The financial forecast of the Westerville City School District is brighter than expected.
An updated five-year financial forecast shows a projected ending cash balance for fiscal year 2018 that is $7.7 million higher than initially projected in the October 2017 forecast, according to Laura Hendricks, interim treasurer.
She attributes the increase to higher-than-expected revenue combined with lower-than-projected expenditures.
The updated forecast projects the district will end fiscal year 2022 with a fund balance of $92.87 million. Subtract from that the $19 million reserve fund and $1.5 million in estimated encumbrances, and the fiscal year 2022 fund balance for certification purposes is projected at $72.4 million, Hendricks said.
This is approximately $22.1 million higher than it was projected last October, reflecting continued efforts to stretch existing resources.
"I appreciate everyone's continued focus on remaining fiscally responsible while directing the majority of our financial resources into classrooms for the benefit of our students," said John Kellogg, superintendent. "Our staff, board and leadership team have worked diligently to stretch these resources as long as possible, and I believe this latest forecast shows the results of everyone's combined efforts."
While growth from new construction helped increase district revenues, the majority of the increase is likely due to federal tax law changes to the limit of deductibility of property, state and local income taxes, Hendricks told the board May 21.
"There is anecdotal evidence that some taxpayers pre-paid their entire 2018 tax bill prior to Jan. 1, 2018, to take credit on their 2017 federal tax returns," Hendricks said. "The true impact of this will become clearer once we receive the second half settlement in the fall."
She said this forecast takes a conservative approach by projecting decreased revenue projections for fiscal year 2019, followed by returned revenue growth thereafter.
The forecast also reflects an approximate $1.9 million decrease in anticipated expenditures for fiscal year 2018 compared to last October's forecast. At that time, general-fund expenditures were expected to be $168.95 million. The updated forecast sets them around $167 million.
Hendricks said a significant factor in the decrease is the containment of salary growth in fiscal year 2018, which is the first full year of savings from the retirement of approximately 160 certified staff over the last two fiscal years.
Benefit costs also decreased nearly $650,000 due to lower personnel costs and a partial year of premium increases, she said.
"Premiums are forecasted to increase 12 percent in FY19 and 10 percent thereafter," Hendricks said. "This is a change from the October forecast of 8 percent in all years, so we will continue to review actual results with projected amounts and make adjustments as needed."
Due to Ohio's school-funding formula, school districts typically operate on a deficit-spending model.
Much earlier financial forecasts indicated that district spending could exceed revenue as soon as fiscal year 2016. However, even while rebuilding its programs and services from significant budget reductions several years ago, Westerville continued to stretch its resources, Hendricks said.
Last October, the financial forecast indicated that district officials had been able to delay entering deficit spending until fiscal year 2020.
Though the updated forecast still projects deficit spending in that year, district officials have effectively slowed the projected rate by approximately $4.75 million.
Rather than $4.87 million in deficit spending for fiscal year 2020, the latest forecast projects the district will spend only $117,631 more than it receives in revenue.
"We continue to manage our resources wisely on behalf of the taxpayers in our community," Hendricks said. "While our cash reserves are strong, we will need to continue to investigate levy scenarios that could provide additional operating revenue in the future."
The district continues to maintain a $19 million reserve fund that provides approximately 45 days of operating costs to address any unforeseen financial crises.
Hendricks said a new funding formula enacted by Ohio in FY14 introduced a funding cap that prevents Westerville and other districts from receiving more state revenue it otherwise is owed. Hendricks said without the state funding cap, the district would have received an additional $11.8 million in revenue for FY18.
The updated five-year forecast is posted at www.wcsoh.org.