WICKLIFFE BOARD OF EDUCATION 5-Year Financial Plan (SM-7) Assumptions: Fiscal Year 15 January 12, 2015

Transcription

1 Exhibit 11 WICKLIFFE BOARD OF EDUCATION 5-Year Financial Plan (SM-7) Assumptions: Fiscal Year 15 January 12, 2015 The Ohio General Assembly enacted House Bill 412 requiring public school systems annually to prepare a five year forecast of anticipated revenues and expenditures including the annual funding of three new funds; textbook & instructional materials, capital & maintenance, and a budget stabilization. The intended purpose of the forecast is to provide a means for the Ohio Department of Education and the Auditor of State to identify and assist districts headed toward financial difficulty. The forecast includes the following district funds: General Fund (001) Fiscal Stabilization Fund (Historical) Education Jobs Fund (Historical) The Ohio Department of Education and Auditor of State mandate the format of the financial forecast. The forecast provides three years of historical (actual) data and five years of projected (forecast) data. The column titled Fiscal Year 2015 represents current year (July 1, June 30, 2015) revenue and expenditure estimates. This forecast was prepared as of October 15, 2014 and represents the board and management s best estimate based upon information available to date. The forecast assumes the maintenance and continuance of programs extant as of January 12, LEGISLATION Personal Property Tax Reductions HB283 adopted in 1999 reduced the assessed valuation of the inventory component of personal property tax from 25% to 0% by Beginning with the January 1, 2002 tax year, the assessed valuation of the inventory component of personal property taxes was reduced by 1% through the 2006 tax year. Effective January 1, 2007, assessed values on the inventory component of personal property taxes were reduced by 1% each year beginning in 2008 until the assessed value is 0% but not later than 2031.There has not been any legislation passed to replace the lost personal property taxes from State of Ohio revenues. The inventory component of personal property tax generated $1,527,222 per year for the Wickliffe City Schools. HB95, the state budget bill for FY2004 & 2005 further reduced the assessment rate for inventory effective FY2006. The assessment rate for the inventory component of personal property was reduced by two percent until the assessment rate equaled zero. There has not been any legislation passed to replace the lost inventory tax. Taxpayers owning personal property with a taxable value less than $100,000 were required to file a return even though they did not owe any tax. The tax was reimbursed to school districts by the State of Ohio. Effective FY2005, per HB95, taxpayers were no longer required to file a return. The reimbursements were eliminated. There has not been any legislation passed to replace the lost tax. Per HB95, effective FY2006, the assessed personal property rate of telephone company equipment was reduced from 88% to 25% over a three-year period. There has not been any legislation passed to replace the lost tax. HB66 eliminated all tangible personal property tax from the local tax base by tax year School districts were held

2 harmless through FY2009 followed by a declining reimbursement through tax year Am. Sub. H.B. 1, the biennial budget bill for FY extended tangible personal property tax hold harmless payments two years through FY2013. Am. Sub. H.B. 153, the biennial budget bill for FY reduced tangible personal property tax hold harmless payments 2% per year thru This will result in a loss of $667,454 in state funds for the two- year period. Am. Sub. HB59, the biennial budget bill for FY , maintains reduced tangible personal property reimbursement at the rate. Hold harmless payments are projected to remain flat FY The Board of Education will continue to work with CFFO to deter further erosion of tangible personal property tax revenues. Property Tax Administration Fund Per HB95, effective FY2004, the Property Tax Administration Fund was created to pay the Department s cost of administering the property taxes and overseeing the equalization of real property values. The Fund is funded from a portion of the state reimbursement to schools for the loss of revenue due to the 10% rollback of real property taxes. Effective FY2004 for ten years an estimated 10% per year will be deducted from the Wickliffe City Schools rollback payment and credited to the Property Tax Administration Fund. There has not been any legislation passed to replace the lost tax. Public Utility Deregulation, SB3 & SB287 Effective Tax Year 2001 non-municipal owned electric utilities and natural gas were deregulated in the State of Ohio. Public Utility personal property was reduced from 100% assessed value to 25%. The legislation significantly reduced revenues to certain school districts and moderately affected others. Effective May 1, 2001 a kilowatt hour (KWH) tax went into effect and July 1, 2001 a measured cubic feet (MCF) tax went into effect. 37.8% of which was deposited in a new Property Tax Replacement Fund (PTRF). 70% of the PTRF is paid to school districts that lost revenue as determined by the Ohio Department of Taxation. First distributions were made to cover costs of fixed sum levies such as debt issues and emergency levies. Fixed rate levies were replaced from 2002 through The first distribution was February All guarantees of reimbursement from the PTRF expire by 2016, with the exception of debt levies. Public utility deregulation resulted in a loss of $4,027,474 in valuation to the Wickliffe City Schools; $477,080 in revenues. SB3 and SB287 provided a 5-year hold harmless period, FY FY2006. At the end of the hold harmless period the State compared state aid to the District loss. If state aid exceeded the loss, the payments were to end. If state aid was short of the loss, payments would continue for an additional 10 years. Effective FY2012 the state budget eliminated the districts reimbursement payment for electric deregulation. This resulted in an annual loss of $238,540 in state revenues. REVENUE ASSUMPTIONS Taxes (General, Tangible & Property) Local and state reimbursed taxes comprise the largest portion of the districts operating budget. Tax estimates are based on historical growth patterns, including scheduled Lake County updates and reappraisals of taxing district real estate, substantiated by information provided by the county auditor. Fiscal year 2015 taxes are presented as of the county auditors most recent certificate of estimated resources. FY2013 was the first full year of collection of the 7.9-mill continuing levy approved November FY2016 through FY2019 are projected per the most recent Schedule A issued by the Lake County Auditor. Zero growth is projected after the FY 2015 update until the housing market rebounds. The projection does not include an estimated gross $790,000 the District may receive in FY2015 for a County Treasurer authorized sale of tax delinquencies.

3 STATE REVENUES UNRESTRICTED/RESTRICTED GRANTS-IN-AID DeRolph On March 24, 1997, the Ohio Supreme Court rendered a decision declaring certain portions of the Ohio school funding plan unconstitutional. The Court stayed the effect of its ruling for one year to allow the Ohio General Assembly to design a plan to remedy the perceived defects in the system. Since the Supreme Court ruling, the Ohio General Assembly has passed numerous pieces of legislation in an attempt to address the issues identified by the Court. The court of Common Pleas in Perry County reviewed the new laws and, in a decision issued on February 26, 1999, determined they were not sufficiently responsive to the constitutional issues related under the thorough and efficient clause of the Ohio Constitution. The State appealed the decision made by the Court of Common Pleas to the Ohio Supreme Court. On September 6, 2001, the Ohio Supreme Court issued an opinion regarding the State s school funding plan. The decision identified aspects of the plan that required modification if the plan was to be considered constitutional, including: - A change in the school districts that are used as a basis for determining the base cost support amount. Any change in the amount of funds distributed to school districts as a result of the change were retroactive to July 1, Fully funding parity aid no later than the beginning of fiscal year 2004 rather than fiscal year The Supreme Court relinquished jurisdiction over the case based on anticipated compliance with its order. The State of Ohio, in a motion filed September 17, 2001, asked the Court to reconsider and clarify the parts of the decision changing the school districts that were used as the basis for determining the base cost support amount and the requirement that changes be made retroactive to July 1, In November 2001, the Court granted the request for reconsideration, but also ordered the parties to participate in a settlement conference with a court appointed mediator. On March 21, 2002, the mediator issued his final report indicating that the conference was unable to produce a settlement. The Coalition for Adequacy & Equity appealed the decision to the United States Supreme Court. The United States Supreme Court chose not to review the case. Governor Taft appointed a Blue Ribbon Task Force to investigate school funding. A statewide petition drive was considered to place a constitutional amendment on the ballot. The state legislature approved the Governor Strickland s Evidence Based Model (EBM) as the funding method for public schools for the biennial budgets. The Model consisted of a list of inputs for determining adequacy with a local share based on local wealth. The structure remained a foundation model. Governor Kasich abolished EBM and proposed a new formula to fund public schools. Am. Sub. HB59 was Governor Kasich s primary and secondary education budget for FY2014 & The new funding formula established caps for districts with local factors in excess of averages of State of Ohio public school districts. FY 2013 was funded on a transitional basis until the new formula was devised. Wickliffe was/is subject to the cap on funding in FY2014 and Future years have been projected flat in keeping with historical patterns of state funding.

4 Unrestricted State Grants-in-Aid Unrestricted State Grants-in-Aid consist of the State of Ohio primary and secondary education payments authorized under Am. Sub. HB59. Restricted State Grants-in-Aid Restricted State Grants-in-Aid are revenues received from the State of Ohio for specific programs. The district receives funds for career technical training, disadvantaged pupil impact aid, transportation of special education students and catastrophic reimbursement. Restricted Federal Grants-in-Aid Restricted Federal Grants-in-Aid were one time revenues received from the federal government authorized under the American Recovery and Reinvestment Act (ARRA) and Education Jobs funds. Effective FY2012 forward, the district no longer received either funding. Property Tax Allocation Property Tax Allocation are revenues received from the State of Ohio for property tax legislation; Rollback & Homestead Exemption, Public Utility Deregulation and Personal Property Tax. The district received tangible personal property hold harmless funds through FY2011 followed by 2 years (FY2012 & 2013) of declining funds. The declining reimbursement resulted in a loss of $667,454 over the two fiscal years (2012 & 2013). The projection presumes flat funding at the reduced hold harmless rate of FY14 forward. The district passed a continuing 7.99 mill levy in November Increased revenue collections for rollback and homestead reimbursement are projected. The increase in FY2015 represents second half FY2014 rollback & homestead exemption taxes received after the District closed its books for FY2014. Effective FY2013 the district began receiving payments for casino revenue profits; approximately $73,000 is projected for FY2015 forward. ALL OTHER Other revenues consist primarily of interest earnings, rental income, employee share of medical premiums and student fees. OTHER FINANCING SOURCES Proceeds from Sale of Notes The District entered in a lease financing arrangement for the purchase of hardware, software and upgrades to the infrastructure. Advances & Transfer Advances and transfers are loans and subsidies, respectively, to district programs that are unable to operate at break-even. Advances are based upon historical data.

5 EXPENDITURE ASSUMPTIONS Expenditure forecasts include extended contract certificates required by HB412. Personal Services & Employees Retirement/Insurance Benefits Salaries are forecast based on existing negotiated agreements through fiscal year Fiscal years forecast negotiated step increases only. The General Assembly passed pension reform legislation. The projection anticipates the retirement and replacement of teachers and support staff. Insurance benefits are forecast to increase 10% per year assuming no change in plan design and the district remains in the Lake Schools Health Consortium. Purchased Services, Supplies & Materials, Capital Outlay and Other Objects Purchased Services include special education tuition & transportation payments, utilities, plant repairs and community school tuition payments. The FY2015 projection includes final payment of relocation and site preparation of a modular unit, PEP grant facility improvements, wrestling room renovations, window and roof replacements. The supplies and materials line item includes a projection for the purchase of textbooks aligned to the Common Core. Debt Service The District has no debt. OTHER FINANCING USES Transfers & Advances Transfers and advances are forecasted based upon historical patterns of board subsidies. Encumbrances Estimated encumbrances are forecasted upon historical patterns and year-end cash balances. RESERVATION OF FUND BALANCE The forecast includes an amount set aside as a budget reserve for capital repairs. The forecast assumes the Board will spend the required amount on capital repairs each fiscal year. AVERAGE DAILY MEMBERSHIP ADM Forecast is projected based upon historical patterns. 5-YEAR ASSUMPTIONS 01/12/2015