Revised financial forecast reflects loss of jobs
The district's bottom line looks better due to extensive personnel cuts, but as expenditures continue to exceed revenue and fund balances drop, Upper Arlington schools will simply "run out of money," board President Robert Arkin said.
"Our expenditures exceed our revenue," Arkin said. "As long as that is happening, we are going to run out of money."
Board members discussed the district's new five-year financial forecast in a special meeting Monday, April 29.
Treasurer Andy Geistfeld said the recent elimination of more than 40 staff positions and a decrease in various operating budgets reduced projected expenditures in the new forecast by about $13.4 million over the next five years.
"As painful as the cuts were and still are, they were necessary to get here," he said.
Board members recently approved the non-renewal of contracts for 29 teachers. Those non-renewals, added to recent retirements and resignations of retire-rehire positions, means the district will start the next new school year with about 45 fewer staff members.
Superintendent Jeff Weaver said the cuts have a consequence.
"When we open our doors in August, our class sizes will be larger," he said. "Our teachers will rise to the occasion, but we have not yet felt the true impact of these cuts."
Geistfeld said the rejection of a 5.8-mill operating levy request in November 2012 made cuts necessary in order to keep the next levy request -- expected to be on the ballot this November -- as low as possible.
He said last fall's vote was Upper Arlington's first levy defeat in about 20 years.
Residents approved a 6.2-mill combined operating levy/permanent improvement request in November 2007, with 4.2 mills to be used for operating funds.
Geistfeld said the district was able to break the three-year levy cycle by stretching money from that levy for more than five years.
The district's revenue at the end of fiscal year 2012 was $68,123,276, with expenditures of $77,907,945 leaving a deficit of $9,784,669. That deficit was offset by a carryover cash balance; minus encumbrances, that left an unreserved fund balance June 30 of $32,805,109, Geistfeld said.
Projections in the new forecast show that balance dwindling to about $15.7 million in 2015 and $7.2 million in 2016, until it disappears into a deficit of $3.7 million in June 2017.
Besides the budget cuts, other factors reduced the district's projected deficit, including increases in property taxes and TIF (tax incremental financing) funds by about $3 million over the five years.
Geistfeld said the increases -- due to an increase in public utility personal property taxes generated by new power lines running through the district -- were offset by a decrease in real estate taxes after this year's tax re-evaluation and new construction being less than expected.
"Based on receiving casino funds this fiscal year, we've included revenue generated from casino receipts in future years," Geistfeld said. "This has increased revenue by about $1.1 million over five years."
He said medical insurance expenses were not as high as expected, so the cost of the district's medical premiums decreased by 6.8 percent, resulting in an anticipated decrease in expenditures of $3.3 million over five years.
Purchased services are also tracking better than expected, he said, so those projected expenditures could be reduced by about $2 million over five years.
Capital outlay decreased by $500,000 because of the elimination of a $500,000 one-time expense to prepare classrooms for the addition of an all-day kindergarten -- something that was eliminated after the failure of the levy.
State aid continues to go down as tangible personal property and public utility reimbursements are phased out, Geistfeld said. The district received $2.2 million less last year from the state than the year before and expects an additional reduction in state aid of about $540,000 this year.
Geistfeld said the lower expenditures and the increase in revenue allowed the new forecast to reflect a reserve large enough to cover two months worth of expenditures by the end of fiscal year 2015.
"We believe it is important to maintain that balance, as we think strategically regarding a future levy, and in order to keep our strong bond rating," he said.
He reminded board members that the new forecast "is a living, breathing document, based on assumptions and trends."
"It is not a nickels-and-dimes chart," he said. "Some of these numbers could change. We will keep tweaking the numbers."