Feeling like a Million Bucks.

The State of Ohio has not had a school funding formula last more than just a few years in quite some time. Every 2 years seems to bring us another biennial budget with its share of winners and losers as the formula is changed.

While the legislature and the Ohio Department of Education produce simulations, conservative treasurers will always wait until the money starts flowing before incorporating the numbers into projections.  For this cycle, that first payment happened last week and the financial news appears to continue to be very good for Worthington.

Here are the summaries. The first is from the "Bridge" report that detailed our state foundation funding and deductions from 2011. The second is from the new funding report in October of 2013.

Worthington State Funding 2011-2012 and 2012-2013
 

Worthington State Funding 2013-2014 and 2014-2015

 

 

So the numbers are as follows:

 

Previous Budget:  Total Foundation Funding before deductions: $13,818,020

                              Total Foundation Funding after deductions:     $10,891,501

 

New State Budget Total Foundation Funding before deductions: $14,681,693

New State Budget Total Foundation Funding after    deductions: $11,936,511

 

To be sure, these are unofficial projections based solely on the data from ODE.  Our Treasurer will be updating the Board with his official projections later this month. The numbers will be vetted through the Treasurer's Advisory Committee at a meeting on October 21 and be the main topic of the Board Meeting on October 28.

 

Unofficially, though, this is a difference to the bottom line of $1,045,010 for the first year. That's a little over a million dollars a year  of unanticipated revenue that can be use for programmatic expansion or saved for a rainy day. Please note that these funds are over and above the funds that Worthington will receive from the permanent reimbursement of the Tangible Personal Property Tax now ensconced in state law.

 

The news gets even better!  Worthington's state foundation funding was "Capped Out". The state, in an attempt to conserve funds, ruled that no school district would receive more than a 6.25% increase between this year and last year, even if it would receive more funds under the formula. As you can see from the second chart, the calculated formula number is closer to $19,000,000. Since the cap is 10.5% in the second year of the biennium, Worthington should receive another increase for the 2014-2015 school year.

 

All of this good news is why I continue to believe we will have sufficient revenue (again, assuming current state law is maintained with regard to TPP reimbursements)  to extend the 2012 levy until at least 2017 and maybe 2018 while also having sufficient funds for programmatic expansion such as the reintroduction of a foreign language program in the elementary grades.

 

 

 

 

 

 

 

 

 

 

 

 

 

 





 

2018

In November of 2012, Worthington City School district  residents passed an incremental operating levy.  Our district had made a case that reductions at the state level, particularly in regard to tangible personal property tax reimbursements, were going to result in a significant funding drop which, if quality was to be maintained, would have to be restored at the local level. At the time, it was a perfectly valid assumption. In fact, prior to voting to place the levy on the ballot, State Representative Mike Duffey had arranged a conference call between me and the chairman of the Ohio House Budget Committee,  and Chairman Amstutz told me directly that it was more likely than not that Worthington's TPP revenue from the state would be phased out. In addition, we made some other assumptions in advance of placing that levy on the ballot. We assumed there would be no retirements from the Worthington School District, or, more correctly, we conservatively did not include those in the forecast used to determine the levy amount. We also forecasted some steep increases in employee health care costs.

Fast forward a year. The levy has passed and, in the fullness of time, we now know how our assumptions panned out.  

• TPP Reimbursements were not phased out and current state law says that they are not going to be phased out. Assuming state law is not changed, this will result in 22.2 million dollars of unforecasted revenue to the district in the next 4 years, and approximately 10 million dollars a year after that.
• We had over 100 certified staff retire. This will result in considerable savings each year. In fact, our average teacher salary dropped $2,500 in the last year alone.
• We are anticipating around $400K/year in casino money. That money was not yet forecasted when we determined the levy amount.
• Our health care renewal rate was forecasted to be 13%. Because of our lower-than-expected claims experience, it turned out to be 3.56%.

Now, it is time to do some long term financial planning. When will the Worthington School District have to run another levy.

First, let's figure out where we are. If you want to know when the next Worthington levy will be required, you must first calculate a target cash balance that you want to maintain at all times. The Government Finance Officers Association (GFOA) recommends 60 days of expenditures while the credit agencies say that 5% is fine. We'll go with GFOA for the purpose of this exercise.  Once we find the first year when we no longer have that 60 days of operating expenses in the bank, the rule of thumb is that we back it up 2 years and that would be the year that we need to run the next levy.

So, with all the good financial news, let's get to work calculating when that next levy might be required. For the purposes of this exercise, I am going to be really, really conservative and only use the TPP reimbursements as a modification to the forecast that was passed in May of 2013. If we do this, we would take the ending cash balance at FY17 in the lower right hand corner of the link, which is 24.3 million dollars and add the 22.2 million dollars above, giving us a total of 46.5 million dollars. This is above our rule of thumb, so no levy is required in 2015.

Since this forecast only runs through 2017, we need to approximate what other years of the forecast might look like. Being ultra conservative, we anticipate virtually no new revenue from anywhere (note: the treasurer does assume a small amount of incremental revenue from "inside millage")  and we anticipate expense growth at the projected rate in 2017, which is 3.2%. Let's do that for three additional years, FY18, FY19 and FY20. When we do this, we get a very rough forecast that looks like this.

The resulting forecast has a chart showing the following ending cash balances.




Worthington School
 District *Unofficial*
7 year projection with TPP reimbursements

The blue line represents the projected end-of-year cash balances assuming the state keeps its hands off of our TPP reimbursement revenue and that we keep expenses growing at a modest rate of about 3.2% after 2017, or roughly 150% of the current inflation rate.

So where am I going with this?   

Last year, when voting to put the levy on the ballot, I proposed making a promise to the taxpayer that if TPP reimbursements did continue at a pace higher than that forecasted, the Board and the administration make a commitment to save those dollars and put them towards extending the life of this levy. The board did not want to entertain such a promise at that time, but I want to renew that proposal, and here is why.

Voters in Worthington agreed to provide our district with additional operating funds because the district told them that the state was severely cutting our funding.  That message was in virtually every levy communication, and rightly so. Had the state actually cut our funding and without the levy funds, it would have been a scary proposition.  In fact, the district said in numerous forums that we would have to cut 10 million dollars out of the budget over the next several years.  In the fullness of time, we now know that the state funding wasn't cut, so the question becomes: What should the Worthington School District do with the windfall? In my opinion,  the right thing to do  is to honor that campaign message, preserve the bulk of those funds,  and extend the length of this levy.  

So how do we make that happen?  If there is one observation I’d make about government at all levels, Republicans, Democrats and everyone in between, if you’ve got money, you spend money. It’s human nature. That’s why I believe that if extending the life of this levy is to be a management objective, it must be stated as such and management must be held accountable for the results.

The primary vehicle the Board Of Education has to hold administration accountable for results is through the Ohio Superintendent Evaluation System.  OSES provides for a set of goals for the Superintendent to accomplish each year. At the August 26, 2013 BOE meeting, I proposed that one of the goals be in the area of resource management that, simply stated, the district be managed in such a way as to not require an operating levy until 2018. The annual, measurable objective (part of OSES) would be to maintain a sufficient cash balance and five year forecast consistent with that goal.

Obviously, it is a long time between now and 2018 and many things can happen. The goal would have to make allowances for unexpected events. The state could decide tomorrow to cut our funding in half, or issue a series of unfunded mandates. Goals are not meant to be completely inflexible, only to publicly express intentions.

I also want to emphasize the point that this goal  does not mean we won't have money for new initiatives. Quite the opposite. Remember, this calculation only includes TPP reimbursements. We have savings from retirements and much lower then expected health care costs, we have revenue from  casino operations and ODE is estimating an additional 1 million dollars a year in state aid that we can use towards new programming. We are applying for grants from the Ohio's new "Straight 'A' fund". We also have bond money for technology capital equipment purchases.

The intent of the goal is not to starve the district of needed revenue, it is merely to state an intention that since the assumptions we documented vis-a-vis state funding to pass the levy in 2012 turned out inaccurate, we use some of the difference to extend the life of the levy, and 2018 is where the math says it would end up using the same rule of thumb that we've used in past levy cycles.

On Monday, September 23, the Board of Education will discuss and perhaps vote on the goals. The resource management goal, as written, is to extend the life of the levy until (at least) November of 2017. Whether we ultimately wind up agreeing on 2018, 2017 or 2019, the important thing is the philosophy of preserving the unanticipated TPP reimbursement revenues to give Worthington taxpayers a respite from the 3 year levy cycle.  By doing so, we have the opportunity to maintain credibility with our constituents and preserve the hard-won trust of our taxpayers, trust that will be necessary the next time we come to voters with a levy request. That's why I pushed for the resource management goal this year and that's why I will be supporting it on Monday.






















 

Conflict of Interest.

One of the rituals for School Board Candidates in Worthington is the screening/interview process for potential endorsement by the Worthington Education Association, also known as our local teacher's union. The endorsement generally comes with a campaign donation.

I've screened with the WEA before and even received their endorsement in 2005. This year, I decided not to screen and not to accept the endorsement even if it was offered. This is the letter I wrote to Mark Hill, the President of the WEA explaining my reasons.

Mark -

Thank you for the offer to screen for the endorsement of the Worthington Education Association in the upcoming school board election. I regret that I must decline, and I thought I'd take a few moments to explain why.

There is nothing wrong with an employee association endorsing candidates at any level. There is, however, in my opinion, an ethical problem for a school board candidate seeking or accepting an endorsement, let alone money, from an organization representing individuals where an employer/employee relationship exists.

In the weeks, months and years to come, the Worthington Board of Education will be called upon to negotiate salaries, benefits and working conditions in good faith with the WEA, to ensure fairness to both employee and constituent in personnel matters, to ensure both fairness and efficacy in employee evaluations and vote on or get involved with a myriad of other issues that directly impact the members of your organization. The Worthington community needs to know that any decisions I make have not been influenced by your endorsement or a campaign contribution and the only way to absolutely guarantee that is to not participate in this process.

That said, nothing in this letter should be construed as "Marc doesn't want to talk to the teachers". As you know, you and I have worked collaboratively in a variety of situations, including many years on the district's Shared Solutions Committee, Race to the Top committee and the Teacher Evaluation Design Committee. I would anticipate that such collaboration would continue if I am privileged enough to be re-elected.

 

Best wishes,

Marc Schare

Worthington Board of Education.

 

This was a personal decision. I am in no way suggesting that any of my fellow candidates would make decisions based on receiving (or not receiving) the endorsement or campaign contributions. I am saying that the practice of an employee union subject to collective bargaining essentially selecting their employers and then negotiating with those they selected is problematic. It is the very definition of a conflict of interest. The union has every right to endorse whoever they want - the conflict of interest is strictly on the candidate.

 

There are lot of perceptions, and misperceptions, about unions, both locally and across the state and the country. In my 8 years as a Board Member in Worthington, I've come to value our district's relationship (and my personal relationship) with our employee organizations. Obviously, strong relationships between the Board, administrators, teachers and other staff is essential to the learning process. My position on the endorsement is not intended as an anti-union statement. It is simply that Worthington School District residents have a right to know that my actions representing them will be free of any conflicts or even the appearance of a possible conflict of interest. You might agree or disagree, but that's why I made the decision I did.

 

 

 

 

Ohio Superintendent Evaluation System

The Ohio Superintendent Evaluation System is a voluntary mechanism by which a school board may objectively evaluate a Superintendent. It was first used in Worthington in 2011 and will be used for the second time this coming school year of 2013-2014.

Step One of the system is to create a job description for the Superintendent. While the job description might get edited over time, it is not expected to change much from year to year. Since I was Board President in 2011, the task of writing the job description was mine. Fortunately, the state does provide a template, but school boards are encouraged to alter the template based on local requirements. Worthington's Superintendent Job Description can be found here with the local criteria scattered throughout the first few pages of the document. The Superintendent's evaluation will consist partially of how well he (or she) accomplished the various tasks in the job description.

Step Two of the system is for the Board of Education, Administrators and the Superintendent to agree on a set of achievable, measurable annual goals. This is harder than it sounds. If the goals are very broad (e.g. "Students should learn more"), the Superintendent receives no guidance as to what is really desired. If the goals are very specific, the district focus might be so narrow as to be counterproductive. The goals must be achievable. It serves no purpose to provide an annual objective that is unattainable. The goals must be measurable so that a Superintendent can be fairly evaluated on whether or not they were accomplished. As a general rule, the goals should focus on the "what", not the "how".

Step Three of the system is for the Superintendent to report to the Board and the community in the middle of the school year on progress towards the goals. Step 4 is for the Board to complete the evaluation at the end of the year based on both the Superintendent's performance on items in the job description and the Superintendent's performance on meeting the annual goals with allowances for the inevitable distractions that the CEO of any large, complex organization faces day to day.

The Ohio Superintendent Evaluation System, in a nutshell, is the main vehicle by which the Board and the community sets clear expectations for the upcoming school year and holds the Superintendent accountable for the results.

How the Superintendent accomplishes these results is mostly up to the Superintendent and their administrative team. One methodology would be to include the district's goals in the annual Building Improvement Plans for each of our 18 buildings, or those buildings where it would be appropriate. This would allow the Superintendent and Central Office staff to hold the principals accountable for the goals in their buildings. That's just one methodology, there are many others.

This year, caution is very much called for because of changes occurring at the state level. Worthington will be implementing the Common Core state standards and the Ohio Teacher Evaluation System. That may not leave a lot of administrative time and energy for local initiatives.

The Worthington Board of Education will meet in a work session on Saturday, August 10 at 1pm to discuss the 2013-2014 goals for the Superintendent as part of OSES. Please feel free to spend your Saturday with us, but if you'd prefer to offer your thoughts ahead of time, please feel free to contact me at your convenience.  I have tons of ideas for what our district's goals for the upcoming school year should be and I'd love to hear what you think.

Financial Transparency

What does it mean for a school district to be financially  transparent.

It's not an easy question and each reader probably has a different opinion.

For me, financial transparency means providing information about revenues and expenditures in the district. Sounds simple, doesn't it, until you start thinking about the details.  The information should be provided in multiple formats and in multiple levels of detail to satisfy the demands of a diverse constituency. The documentation should attempt to answer questions that can be reasonably anticipated while also providing information that ties the financial health of the district to the academic and programmatic goals of the district. For example, if we are increasing staff as is the case for the upcoming school year, we owe you an explanation as to why. Financial decisions cannot be divorced from programmatic and operational decisions.

Our district has made tremendous strides in financial transparency under our current treasurer, Jeff McCuen.  His department produces several documents each year, including a five year forecast, a PAFR, a CAFR and a comprehensive budget document. If you are looking for a rough idea of how we are spending your money and how much of your money we are spending, the Popular Annual Financial Report will suffice. If you want much greater detail, one of the other reports would probably do the job. The comprehensive budget document details revenues and expenditures for all funds, not just the general fund. With this document, you can see the various grants received by the district and what we do with them, as well as a wealth of other financial information about our district.

Here is a list of financial documents from the district's web site:

1) Popular Annual Financial Report (2012)

2) Consolidated Annual Financial Report  (2012)

3) Five Year Forecast  (May, 2013)

4) Monthly Financial Report (May, 2013)

5) Comprehensive FY14 budget document 

In addition, in conjunction with the district's issuance of bonds after the successful 2012 bond levy, there is an "official statement" - the document that municipal bond buyers will read to determine the credit worthiness of the district. It makes for some interesting reading. In addition, the district received updated ratings from Moodys and S&P in conjunction with the issuance of bonds. These ratings are also used by municpal bond buyers.

6) Official Statement from the 2013 Bond Issuance.

7) Moodys and S&P ratings.


All that said, financial transparency remains a work in progress. For example, we (and most other districts)  obfuscate the compensation of some staff members by including in their contracts provisions such as the taxpayer pickup of the employees portion of STRS and the ability to buy back unused vacation days. I'm not saying these fringe benefits aren't deserved, but my preference would be to include the value of these provisions  in any report that describes the total compensation of a public employee. Some school districts are eliminating these provisions in favor of just offering the employee the equivalent in salary, or encouraging the employee to use vacation time.

Still, I'm happy with the progress we've made towards financial transparency. What do you think? Does our district providing enough financial information and if not, what would you like to see in this area?

The civics lesson of a lifetime

I wish that everyone in the Worthington community could have been at Worthington Kilbourne High School this morning to see this:

The picture needs a bit of explanation. Worthington Kilbourne Assistant Principal Kevin Johnson had an idea that he thought he would run by his acquaintance, Judge Michael H. Watson of the US District Court, Southern District of Ohio. Would it be possible for Judge Watson to have a United States Citizenship Naturalization Ceremony in a public high school?  After many meetings between Mr. Johnson and the Judge's staff, it came to pass and that event happened today.

Seventy individuals as young as 18 and as old as 82 filed into the WKHS auditorium to take the oath of citizenship (pictured above) and become United States Citizens. Watching them along with family and friends were hundreds of high school seniors  getting what had to be the civics lesson of a lifetime. These people came to our country, for some, decades ago and have been pursuing citizenship in some cases for years. For them, today was the culmination of a  dream. Judge Watson asked each person to state what citizenship meant to them. For some, it meant the gaining of the same rights as all Americans have. For others, it meant joining their family as citizens. What our students witnessed were people who worked hard and played by the rules, all to get something which they obtained, for the most part, simply by being born in this country. It is unlikely that these kids (or the adults) will view their status as American citizens in quite the same way.

Mr. Johnson organized quite a show, including "The Star Spangled Banner" from the WKHS marching band, America the Beautiful from the WKHS choir and a fantastic keynote address from WKHS parent Reverend Timothy Ahrens.  Reverend Ahrens noted that most of us are second or third generation Americans whose parents or grandparents or great grandparents came from somewhere else. The ceremony concluded with a rendition of "Proud to be an American" which was meant to be only on video but wound up being sung spontaneously by everyone in attendance.

The Dispatch covered the event.

http://www.dispatch.com/content/stories/local/2013/03/21/Immigrants_take_oath_at_Kilbourne.html

What was learned this morning won't show up on the state report card and can't be assessed by a proficiency test, but in my opinion, was as important a learning experience as anything our seniors will experience this year. Thanks to WKHS Assistant Principal Kevin Johnson and the entire WKHS team for making it happen.

Breaking a promise, but for a good reason

To the credit of our Board of Education and our adminstration, past and present, we are collectively very big on keeping promises that our district makes to the community, especially with regard to levies. For example, in 2006, we passed a "no additional millage" bond levy promising that taxes would never increase above the 3.8 mill rate that taxpayers were already paying. As it happens, bond issues in the state of Ohio are open ended commitments on the part of the taxpayer and the county auditor at the time authorized us to increase the millage above the 3.8 mills. Worthington Schools said no to the additional millage (and money) and to this day, we've kept that promise.

Fast forward to 2012. In numerous community conversations and in any number of personal discussions, district officials and board members (including me) pointed at the necessity of bandwidth expansion in our buildings as one reason for the technology component of the bond levy. It is clear that high speed, universal and unconstrained access to the Internet will be a requirement in all Worthington Schools buildings moving forward.

After passage of the bond issue and issuance of the bonds, the district formed a bandwidth committee on which I was privileged to participate, and we began to explore options. That's when we discovered that it was in the best interests of Worthington taxpayers for our district to break a promise.

Allow me to explain. The federal government runs a program called e-rate. As part of that program, school districts can apply for reimbursement of technology expenditures based on the percentage of economically disadvantaged students attending school in the district. We anticipate that through the e-rate program, the federal government might pay up to 50% of the costs of the bandwidth expansion. Since the bandwidth expansion is projected to cost 1.5 million dollars up front, we are talking about a significant amount of money.

Unfortunately, in order to qualify for the e-rate reimbursement, we discovered that we cannot purchase the fiber outright as a capital improvement, it must be purchased as a service. Ohio law says you cannot pay for a service out of bond funds, therefore, for our purposes, the rules of e-rate funding were inconsistent with the rules for what you can pay for with bond funds. If we kept our promise and used bond funds for the bandwidth expansion, we would be turning down up to $750K in federal money.

At the March 11, 2013 board meeting, we made the decision to pay for the bandwidth expansion primarily out of the interest earnings that were accumulated off of the 2006 bond issue.  These funds, while not part of the general fund, could have been transferred into the general fund so they are essentially unrestricted funds. In doing so, we qualify for e-rate reimbursement, essentially cutting the local cost of fiber / bandwidth expansion by up to 50%.  I am loathe to break promises made during a levy campaign, however, I felt that if Worthington School District residents had this information, they would agree with our conclusions. 

There are two open questions.

First, since we didn't spend the 2 million dollars we allocated towards bandwidth, we still have those funds available in the technology portion of the bond fund. We can keep them there or move them into a contingency fund, perhaps stretching the bond levy out another year. Second, we will be receiving federal e-rate reimbursement payments over the next 3 years. That money could be deposited into the general fund or it can be used to pay bills. Both questions will be discussed at the next Treasurer's Advisory Committee meeting.

This blog post is in the interests of full transparency on what was done and why.