Upper Arlington Schools finances took a nearly $2 million hit from the state recently, and the five-year forecast shows deficits in both cash balances and the rainy-day fund, according to district officials.
Gov. Mike DeWine announced May 5 that $775 million would be cut from the state budget because of economic fallout caused by the COVID-19 coronavirus pandemic. That includes a $300 million reduction in basic state aid for K-12 schools.
Upper Arlington's loss in state funding for fiscal 2020 is $2.059 million and is among the biggest dips in Ohio, district treasurer Andrew Geistfeld said.
"The state reduced our annual budget amount that we receive to $1.83 million, or 53% of the amount of money we get ... for basic aid," he said. "That's much different than we expected."
Geistfeld said district treasurers with whom he had spoken before the announced budget cuts said they had expected a 3.7% cut for all districts.
As a result, he said, Upper Arlington Schools officials will spend several weeks trying to rework the district's five-year financial forecast to address those cuts and other projected budget challenges.
According to information Geistfeld presented to the Upper Arlington Board of Education on May 12, the task will be onerous because the outlook is ominous.
The total in state funding is about $2.28 million for fiscal 2021, $2.22 million in fiscal 2022 and $2.05 million in fiscal 2023 and 2024.
That amounts to a reduction of $2.36 million in fiscal 2021, or about 51%, $2.22 million (50%) in fiscal 2022 and $2.05 million in fiscal 2023 and 2024 (50%).
According to his revised forecast, for fiscal 2020, total revenues, including state aid and other funding sources, are about $96.9 million, and total expenditures and other financing uses are about $97.97 million, leading to a deficit of about $1.07 million.
In fiscal 2021, the projected total revenue is about $94.75 million, with total expenditures almost $103.45 million, for a deficit near $8.7 million.
By fiscal 2024, total revenues are estimated at $96.31 million, outpaced by $116.54 million in total expenses, for a deficit of $20.23 million.
"Obviously, that can't happen," Geistfeld said. "So we'll be having some conversations on that after we make some changes to our current expenditures."
District policy in recent years has been to maintain a rainy-day fund -- an unreserved fund balance that's not appropriated for expenditures -- of 25% of the general fund.
Geistfeld said without reducing district expenditures or gaining new revenue, the rainy-day fund would shrink from approximately $23.73 million in fiscal 2020 to a deficit of about $145,314 by fiscal 2022.
"You see that (by) that third year in fiscal year '22 right now, we can't even reserve at the amount we typically reserve in the rainy-day fund," he said. "We start spending that rainy-day fund fairly quickly."
By fiscal 2024, he said, that deficit is projected to grow to approximately $39.07 million.
Geistfeld said the five-year forecast, as presented to the board May 12, was "almost a worst-case scenario" and that district officials would find areas of the budget to trim to shrink deficits.
School board president Nancy Drees said she was alarmed by the news and said the district has a lot of work to do to balance a reduced budget.
"Looking at those numbers, I'm very concerned with our budget," she said. "We'll have to look at those expenditures very closely in the months going forward. It's a lot to consider."
The five-year projections don't account for any new revenue coming to the district.
Before the pandemic, district officials had planned to put a new operating levy on this November's ballot to generate money to pay for day-to-day expenses such as teacher salaries, instructional and pupil support, technology and transportation.
The new levy would be a replacement of a 3.75-mill, three-year levy voters approved in November 2017 that also provided $230 million for facilities projects.
The operations portion generates approximately $6.3 million annually.
Last November, Superintendent Paul Imhoff said administrators and the school board would work in "early spring" to determine the size of the new operating levy.
At this point, however, district officials haven't had those discussions because the pandemic forced school building closures and budget cuts and generally has thrown everyone for a loop.
Drees said the board has yet to determine if it will proceed with any levy request this year.
"We're, right now, looking at our expenditures," she said. "We don't have an answer right now, but we're working on that.
"It is a hard decision to go to the ballot. It's not taken lightly, and we do understand the hardships our residents are going through right now."
Although no decisions have been made for seeking an operating levy this fall or in the future, Geistfed said a new levy would lessen the budget shortages projected in the five-year forecast.
"Any additional revenue would have a positive impact on the forecast," he said.