School District Financial Forecast: Shortfalls in the Short-term; Anticipated New Funding
Office of the Treasurer
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 25, 2018. Despite anticipated deficits of $947,000 in Fiscal Year 2018 and $881,000 in Fiscal Year 2019, the Treasurer forecasts near breakeven operating surpluses in Fiscal Years 2020, 2021 and 2022. The General Fund carryover cash balance absorbs the shortages in the early years and is replenished in the later years.
“This is exactly why we do financial forecasting – so that we can anticipate future events/factors – and plan and act accordingly. Like most school districts across the state, the District has been experiencing a significant drop in student enrollment – in the past enrollment has remained relatively flat. Enrollment drives our state funding, which is considerable. The financial impact of declining enrollment on the District could be significant,” commented Shaw. The School District is blessed in that several positive economic factors are offsetting the impact of declining enrollment,” commented Shaw.
The most recent forecast was filed with the Ohio Department of Education on May 31, 2018. “The Board and administration are aware of the challenges and continually are addressing them.” Shaw noted this is evident in the recently developed Continuous Improvement Plan for the School District. “The District is attacking these financial challenges on several fronts”, commented Shaw.
For the prior year ended June 30, 2017 (FY 2017), the District incurred a deficit (expenditures exceeded revenues) of $432,403. Revenues of $35.8 million were exceeded by expenditures of $36.2 million. Operating revenues increased 1.5% while operating expenditures were largely held in check, increasing 2.6% over the prior year amount.
Under current assumptions, the District is forecasted to close the current year that ended on June 30, 2018 (FY 2018) with an operating deficit of $946,000. This deficit is slightly larger than the previously forecasted deficit (10/2017) of $894,000. A deficit of $881,000 is forecasted for Fiscal Year 2019. Revenues are expected to exceed expenditures in fiscal years 2020, 2021 and 2022 in the amounts of $325,000, $596,000 and $323,000, respectively. The District had a carryover cash balance of $8.2 million at June 30, 2017 that is used to absorb fiscal year deficits, if necessary. According to the forecast, the District would have $7.6 million at the end of FY 2022. The District’s goal is to break even operationally each year. It has operated in the black for 19 out of the last 22 years.
The slight improvement in forecasted cash position over the life of the forecast is largely due to three primary reasons. First and foremost is the completion of the Leach Xpress natural gas pipeline across the School District territory. The pipeline went into service on January 1, 2018 (delayed from original projected in-service date of November 2017). Significant public utility personal property taxes associated with the pipeline will begin to be received in calendar year 2020. Secondly, the School District is anticipated to receive increases in state funding associated with the implementation of the Community Eligibility Provision program. This program expands the free breakfast and lunch program to all schools (including the middle school and high school) this fall (2018/2019 school year). Previously this program was only offered at the elementary school level. Thirdly, the School District and its employees continue to control health insurance costs via health plan selection management and positive health claims experience. Working together, the School District and its employees have managed to control this significant cost driver.
It is important to note that the five year financial forecast includes the impact of the recently negotiated three year contract with the Logan Education Association union (teachers). It also includes forecasted transfers to the food service fund resulting from the expanded free breakfast and lunch program.
“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 great leadership across the School District and a great spirit of cooperation.” As in the past, all parties, from the top down, recognize that continued spending restraint will need to be followed. Non personnel budgets have been frozen and are being managed prudently. Staffing levels are continuously monitored closely.
Local tax revenues (real estate and personal property) for the next four years are estimated to remain relatively flat. With the District receiving 66% of its funding from the State, it is very important that the District monitor developments at the state level closely. No major changes are anticipated in the state funding formula in the forecasted period. It is hoped that current “guarantees” and “caps” in the funding formula will remain in place.
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 energy and financial resources as a result. The District has also implemented and supports a Digital Academy which has begun to successfully reduce deductions from state funding relating to community schools/charter schools. 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 information provided by the financial forecast, future decisions can continue to be made that are in the best interest of the students, staff, community and taxpayers.”
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 immediate plans to approach taxpayers with an operating levy in the near future. The Board has instructed the Administration to continue to work to eliminate operating deficits.
The complete five year financial forecast and assumption are located on the District website at www.loganhocking.k12.oh.us, under the Treasurer’s Department. For additional information, contact Treasurer Shaw at firstname.lastname@example.org or (740) 385-8510 extension 2725.
Financial forecast press release 7.2018
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