Office of the Treasurer
Written by: Paul Shaw

Financial Forecast: Challenges Remain Greater Than Ever

Pledging to continue to provide financial forecasts that are current, consistent and credible, Logan-Hocking Local School District Treasurer/Chief Fiscal Officer Paul Shaw presented his most recent forecast to the Board of Education on Monday June 18. “The challenges we face today – decreasing or stagnant revenues, increasing costs – will continue in the next five years, and will place demands on the School District which we have not seen, to this degree, in the past”, commented Shaw. “The Board, administration, and staff are aware of the challenges, and have been and will continue to be ready to tackle them.” The most recent forecast was filed with the Ohio Department of Education on May 28, 2012.

For the year ended June 30, 2011 (FY 2011), the District operated in the black (revenues exceeded expenditures) to the extent of $992,244. Revenues of $33.6 million exceeded expenditures of $32.6 million. The District is forecasted to operate in the black again for the current year ($317,086); however, under the current assumptions, deficits (expenditures greater than revenues) are forecasted for the remaining four years (deficits of $787,383, $306,489, $413,005 and $508,968 in FYs 2013, 2014, 2015 and 2016, respectively). The deficits, in total, are smaller than projected last year at this time. The District had a carryover cash balance of $8.3 million at June 30, 2011 that can be used to absorb fiscal year deficits, if necessary.

“This is exactly why we do financial forecasting. By looking at our past, and anticipating our future, we can do our best to adequately plan for the present and the future”, commented Treasurer Shaw. “We have a great spirit of cooperation in this School District.” The Board of Education, administration and the Logan Education Association (LEA) realized the need to implement austerity measures in an effort to mitigate potential job losses and help preserve education quality in the District. As such, the Board and the LEA ratified an agreement in September 2011 to freeze base wages and experience increases (steps) in FY 2013 and 2014. A 1.5% increase in base pay will take effect in FY 2015, along with the resumption of experience increases (steps). These actions have significantly reduced the levels of forecasted deficits. All recognize that continued spending restraint will need to be followed. Non personnel budgets have been frozen and are being managed prudently.

Local tax revenues for the next four years are estimated to remain relatively flat. State funding is forecasted to remain relatively flat as well. A new funding formula was anticipated to be released by Governor Kasich in 2012 but has been delayed. It is not known what the impact on the School District will be. With the District receiving 62% of its funding from the State, it is very important that it monitor developments at the state level closely. The School District will receive one-time funding of $1.2 million in Federal Ed Jobs money in FY 2012.

Casino revenue has been projected to be received beginning in FY 2013. Tax revenue to be generated from the casinos was estimated by the Ohio Department of Taxation. The tax revenue is to be paid to the state daily by the casinos, but the allocation to schools will be done quarterly, 30 days after the close of each calendar quarter. Revenue allocations from the casino tax are intended to supplement current state aid to school districts. It is not intended to supplant. This is not a guarantee that supplanting will not occur. Supplanting is unlikely to occur in FY 2013, but that is less certain as a new funding formula should take effect in FY 2014. The amount of casino revenue calculated for Logan-Hocking School District and included in the forecast is $83,794 in FY 2013 ($21 per pupil), $283,301 in FY 2014 ($71 per pupil), $327,192 in FYs 2015 and 2016 ($82 per pupil). If this revenue is not received, deficits will obviously be larger. This situation will continue to be monitored.

The District continues to explore cost savings measures. For example, the employees of the District have agreed to reductions in health care benefits and are funding more of the premiums personally. The District continues its aggressive campaign to reduce utilities expense and to conserve resources. Administrative costs per pupil remain lower than similar districts and the state average. “As stewards for our communities’ resources, we will continue to work hard each and every day to be as efficient, economic and effective as we can be. It is hoped that with the information provided by the forecast, future decisions can continue to be made that are in the best interest of the students, staff, community and taxpayers.”

Shaw noted that “…out of respect for taxpayers, it is imperative that we continue to analyze spending first before seeking additional resources from taxpayers. It is hoped that “right sizing” combined with existing taxpayer support will lead to sustainability. If not, the School District will have no choice but to cut programs, as others across the state have been forced to do.”

Highlighted in the forecast was the fact that $516,769 was being drained from the School District in FY 2012 by resident students attending “community schools”. This was an increase of $129,000 over the amount deducted from the School District in FY 2011. Community schools are generally on-line, for profit schools where students can attend school from their homes. Shaw recognized this as a threat to public schools as we know them.

Amazing Fact: Logan-Hocking School District taxpayers were last asked to approve an operating tax levy over thirty years ago, in November 1981, which they did. Despite the currently forecasted operating deficits, there are no plans to approach taxpayers with an operating levy in the near future.