- 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.
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.
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.
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.