Gallia-Jackson-Vinton JVSD Forecast Assumptions May 2013 Fiscal Years Ending June 30, 2013 Through 2017

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1 REVENUE ASSUMPTIONS Page 1 Property Taxes (General and Tangible Personal Property) and Property Tax Allocation General Property, Tangible Personal Property, and Property Tax Allocation Taxes have been combined for purposes of this forecast. The County Auditor estimates for fiscal year 2013 gross tax revenue is 2.6 million dollars, with a delinquency rate of 3.5%. The actual receipts for fiscal year 2012 were 4.5% less than the amount certified; therefore 2013 taxes are being estimated less than they were certified. Total taxes for fiscal year 2013 are estimated at $2,543,617. We are estimating an increase of two percent for each fiscal year for the remainder of the forecast. The Tangible and Utility Personal Property tax reimbursements have been phased out. As passed by the legislature several years ago, the hold harmless period should have been through 2013; however, due to actions of the governor and legislature, the reimbursement will be stopped in fiscal year Due to the elimination the district lost $316,117 in fiscal year 2012 and will lose an additional $9,894 this fiscal year. Grants-in-Aid (Unrestricted and Restricted) Historically, the state funding of joint vocational schools was foundation-based. In the past, the legislature determined a per-pupil funding amount per the district s enrollment with a local chargeoff of.5 mills. Special education and career-tech funding included additional weighted funds, due to the high cost of supporting these educational environments. During fiscal year 2007 two ADM counts were implemented. Recently education funding was completely overhauled. Vocational schools and Career-tech centers have not yet learned of our fate. During the current biennium budget it is to be studied to determine the best way to fund career-tech education. In fiscal year 2010 and 2011 joint vocational and career-tech centers were granted a.75% increase over the previous years funding level. Since the new overhaul of the State funding formula for career-tech centers still unknown and the level at which the State will fund career-tech centers, our financial future is very uncertain at this time. Career-tech centers did not receive State Fiscal Stabilization Funds in the past, as did K-12 schools, and we were not included in the Jobs Education Funding during fiscal year With so many unknowns and uncertainties it is hard to predict what will happen to our State funding. When the biennium budget was released in April 2012, it was determined that Career Technical funding would be flat funded for fiscal year 2012 and Therefore, we are projecting a flat-funding scenario for all years of this forecast. Two components of formula funding, Unrestricted Grants-in-Aid and Restricted Grants-in-Aid are still present, with basic aid (a per-pupil funding amount) being unrestricted and weighted funding for special education and career-tech being restricted. Total formula funding for the general fund for fiscal year 2012 was $2,606,404 unrestricted and $1,851,156 restricted. Approximately 15 percent of our formula funding is accounted for in the 028 Fund, which funds the activities of the

2 Page 2 Special Education Consortium that is provided for our participating school districts. Since careertech is flat funded, we estimated formula funding the same as fiscal year 2012 for fiscal year 2013 and each year thereafter. Since we still do not know the fate of career tech funding, a watchful eye will be kept on future developments. If the State should decrease our funding, a one percent decrease would amount to a loss of approximately $44,000, which would not have a significant impact immediately. However, a decrease of ten percent would be material and significantly affect the district and this forecast. If a material change in formula funding is enacted, our forecast assumptions will be changed and the forecast amounts updated accordingly. Accordingly in 2009 voters approved the construction of four full-service casinos in the state of Ohio. The first two of the casinos has now opened. The Constitutional Amendment authorizing the gambling set in place a tax of 33 percent of gross casino revenue, a portion of which is to be allocated to schools as stated: (b) Thirty-four percent of the tax on gross casino revenue shall be distributed among all eight-eight counties in proportion to such counties respective public school district student populations at the time of such distribution. Each such distribution received by a county shall be distributed among all public school districts located (in whole or in part) within such county in proportion to each school district s respective student population who are residents of such county at the time of such distribution to the school districts. Each public school district shall determine how its distributions are appropriated, but all distribution shall only be used to support primary and secondary education. The casino revenue is intended to supplement current state aid to school districts and is not supposed to supplant, as stated below from the Constitution: Tax collection, and distributions to public school districts and local governments, under sections 6(C)(2) and (3), are intended to supplement, not supplant, any funding obligations of the state. Accordingly, all such distributions shall be disregarded for purposes of determining whether funding obligations imposed by other sections of this Constitution are met. However, with the new state funding formulas for all schools still looming in the future, supplanting could occur and schools would not realize any gain in revenues from the casinos. Early estimates indicated a distribution of $21 per student in fiscal year 2013 and $71 in However, those estimates now have been reduced to a range of $19 - $20 for fiscal year 2013 and $50 - $55 for Since the casino revenue will not be a significant source of revenue for the District, we are not including this revenue in the forecast at this time. Other Revenue Other revenue consists of various other miscellaneous local sources (i.e.: tuition, interest income, donations, and other local taxes). These various components fluctuate annually, but the total category of revenue is fairly consistent. It is estimated the district will receive $579,766 in other

3 Page 3 revenue during fiscal year It is projected that this category of revenue will increase 2.0% each year thereafter. Advances-In Advances-in/advances-out is an internal accounting activity supporting various special revenue funds of the District. Advances-out (expenditure) is made at the end of the fiscal year to cover a deficit fund balance of another fund of the District. The advance-in (revenue) occurs when the amount advanced is repaid to the General fund. Since the advances-out of the previous fiscal year are repaid in the next fiscal year, the current year advances-in equals the advances-out from the prior fiscal year. Fewer monies have been needed at year-end for advances-out of the General Fund since the implementation of the ODE-CCIP cash requests. The funds contained in the CCIP are more closely monitored for their cash needs throughout the fiscal year, reducing the amount needed to cover the deficit fund balance at the close of the fiscal year and decreasing the advances-out/advancesin internal activity. The actual advance-in for fiscal year 2013 is $73,717. We estimated $100,000 for fiscal years 2014 through Other Financing Sources (Sale of Assets and Refund of Prior Year Expenditures) This category of revenue is used to account for the sale of District assets and refunds of prior year expenditures. It can vary greatly from year to year. We typically auction excess tools and equipment each year; however, this does not produce a fixed amount of income each year. The actual revenue for fiscal year 2012 was $36,347. Due to the unpredictability of this category of revenue, we estimate $44,000 in other financing sources for fiscal years 2013 through EXPENDITURE ASSUMPTIONS Personal Services New Negotiated agreements with The Buckeye Hills Teachers Association and The Buckeye Hills Support Staff Association were settled, effective June 30, 2011 to June 29, All bargaining unit members will remain at their salary placements and will not advance steps during the duration of the contracts; however, members can advance across training columns, per Board Policy. Members of the Teachers Association enrolled in the health insurance plan will receive an annual stipend of $500 for the duration of the contract. Likewise, members of the Support Staff Association will also receive an annual stipend for enrollment in the health insurance plan, $1,000 for family coverage, $660 for employee/spouse or employee/child, and $330 for single coverage. From fiscal year 2004 through 2008 personnel changes in the district netted an increase of eight new positions. However, teaching positions have been eliminated due to resignations or retirements since fiscal year Two teaching positions were eliminated at the end of fiscal year 2009, one and one-half at the end of fiscal year 2010 and 2011, and one-half of a supervisory position at the end of At the end of 2012, we eliminated two more teaching positions and one half of a supervisory position. Our future is still unknown; therefore, eliminations may become necessary in the coming years. We will assume the 2013 staffing level for FY 14 through FY 17.

4 Page 4 Incremental costs (personnel movement on their respective salary schedules) increased during 2012 due to the newly hired teachers completing higher education courses or obtaining higher degrees. We are estimating this cost to be approximately $10,000 each year. In past years, the district typically saw base increases of three percent each year. However, due to the current economy and outlook of future funding, concessions were made and the negotiated agreements did not call for a base increase last year, this year, or for fiscal year We cannot predict what the future will hold, however, we hope this will not be the new normal. Total salary for fiscal year 2013 is projected at $3,955,591; including regular contract salary as well as salary for substitutes, overtime, severance, and insurance opt-out payments. This estimate also includes the insurance stipends, per the negotiated agreements, in the amount of approximately $35,000 per year. Since the budget bill has eliminated automatic step increases, we did not build these in our forecast. Due to salary and insurance concessions made in the current negotiated agreements, we are estimating a five percent increase in the base salary for 2015 through Employees Retirement/Insurance Benefits The employees retirement and insurance benefits category is made up of two separate components. While the first part of this cost is directly related to the salaries, the other is totally independent of salaries paid. Payroll related benefits are those such as retirement, medicare, and workers compensation. These costs are a fixed percentage of the salary paid. Insurance benefits on the other hand are driven by other economic factors including, competition (supply and demand), geographic location, group size, and health conditions of the group. Health insurance premiums in our region have increased tremendously over the past decade. Trends in the marketplace for our area are 10 to 40 percent! Our initial renewal for the same plan for 2012 saw an increase of 21 percent! In 2012 the Insurance Committee shopped with a few different brokers/agents and attempted to obtain quotes of several health insurance carriers. Through this process, two carriers competed for our business and ultimately we renewed with the current carrier, United HealthCare through our current TPA, McNelly & Gahm Insurance & Consulting, for an increase of 1.4 percent. The plan changed co-pays for prescriptions only. We continued participation in the partial self-funding of insurance costs with the implementation of the Max 105 health insurance reimbursement plan, which has been in place since October With this plan, employees still realize the benefits of a lower deductible health insurance policy. Beginning last October 1st, all bargaining unit members, teachers and support staff, began to share in the cost of their health insurance. Within the past two months we were able to renew the current health insurance plan with no changes for an increase of 4.3 percent, effective October 1, The bargaining unit members will pay the full share of this increase, as agreed upon in the negotiated agreements, both ending June 20, This allows the Board to have a fixed health insurance cost for three years.

5 Page 5 Beginning October 1, 2012, bargaining unit members will pay the following amount towards their monthly health insurance premium: single coverage - $27.71; employee/child - $49.92, employee/spouse - $55.47, and family - $ The fixed (payroll-related) portion of the employees retirement/insurance benefits is projected at 16% of salary, while the variable (insurance) portion is projected to cost approximately $932,000 for fiscal year Since salaries change, the fixed portion is calculated on the projected salary each year. While the cost of the health insurance premium is unpredictable and uncertain, the Board can project a fixed cost for years 2013 and 2014, as provided in the negotiated agreements. We are projecting the health insurance to increase at a rate of seven percent each year. In fiscal year 2015, 2016 and 2017 we anticipate the Board will pay 85 percent of the monthly premium and 15 percent of it will be paid by all employees. Purchased Services, Supplies, and Other Miscellaneous Expenditures Expenditures for purchased services, supplies/materials, and other miscellaneous expenditures vary from year to year mainly because of the required set-aside spending and the career-technical weighted funds spending requirements, as established by the Legislature and the Ohio Department of Education. These costs also bear a direct relationship to inflation and changing economy. In June 2011, the set-aside required spending was eliminated. We anticipate these expenditure categories to continue to increase at a rate of 3 percent each year of this forecast. Capital Outlay As with the previous category of expenditures, Capital Outlay expenditures are also impacted by inflation, the set-aside spending requirements, and the career-technical weighted funds spending requirements. This category also involves purchase of new technologically advanced products, which can be quite costly. We do not expect these expenditures to decrease. We estimate spending approximately $361,000 in fiscal year 2013 and this to increase approximately 3% each year. Debt Service The District began its OSFC-VFAP during fiscal year As the projected local share of the project climbed, the District was unable to secure additional funding of the increases through our local funds. To keep the District financially sound, the Board of Education was forced to seek additional funding through outside sources. The QZAB (Qualified Zone Academy Bonds) program is a debt-financing program utilizing the issuance of bonds at a very low interest rate. The Board of Education felt the QZAB Program was the best option for the District and authorized the Treasurer to proceed with an application for the QZAB through the Ohio Department of Education for $3,000,000. The District sought the assistance of Jason List, Vice President of Public Finance, Robert W. Baird & Co., for the application of the QZAB. The QZAB was finalized and closed on March 10, 2008.

6 Page 6 The District made the first payment in March The principal will remain at $204,000 for fifteen years, with the interest (2.31% supplemental coupon) payment decreasing over time. The interest payments for fiscal year 2013 through 2017 respectively are: $52,061; $47,328; $42,595; $37,862; and $33,130. The principal and interest payments are reflected within line items and 4.06 of the forecast. Transfers-Out, Advances-Out, and Other Financing Uses During fiscal year 2007, we obtained an approved Master Plan with OSFC for renovations to the career center. As part of the approved Master Plan agreement the OSFC requires the District to set aside monies to help fund maintenance expenses of the newly renovated facility, requiring a yearly transfer of $183,691 for the next 23 years into the Maintenance Fund (034). The first such transfer was made in Since implementation of the Max 105 plan, we must transfer monies annually into fund Employee Benefits Self-Insurance Fund, to pay for the reimbursement of these claims. It is estimated that $100,000 is needed yearly. We estimate anther $24,000 is needed annually to support our local funds. The advances-out, as explained in the advances-in section of the Revenue assumptions, is needed to cover deficit fund balances for reimbursable type grants. It has varied from year to year depending upon the type and number of grants awarded in each year. We estimate $100,000 will be needed for advances-out each year of the forecast. The expenditure for the Other Financing Uses category represents refunds of prior year receipts. Expenditures of this nature are very rare. There has not been any expenditure in this category since fiscal year Due to the unpredictability of these expenditures, we are projecting $5,000 in this category for each year of this forecast. Encumbrances Encumbrances at a year s end vary from year to year, averaging around $340,000 over the last three fiscal years. For fiscal year 2012, encumbrances were $161,700. We are estimating $160,000 for encumbrances for fiscal year 2013 and increasing that to $300,000 for fiscal years 2014 through RESERVE ASSUMPTIONS Effective June 26, 2011, HB 30 authorized school districts to discontinue the required practice of set asides for textbooks and instructional materials. While it is unclear whether HB 30 addressed the capital and maintenance set-asides, we have consistently exceeded the required levels of spending. Therefore, we will not set aside monies for capital maintenance. Several years ago, S.B. 345 eliminated the requirement to maintain a budget reserve; however, it required that any Bureau of Workers Compensation rebate money remain in the budget reserve. The District received $32,757. The bill also placed special conditions on the expenditure of the BWC rebate monies. Any portion of the BWC rebate monies remaining in the budget reserve set

7 Page 7 aside are to be used solely for the following purposes: (1) to offset a budget deficit; (2) for school facility construction, renovation, or repair; (3) for textbooks or instructional materials, including science equipment or laboratories; (4) for the purchase of school buses; or (5) for professional development of teachers. The District does not anticipate expending this reserve at this time.