Wayne Local Schools Business Plan Notes ( ) SUBMITTED MAY OF 2012

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1 Please visit the Ohio Department of Education website at ftp://ftp/ode.state.oh.geodac/5-yrforecast/ Wayne Local Schools Business Plan Notes ( ) SUBMITTED MAY OF 2012 The following are the assumptions and facts that were used to prepare the Wayne Local School s forecast and financial projection. The district monitors the initial ensuing 12 months constantly. If issues arise that materially impact the cash position then the board is updated immediately and such issues would need to be addressed. The Wayne Local School District (the District) is a body politic and corporate established to exercise the rights and privileges the constitution and laws of the State of Ohio convey to it. The District covers land located in Warren County and a portion of Greene County. The buildings and administration are located in the village of Waynesville. The District serves an area of approximately 50 square miles. The District has a history of strong academic, arts and athletic success. The recent Ohio report card as published by the Ohio Department of Education has Waynesville at the EXCELLENT rating with 26 out of 26 indicators met. In addition you will find based on ODE reports Wayne Local Schools has one of the lowest per pupil spending amounts in the State. The link to the ODE web site is: For years , both the revenue and the expense side of the ledger are based on current known economics and are forecasted as such. The business plan does include the forecast of the renewal of our expiring emergency levy in 2014 that would impact fiscal years 2015 and on. The renewal is crucial to continue our operations. Note the word renewal and not a proposed increase in taxes. It is important to note that any school can be immediately impacted by the demands of unfunded mandates or by new students that need special assistance or specialized services. We are forecasting one added teacher and one added special education aide during the forecast period. If any other positions need to be added, this will unfavorably impact our forecast. To ensure a balanced budget thru 2016, we are looking at staff adjustments. The major obstacle to a clear picture of our financial health and our cash position forecast reside in one single item and that item is our state foundation support. The Department of Education has provided forecast numbers to use for 2012 and 2013 but the district could be impacted by further reductions due to state solvency or due to property valuation impacts. When you sum the base state aid and the reimbursement by the state for property tax roll backs and homestead exemptions this total is now down to 38% of our total revenue. Just a few short years ago this state support was well over 50% of total revenue. In 2005 the state moved to reduce personal income taxes by 4.2% per year to a projected total of a 21% state personal income reduction by 1

2 2009. As you are aware the % reduction was halted to avoid major cuts to all governmental agencies in the state. With the 2010 reduction we now have a decrease of state taxes of 21% and with the tremendous loss of manufacturing jobs in Ohio you have a recipe for financial disaster. To maintain operations many schools have turned to even more reliance on local property taxes. Assumptions: REVENUE LOCAL PROPERTY TAXES (LINE 1.010) Property tax revenue is estimated on known millage and current valuations. Warren County had a triennial update in 2009 and we experienced about a 10% reduction in residential property values. All of Warren County will have a reappraisal this calendar year but with the continued weakness in the housing market we are not forecasting any net increase in real estate appraisals. Despite a bleak housing construction market in the state, we are experiencing some new housing starts and property developments are planned within our district boundaries. This will be monitored for future financial and student enrollment impact. We did successfully pass a levy in 2009 and the forecast reflects that revenue stream. This five year emergency levy will need to be renewed in Our forecast assumes a renewal at the millage in effect in The amount of the levy proceeds at risk for school year 2015 is the equivalent of a half year of levy proceeds or $1,653,541. The total revenue generated from the levy for one full year is $3.3 million and this is amount at risk in school year 2016 if the levy were to not be renewed. This renewal is critical to the district. STATE FUNDING (LINE 1.035) The State Leadership has done their best to keep public schools afloat but schools with higher property values per student have seen a severe reduction in their state support since Our state aid was at a high of $4.5 million in 2003 and is projected to fall to $3.3 million by 2014 despite growing student enrollment. Restricted Federal Aid line (4.6% of revenue in 2011) GONE!!! The amounts shown for 2011 (on line 1.045) reflect the ARRA stabilization of $327,453 and the education job s bill amount of $240,614 for a total of $568,067. These funds supplanted what we had received in our normal state aid. These funds are now gone and not to be replaced. Thus there is no revenue dollars forecasted for this line item. Property Tax Allocation line This is the amount we are reimbursed from the State for Homestead and Roll- Back amounts. Residential taxpayers can receive 12.5% reduction in taxes and Senior Citizens can avoid paying taxes on the first $25,000 of market value of their residence. The state reimburses taxing entities for such credits to local residents. 2

3 Other Revenue line All other revenue is based upon historical projections or known revenue flows. This line includes open enrollment dollars, MRDD receipts, student fees and investment income. Warren County MRDD is providing approximately $105,000 for for our pre-school special education services. Their much appreciated support is to stop at the end of this year. Investment income is based upon available cash balances to be invested and the federal funds interest rates. All Ohio Pubic school investment options are limited to select Government backed notes and securities and basic CD or Star Ohio investments. Investment income is limited by such available investment options but these restrictions by state law are necessary to limit the risk and exposure to losses from ill advised investments. Security and safety is at the core of the district s investment policy. Interest rates are ridiculously low and almost non-existent. Given the rates and the lack of a long term cash balance we will not increase the duration of our investments. These factors limit our ability to generate revenue dollars from investments. We continue to purchase government backed securities to maximize our return without liquidity risk, Interest earnings are so anemic if you sit on the sidelines you will only generate at best a.0007 annual rate of return! Assumptions EXPENSES: The financial model includes an integration of the key ingredients of projected student population, projected staff human resources and related expenses. Staff and Human Resources (lines and 3.020) Staff and related resources typically are driven by student population and board initiatives. Our economic outlook is one of great concern and trepidation that will need constant review. The paradox of our school administration is the desire to reward and recognize achievements of an excellent teaching staff counterbalanced by the fiscal constraints of reduced state aid and the ability of local taxpayers to support the given level of cost. Ultimately most districts will be at the crossroads of incurring staff reductions to fund a very base and reduced level of education. People drive the educational process and therein lay our cost drivers. The Board of Education controls the School District's instructional and support facilities staffed by 61 classified employees, 90 certificated full-time teaching personnel, and 4 administrators who provide services to 1,516 students. The district also serves additional pre-school students that are not included in the total shown. The district is the home of numerous community groups activities. The School District currently operates three buildings situated on one site location. 3

4 Staff and Human Resources (lines and (continued) The current year (2012) contractual 1.5% base increase is reflected in the 2012 actual expenses. We are currently preparing to enter negotiations and the forecast is no wage increases for and step freeze for the years Forecasted health care premium increases are 3.5 % for 2013 and a rate of 12% increase per annum for Health care costs are growing at an average of 12% per year or a rate of $160,000 per year. This is the equivalent of a 2.2% wage increase for every employee! As you can see more and more dollars are being consumed by one item and that albatross is Health Care. We have made changes to co-pays and have implemented spousal rules. We are benefitting from our Purchasing Council to buy down premium costs in We were told to expect 12% increase and even though our actual expenses exceed the premiums we are getting a renewal of 3.5%. Purchased Services line Purchased services include everything from electric, natural gas, water and sewer, insurance to bus fuel. Also included are tuition cost for our resident students attending other educating entities and the cost of services purchased from the Warren County Educational Service Center. As you examine the dollar increase in purchased service expenses from the current year 2011 to a 2012, you will see an increase. Please understand that we received ARRA grant funds in 2010 and This allowed for purchased services to be charged to the grants. All of the ARRA grant Title I and Title VI-B funds expired in This means that the general fund will once again absorb these costs. We used $179,319 from the American Recovery and Reinvestment Act in fiscal year 2011 to pay for Special Education Services from the Warren County ESC that was not charged to the general fund. So as the ARRA grant accounts and funds disappear, the expenditures will re-appear in our General Fund expense forecast. The other major increase in this account is the cost of district students attending other schools. This could be for those payments required for resident students participating in open enrollment, community, PSEO, alternative or virtual schools. This exceeded $200,000 in school year The remaining major expense is about $200,000 of costs per year for pre-school students. These pre-school students were previously served by the Warren County MRDD; however by law these expenses are the responsibility of our district. The state mandates Pre-school but does not even come close to adequately funding the cost of a Pre-school program. We will benefit from a 6% reduction in electricity in due to energy savings and negotiated agreement with DP&L. To further address utility costs Go-Sustainable energy completed an extensive energy audit of our district. The study indicated that our past actions give us a good grade in the area of energy efficiency. We will be implementing further savings ideas in the next 12 months to save electricity usage. We have forecasted very small increases in such expenses. 4

5 Supplies and Materials line This account includes Student fee accounts where revenue is collected from Parents for such fees and then expended for school materials such as workbooks and materials and other materials and textbooks that are paid directly from the general fund. We spend about $200,000 per year in instructional supplies, materials and library and administrative items to supply our classrooms with textbooks and educational materials. In the area of bus supplies our transportation fuel costs continue to be a concern. It takes approximately $110,000 to provide parts and fuel for our bus routes. Our janitorial and office materials amount to $70,000. Capital Expenses lines Capital items are projected to be funded by the permanent improvement fund. Other Expenses line The other major line item expense is county auditor and county treasurer fees for the assessment and collection of property taxes. This amount is approximately $85,000 per year. The costs to have our books audited are estimated to be $17,000 every other year. The state withholds $60,303 from our foundation revenue and transfers this amount to the Warren County ESC. As a Local school we have to pay this each year. Other expenses include liability insurances, and other ESC expenses. Closing In summary the forecast provided is our current best estimate of the future financial picture of the General Fund of Wayne Local Schools. This forecast will be reviewed in detail and approved in a regular board meeting of the Board of Education of Wayne Local Schools and approved for ODE submission. Medical Insurance premium growth is simply crushing all business entities. We have a joint insurance committee looking at options. Our staff has agreed to higher co-pays and other adjustments but the cost of insurance continues to skyrocket The District thanks the citizens of Wayne Local for their support of our schools. We have fantastic Academic results from their investment in our school s teachers and children. We live in a great community with great parents and great kids. Though we are sound financially today, we face looming economic challenges. 5

6 WAYNE LOCAL REVENUE VS EXPENSES $14,000,000 $13,500,000 $13,000,000 $12,500,000 $12,000,000 $11,500,000 $11,000,000 $10,500,000 $10,000, REVENUE $12,783,534 $12,709,782 $12,538,504 $12,682,949 $12,704,921 EXPENSES $11,916,892 $12,304,603 $12,733,404 $13,175,063 $13,629,930 BY FISCAL YEAR 6