Imagine trying to create a 5 year budget for your family. Do you know how much money you are going to make? Do you know what your expenses are going to be? Can you possible imagine all of the emergencies that may pop up? This is the task that school treasurers throughout Ohio face twice a year. In a nutshell, they create a five year forecast which is a best guess as to what the revenues and expenses of the school district will be for the next five years.
Ordinarily, no one would need to be concerned if the forecast is not accurate, were it not for three basic, undeniable facts of school finance in Ohio.
The Five Year Forecast determines the amount that a school district will ask for at levy time
If the school district has the money, it will spend it.
All levys in high performing school district pass, eventually.
Therefore, there is a tremendous built-in incentive to overestimate on requirements, thus increasing the amount of the levy and the available funds.
Worthington is no different. We create a five year forecast and base levy requests off the forecast, however, Worthington is one of the few districts that does not have a separate source of capital improvement funds. We have used the sale of unused property for this purpose but now, we are out of property. Our treasurer must therefore include some amount of capital improvement needs in the operating budget and include those needs in our next operating levy request. This is bad for the taxpayer because once the funds are in the operating budget, we don't know how they will be spent, but there is no guarantee that they will be spent on capital improvements. As part of the financial restructure, the Board of Education has promised that 11.23 million dollars will be cost-shifted out of the operating budget and into the capital improvement budget. The operating budget will therefore be reduced by 11.23 million dollars over 5 years, with a corresponding reduction in our operating levy request amounts.
The restructure also accomplishes the goal of bringing a greater degree of certainty to the operating budget. If the district has emergency repairs, roof replacements, mold or other unanticipated needs, that money will no longer have to come from the operating budget, so classroom instruction will not be impacted. Here is a small example of how this might work. This is some detail from the district's latest approved five year forecast, from January.
Turning our attention to line 516 (Software Materials), we see the district has projected software expenses of $160K/year. That money is currently part of the operating budget and this expense would be included in any operating levy request. We will be able to cost-shift this expense (as well as the expenses for lines 520, 530, 570 and 640, 740 and 760) into money that you approved for capital improvement purposes. These lines could then be zeroed out in the operating budget, reducing the amount of the next operating levy.
Our resolution calls for 11.23 million dollars (out of 35 million) to be used for this purpose, so 32% of the requested funds would have been part of the next operating levy request anyway. This restructure essentially allows us to pay for these expenses over a longer period of time (which makes sense because they will be used over a long period of time) and minimizes current levy requirements.