FY 2028.

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