Every May and October, school districts are required to file an updated Five-Year Forecast with the state of Ohio. Treasurer Debbie Caudle presented an executive summary of the Forecast to the board and community at the October 19, 2017 meeting.
For the current year (FY2018), receipts are projected to be $71.3 million. Of this, 58% is from local taxes; 8% is from other local sources (i.e., business agreements); 34% is from the state; and a very small sliver is from investment income.
FY2018 is the first year of the state’s biennial budget; we know what we can expect from the state this year and next. The state had promised to move us on to the “funding formula,” which equalizes funding across school districts, by the end of next fiscal year – and their budget does do this, increasing Milford’s revenue on the formula a little over $1 million over the next two years.
However, as has happened with items like lottery money and other areas where the state has promised school districts will receive additional income – while the state keeps the promise of providing funds in one area (today, via the formula), it then cuts funding in another area. After reductions in transportation and casino monies, Milford will see only a very slight increase in net funds, despite the $1+ million increase we will receive from being moved to the formula.
This year is also a property revaluation year. Property values across the county are rising appr. 16%. However, school districts are funded on “inside” and “outside” millage. Only “inside” millage grows with property revaluation; the total of the “outside” millage stays the same to the district, which means any increase in valuation actually decreases the amount collected for the district from any individual homeowner. The majority of the district’s millage is “outside” mills, which means we will have a small increase on our 3.8 “inside” mills. (This is incredibly confusing, I know – one of the most confusing parts of school finance – and the real reason school districts require additional operating levies. If you have questions, please let me know).
Expenditures in FY2018 are estimated at $69.1 million – the district is, thankfully, still able to operate within its means. Over 70% of this is for salaries/benefits, which makes sense as a school district is a service business. The second-largest expense category is purchased services (i.e., transportation, etc).
In FY2018, we are in the first year of our negotiated personnel agreement, which covers the next three years. We will also continue the 1:1 technology program in seventh grade that was implemented two years ago, and we will continue to refresh technology.
For future years, Mrs. Caudle has used conservative figures for each line item projection. She has kept revenues flat, since we have no idea what will happen after this biennial budget, with a new governor in office. She has increased purchased services and supplies at a conservative 3% each year. She has included a five-year plan for technology, curriculum, and maintenance needs.
With these projections, our ending cash balance grows through the end of FY2019; then, expenditures begin to outpace revenues, and we start to eat into this cash balance. By the end of FY2022 (the last year on this Five-Year Forecast), we are projected to have a cash balance of $20.8 million, which is appr. 93 days of operating funds (the state recommends having at least 90 days of funds on hand at all times).
Coming back to “inside” and “outside” millage again: “outside” millage represents the operating levies passed by the community through the years. This money does not grow over time; if the district passes a $5 million/year operating levy this year, we will still collect $5 million in two years, in five years, in 10 and 20 years. Since the majority of our revenue comes from property taxes, and the majority of property taxes never increase, even as costs increase (as they do for all businesses) … this is why districts must continually come back to the voters for new operating income.
If you recall, when the community passed the last operating levy in May 2013, it was designed to be a three-year levy that the district promised would last at least four years. Four years is now passed, and we are still very strong financially. In fact, if all holds true in the current Five-Year Forecast, that levy will last almost 10 years! Kudos to all our staff who focus on spending just what they need to ensure our funds stretch as many years as possible.