Austerity measures and unexpected savings will keep the Olentangy Local School District operating in the black through the end of the 2012-13 school year, according to a new report released last week.

Austerity measures and unexpected savings will keep the Olentangy Local School District operating in the black through the end of the 2012-13 school year, according to a new report released last week.

The updated five-year financial forecast, reviewed by the school board at its May 24 meeting, shows the district will continue to operate under a budget surplus through fiscal year 2013, thanks to cuts in salaries and benefits for teachers, cheaper than expected gas and other savings.

Starting in fiscal year 2014, expenditures will begin to outpace revenues -- but thanks to reserve funds, the district's overall cash balance will remain positive through that fiscal year, district leaders said.

The budget is an improvement over an October forecast that projected a $3 million operating deficit at the end of fiscal 2012.

But Treasurer Becky Jenkins said more cuts are necessary for the district to reach a goal of stretching its 7.9-mill levy, approved in May 2011, through the 2014-15 school year.

"We have to come up with additional reductions to increase our cash balance; otherwise, we won't be able to make that four-year commitment," Jenkins said.

Even with the new savings, the forecast projects a $5.3 million operating deficit at the end of FY14, and a $14.9 million operating deficit at the end of FY15, as expenditures will exceed revenues in those years.

Much of the turnaround stems from new three-year contracts for teachers, approved by the board at the May 21 meeting. The agreement will save about $13.3 million over the three-year period by eliminating step raises based on length of employment and asking teachers to contribute more to health-care costs.

A merit-based system that will replace step raises in the coming years could result in additional savings, according to the new report, but the state still is working out a timeline for implementation and other details.

The district's other two unions, which cover bus drivers and custodial, maintenance and field service workers, still are negotiating contract renewals. Any savings will be factored into the budget later.

More immediate savings totaling about $5.6 million were identified last month after the district hired fewer teachers than anticipated in FY12, and after the mild winter drove natural-gas costs down.

The budget has seen some setbacks in the current fiscal year, including an increase in the cost of fuel for school buses, up more than 50 percent alongside rising gas prices nationwide.

Health-insurance premiums also jumped by roughly $1.29 million, and Jenkins said they will continue to rise.

The forecast assumes no increases in state funding, despite enrollment growth averaging about 900 students per year.

Despite that growth, the district continues to look for alternatives to building a new high school and middle school. District enrollment projections indicate the district otherwise would need to consider construction of a fourth high school and sixth middle school in the next few years.