Schools project deficit by 2024
- Published: December 13, 2020
With the expectation that the district will be going to voters for more funds in the form of a facilities bond levy in late 2021, Treasurer Emrick presented the annual five-year financial forecast during the school board’s most recent regular meeting Thursday, Nov. 12.
Prepared, as it is each fall, and updated in May for submission to the county auditor, the current forecast shows a widening gap between revenues and expenses, with the district’s cash balance going under the desired 30-day operating balance in fiscal year 2022, and then falling into the red by fiscal year 2024. Each fiscal year runs July 1 through June 30.
After a high cash balance of nearly $5.5 million in fiscal year 2018, the district entered into deficit spending with fiscal year 2019. A cash balance of $5 million that year held steady in fiscal year 2020, after some belt tightening and decreased expenses due to the pandemic-related school closure. But Emrick projects that the balance will continue to drop by increasing amounts each of the next few years to just over $4 million for 2021, $3 million in 2022, about $1.5 million in 2023, and reaching a negative balance of more than $74,000 in 2024.
“We’re going to have to work at our expenditures and do what we can to save more where we can,” the treasurer said.
A graph prepared by Emrick and presented to the board showed a line for revenues and another for expenditures that cross in 2019, go in separate directions before coming back together in 2020, and then grow further apart each subsequent year. While the revenue line remains relatively flat for the next few years, between about $9.5 million and less than $10 million, the expenditure line rises from less than $10 million in 2020 to nearly $11.5 million in 2024.
Emrick explained that revenue sources include property taxes, which she said constitute about half of the district’s income; income taxes (about 17%), state funding (15%) and various local sources, including tuition and open enrollment payments (18%). She noted that open enrollment brings in about $1 million a year.
She reported that while property tax revenue has continued to increase, current collections are running about 3.76% behind projections this year, a circumstance she attributes to pandemic-related delinquencies in tax payments. While property tax revenue increased by nearly $170,000 (over 4%) in fiscal year 2020, she anticipates an increase of only about half that, nearly $36,500 this year. She expects that the following year will see a return to last year’s climb due to the recent property reappraisals. According to Greene County Auditor David Graham, the district will see an estimated $450,000 more in property tax revenue each year after the new appraisal, which takes effect in January.
Income tax revenue, which Emrick last fall anticipated slowing, has not only slowed, but decreased. After an increase of more than $75,000 in fiscal year 2019, income tax revenue decreased by over $77,000 in fiscal year 2020, and Emrick projects a further decrease of more than $156,000 in fiscal year 2021, remaining flat at about $1.5 million in future years.
She anticipates state funding to remain flat as well, with unrestricted state grants at about $1.5 million annually and restricted state grants at over $1.25 million.
Emrick noted that the district’s largest expense is employee salaries and benefits, which she said is to be expected for a service organization. She has said in the past that up to 80% of expenditures going to salaries and benefits is considered healthy for most school districts. Yellow Springs is at a little over 78%, according to Emrick’s report.
She also pointed out that while fiscal year 2020 reflected a 2% base salary increase, as negotiated by both the teachers and staff unions, the next two years reflect a negotiated 1% base salary increase for all employees. She added that the district did not anticipate a change in staff numbers.
As for benefits, after a 17% increase in health insurance premiums last year, staff made changes in their medical insurance so that the anticipated premium increase of 7.5% for fiscal year 2021 would decrease to 3%, according to Emrick, who has factored in a 7.5% increase for future years.
Additional district expenditures include purchased services (16%) and supplies and materials (about 2%).
Emrick ended her presentation by noting that the district is projected to end with a deficit the same year the two emergency levies are set to expire, fiscal year 2024.
Concluding that “planning will need to be done in the next several years to avoid the negative cash balance,” she added, more optimistically, “we have several years to plan.”
The board did not discuss the forecast, but President Conn noted: “Those are the kinds of graphs that the board loses a certain amount of sleep over when we see them.”
“You’re right, we have some time to plan for this, but you’re also right that time can pass more quickly than we anticipate,” he told Emrick, referring to a comment made by the treasurer earlier in the meeting. “I look forward to your leadership in how we plan to make those two graph lines [revenues and expenditures] come closer together,” he added.
Other items from the school board agenda will be in next week’s News.