May 2017 Five Year Forecast approved by school board

In May, the board approved the Five Year Forecast. Treasurer Debbie Caudle has used conservative assumptions in both revenue and expenses. We do expect an increase in state funds in the upcoming biennial budget (2-year budget) – Milford has long been receiving less than our “fair share” of state funding, and the Governor has been working to achieve parity among school districts.

Expense-wise, Mrs. Caudle has used a realistic 3% increase in outside expenses. Also included is the continuation of the 5-year technology plan, curriculum adoption program, and maintenance plans.

The district will end this year with an ending cash/carryover balance of appr. $28 million. This is a nice amount on a budget with expenses of around $69 million, but it will only hold us for so long. Over the next five years, our revenues will increase slightly – mostly from the expected increase in state funding – but, as with every business (and household), expenses continue to grow.

Why is this? To simplify, the way school funding works in the state of Ohio, once a property tax levy is approved, school districts may collect only that amount of money (there are some exceptions to this, but in Milford, they are very slight). So, if a $5 million/year property tax levy is approved, the district will collect $5 million in the first year, and $5 million in the third year, and $5 million in the 10th year – there is basically no growth on this revenue; it is static.

When the property tax is approved, revenues increase significantly, and the cash balance increases. Yet, expenses continue to grow. We must purchase a great many services, supplies, curricular materials, and of course, pay our staff – the largest expense of a service-based organization. As these expenses continue to increase, the district reaches a point where the increased revenue is no longer enough to support the continually-increasing expenditures, and we eat in to the cash balance to keep us afloat.

In Milford, the current board and administration are committed to continuing to find efficiencies and ensure money is spent to bring value. Because of that, we have been able to stretch the property tax (operating) levy passed in 2013 – which was a 3-year levy we promised would last at least 4 years – well past its expected life. However, as we enter the 2020s, our cash balance will begin to decrease and we will again be required to pass an operating levy to meet our required expenses.

To look at it another way – operating levies are like “inflation adjustments,” since the district has no option to increase revenue, but also few options to slow expenses increases over the years. If operating funds were able to increase with inflation, there would be little need for additional operating levies. Since they do not, each operating levy is in effect equivalent to the expenditure growth the district has not received any other way.

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